Friday, 23 January 2015

A PRINCE2 project must have continued business justification. This means that the reason to start the project must make sense from a business point of view and there must be a clear Return on Investment (ROI). For example, the project will cost 20,000 but over the first 2 years, it will deliver a savings of 80,000 for the company. ‘Does the project have business justification?’ is the same as asking ‘Does the project have a valid Business Case?’ If at any time during the project, the expected Return on Investments falls, for example, by about 80%), then the project will most likely be stopped. The Business Case document details the full Business Case, showing why the project should be done, the costs, the expected benefits and timescales. This material is also referred to as the business justification information. As the Business Case document is one of the first documents created in a project, it will prevent some projects that have few real benefits for the company from starting. The business justification is then checked throughout the lifetime of the project. This, for example, can happen at the end of each stage. Even projects that are started to comply with new legislation require justification. For example, the cost of not complying with new legislation might affect the company’s market share or the company could lose clients. This could therefore be given a monetary value.
The Business Case answers questions like:
  • Why are we doing this project?
  • What are the business reasons?
  • What are the benefits for the organization?
The Business Case Theme also describes how to define the Business Case. It will be possible to see if there is a valid Business Case at the start of the project and how to check if the Business Case still has value throughout the project. The Executive is responsible for creating the Business Case, but it can be written by others or with help from others. For example, the Executive might involve a person from the financial department to assist with all financial information. The project mandate document usually contains an outline of the Business Case. At the start-up of the project, this would be expanded to the Outline Business Case, which becomes part of the Project
Brief and then becomes a separate Business Case document which becomes part of the PID. The first Business Case document can be completed once the project plan is ready, as it requires the cost, timescale and product information. The Business Case should be updated at the end of each stage to include the latest cost, time and product information, and to verify that the Business Case is still valid.

What happens in the practical world?
Before you heard of PRINCE2, you surely must have had the opportunity to be a Project Manager on a number of projects and you did not see a real Business Case document in most of them. However, someone somewhere in the organization had requested the project and found some budget to pay for this. Did they write a Business Case document? Perhaps they did, or perhaps this was just decided at a management meeting where one person presented the reasons why they needed a product, got permission, and agreed on a budget with the rest of the management team. If you are a Project Manager, ask to see the Business Case for the project. You will learn what questions to ask about the Business Case by reading this Theme. If you work for a supplier that is generally contracted out to clients, then you may not get access to the Business Case, but you should have an idea of the potential value (benefits) of the project for the client. As you will learn later, suppliers are supposed to have their own Business Case. Again, you may have never seen this in paper format, but it usually goes something like this: If the cost to hire a permanent employee is $40 per hour, then the supplier needs to charge $60 per hour. If the client pays $60 per hour (+- 5%), then the supplier’s Business Case is valid.

The Business Case knowledge as per PRINCE2
The purpose of the knowledge in the Business Case theme is to provide a structure to judge whether the Business Case is desirable, viable, achievable and worth the continued investment that is made during the project. Let us look at that statement again and break it up.
  • Provide a structure: Provide guidelines to follow.
  • Desirable: Determine if this product is really needed.
  • Viable: Is it possible to do? Are we capable of delivering?
  • Achievable: Is it possible to deliver the benefit?
  • Worth the continued investment: Will it be worth the investment made during the project? If not, then the project must be stopped.
 Business Justification:

‘Business Justification’ is a popular term in a number of methods and is now used by PRINCE2. Business Justification means that there is a valid business reason for doing the project and it remains valid throughout the project. As you may remember, Business Justification is also one of the 7 principles of PRINCE2. The Executive is responsible for creating the Business Case. It is created at the start of the project and maintained during the project by the Project Manager. The Senior User is responsible for specifying the benefits and these are included in the Business Case. It contains the following information:
  • Reasons for doing the project as you would expect
  • Estimate Costs and Timescale
  • Benefits and dis-benefits
  • Overview of risks
How to best describe what you get from a project?
PRINCE2 uses the terms ‘Output, Outcome and Benefits’. These terms help to describe what we get from a project. My objective here is to explain what these terms mean and, also, how they differ from one another.

Question to uncover Output: What is the product that will be delivered by the project?
Question to uncover Outcome: What can the users do better with this product?
Question to uncover Benefits: List the measurable improvements of using this product?
Outputs: The Outputs of a project are the products that the users will use. These are also known as specialist products and the project is set up to create these products. 

Outcome: You may have heard the expression ‘outcome is a result of change’. From a PRINCE2 project point of view, we say that an Outcome is the result of the change derived from using the project's outputs.

Benefits: PRINCE2 says that Benefits are the measurable improvement, resulting from an outcome that is perceived as an advantage by one of the stakeholders. 

Try to see Benefits as the measurable advantages of using the product. Benefits can be realized during the project, but most benefits are usually realized after the project has closed and sometimes a long time after. Now let us use an example and say that a company installs a new Sales (CRM) system.

Output Question: What is the product that will be delivered by the project?
This will be the Sales system.
Outcome Question: What can the users do better (different) with this product?
Some answers could be:
  • Sales orders are processed quicker and more accurately
  • Client can assess data online and track orders
  • Easier for administration staff to track orders
  • Easier to get reports from the system
Notice how all the answers are very vague, and there is no mention of percentage (%) faster.

Benefits Question: What are the measurable benefits of using this product?
Some answers could be:
  • 40% cost-reduction in handling client data
  • 15% increase in sales as users can order online
  • Overall revenue increased by 12% annually
The Contents of a Business Case
The Business Case should describe the reasons for the project and includes information on the estimated costs, risks and expected benefits. Appendix A of the manual contains a product description for the Business Case. It should contain the following parts:
  • Executive Summary
  • Reasons
  • Business Options
  • Expected Benefits and expected dis-benefits
  • Timescale
  • Costs
  • Investment Appraisal
  • Major Risks
Author - Vijayakumar Reddy, CTO & Lead Trainer, A2A IMTCS Pvt. LTD.

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