ROI is Earned from Great Business Cases

ROI is Earned from Great Business Cases

Billions of corporate dollars are wasted every year on business investments that don’t pan out.?A major industrial firm wasted over $120M in R&D alone in one year out of a $360M R&D budget.?The root cause was found in dozens of business cases that did not fulfill their intended impact.?Some of the deeper reasons rested with prices that didn’t reflect value, products that no one wanted, systems that were not used as envisioned, and inaccurate forecasts.

Business cases are different from spreadsheets that finance provides for you to fill out. Business cases are not fill-in-the-blank templates that are prepared to wrestle budget money for a pet project. In today’s world, some cases can distract attention from strategically important programs.?This waste also impacts business results and deprives more deserving investments of needed funding.?Lastly, a business case is not a one-and-done exercise; it’s a dynamic document that evolves as data are collected and analyzed to make an appropriate decision.

A business case is a standard method to justify a company’s investments. As a lawyer must make the case in a trial, so must businesspeople for business investments. A good business case articulates the financial and business consequences of the investment over time with the rationale for quantifying benefits and justifying operating and capital expenditures.

The business case is designed to answer one or more questions that can be posed as follows:

  • Should we move to another building because more people are being hired?
  • Do we need to expand production capacity to meet unexpected demand?
  • Should we invest in a new product to become more competitive?
  • Could we be more efficient if we automated one of our processes?
  • Would we be able to improve our revenue and profit if we expanded into a new geographic area?

To make the point clear, resources are scarce. Different departments require investments to sustain and improve their operations. Some of these are called out in their annual operating and capital budgets. Yet, sometimes, just because the money is budgeted doesn’t mean the chief financial officer (CFO) is willing to write the check. Therefore, a good business case articulates the financial and business consequences of the investment over time with the rationale for quantifying benefits and justifying operating and capital expenditures.?It does so while considering elements that could include the needs of the business, proposed solutions, and economic outcomes.

Following are some ideas to describe the benefits of solid business cases and a relevant business case methodology.

  1. A business case establishes a consistent model for rationalizing investments across the company.?A business case must be believable. The executives overseeing the company have limited resources and often limited patience. If you and your team present an incomplete business case, poorly crafted assumption sets, erroneous forecasts, or wild, unsupportable claims, you will probably not be asked back.
  2. Business cases vary in size, scope, and level of effort, depending on the amount of investment and degree of risk involved. A business case should be sufficient to put the point across. It doesn’t have to be excessively long and verbose. Regardless of length, however, a business case usually undergoes several iterations before it has just the right blend of information.
  3. A business case absorbs input from different?people, including the most appropriate cross-functional team members. Before you begin the business case, ground rules for document sharing and version control methods should be agreed upon by the team building the case.
  4. In assembling a business case, the assigned project team is responsible for the collection of data, associated analysis, and completion of the case.?The team should be cross-functional, with clearly defined roles and responsibilities, an underlying project plan for carrying out the work activities in preparing the case, and a target completion date. There is never enough time to be as precise as you and your team might prefer. Team members must therefore be comfortable with the risks associated with making assumptions about scope, resource requirements, and financial forecasts.

Almost every investment opportunity in a company should have a formal business case. The business case documents the facts leading up to the investment request and presents the business, operational, and financial rationale behind the investment.

The business case evolves as various inputs are collected and synthesized into a meaningful story, which can be readily told by any team member who helps to develop it. The business case's contents, intent, and impact should not surprise anyone, so it becomes a perfect vehicle for communicating across the business functions. The impact is undeniable. The company will more wisely invest scarce resources, and benefits that accrue to the firm can provide long-lasting, positive results.

To learn more about building a successful business case, join the Business Acumen Institute for a live webinar on June 12 at 11:00 am EDT. Please note you can RSVP on the Linkedin Event page but to get access to the live webinar link, you must formally register here.

How to build a winning business case live webinar hosted by the Business Acumen Insittute promo - hosted on June 12, 2023 at 11 am EDT.
Please join us on Monday, June 12, 2023, for a live webinar sharing the success patterns of winning business cases. To register, please click on the image above.
Marc R. Butler

Advisor | Board Member | Operator & Innovator | Author

1 年

Excellent newsletter, Steven!

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