By Jim Maholic, Oracle
This post is the eighth in a series of articles excerpted and adapted from my award-winning and Amazon Top 10 book, Business Cases that Mean Business (details on the book below).
This series is focused on building business cases for transformational cloud ERP initiatives by aligning projected future capabilities to core business drivers. We’re in the middle of unpacking the four components of the business case, which are:
Congratulations again! You now have a hypothesis that suggests a business pain exists, and you have some evidence that your hypothesis is valid. You have collected evidence by interviewing staff, managers, and executives; by observing certain inefficient behaviors; and, where applicable, looking outside of the company to confirm that such problems have occurred in other organizations and that other organizations have realized value from solving them.
Now it’s time to sift through all of your notes and analyze just what you have collected. Too often, consultants and project managers arrive at this stage of the development of their business case and can’t wait to build a spreadsheet that impresses everyone who sees it. Don’t rush into this. Credibility is always our goal. Analyzing your discovery notes is much more than just putting together a spreadsheet. Make sure you are comparing apples to apples and not apples to automobiles. Once analyzed, some of your analysis will require the presentation of a sound mathematical approach, but don’t get caught up in trying to build the ultimate spreadsheet.
Consider analyzing your evidence in two passes. With the first pass, you will evaluate the evidence from the overall project perspective. In this pass, you will consider your benefits as a total package (without dollar values at this point) to determine whether or not you think the benefit categories that you have discovered will justify the project, at least in principle (chapter 27 of the book, “Boulders, Rocks, and Pebbles,” covers this in great detail). If you believe that certain critical benefits are missing from your business case, you must return to the discovery phase to collect the relevant data to support your hypothesis.
Once you believe that you have the right framework and broad business benefits to justify your project, you must now evaluate the individual benefits a second time to confirm that you have, in fact, collected sufficient evidence to make your case credible and compelling. You will want to confirm that you have as many "boulders" as possible. Boulders are the big benefits to which you can easily assign believable financial value.
As you analyze the data, be very careful not to oversell the benefits that you discover. For example, in the last post we discussed working capital benefits. In that example, we saw our company (Company X) perform poorly against its peers in Days Sales Outstanding. Here’s the trick: it's rather easy to suggest that Company X could improve 1 or 2 days on this metric (which yielded a value to the company of $53.2 million per day of improvement). It would border on the absurd to suggest that our proposal would bring Company X in line with the best performing peer by cutting that measurement a full 24 days. This is the analysis that often goes overlooked. Just because the math supports your hypothesis does not mean that the computed result is a sound and reasonable recommendation. After you collect the data, sit back and put your calculations through a “reasonableness test” before presenting your recommendations to executives. Over-hyped benefits, especially those that are simply too grand to take seriously, diminish rather than enhance your credibility.
In the next article we’ll take your computed results and negotiate with key business stakeholders to further drive credibility. Credibility is your primary currency when presenting a business case to executives.
This post is the eighth in a series of twelve articles excerpted and adapted from my award-winning and Amazon Top 10 book, Business Cases that Mean Business.
Developing a business case is simply the identification, calculation and communication of the value of your proposed capital expenditure. Creating a sound business case should not be intimidating. You simply must approach the development of a business case with discipline and ample planning. This series of articles will give you an overview of the creation of a successful business case. If you wish to explore this topic deeper, or just jump ahead right away, check out my book.