The ´how to´ guide for creating a compelling ROI and business case

Business Case Guide Contents

Chapter 1 - What's a Business Case?

Chapter 1 presents a high-level overview of the business case landscape. Topics include

•  The nature of the case
•  The central problem: Which costs and which benefits?
•  A worst-case scenario: The double-list business case
     –  Costs and benefits depend on case design
     –  Every case needs a time line
     –  The case must have self-evident validity
•  A best-case scenario (the view from 39,000 feet)
•  Business case check list
     –  Are subject, purpose, and scope up front and clear?
     –  Are cash flow projections organized along a time line?
     –  Does the case describe its assumptions and methods?
     –  Does the case include all important benefits?
     –  Does the case discuss critical success factors?
     –  Does the case identify and measure risks?
•  What's the difference? Business case vs. business plan

Chapter 2 - The Main Points

Chapter 2 explains the relationship between case structure and case-building, through an intermediate-level overview of key points.

•  Design and process are everything
•  The natural order of case design
•  The core team: key to credibility
     –  Provides cross-functional cross-organizational support
     –  Spreads the sense of ownership
     –  Communicates methods, rationale, and expectations
     –  Turns damaging criticism into constructive criticism
•  Take the long-term time line view
•  Scenarios: the future in detail
•  Business impacts: costs and benefits 
     –  Costs and the cost model
     –  Benefits come from business objectives
•  The financial model
     –  The cash flow statement
     –  The dynamic approach
•  Uncertainties: the devil is in the assumptions
     –  Sensitivity analysis: what happens if assumptions change?
     –  Risk analysis: how likely are other results?
     –  Contingencies: what must happen?
•  Non financial benefits belong in the case
•  What's the difference? Cost/Benefit vs. ROI vs. Justification vs. TCO

Chapter 3 - Case Design I: The Introduction

The case-building project starts with case design. Some of the first design elements also appear early in the finished document. This chapter begins the detailed, practical explanation of the "what," "why," and—most important—the "how" of each business case element.

•  First things first: The Introduction
•  Recruiting the core team
•  Gathering background information
•  Planning case design
•  Title and subtitle: the message starts here
•  Authors and recipients: anonymous cases carry little weight
•  Dates: more than a formality
•  Executive summary: two purposes for two audiences
•  The subject: what is the case about?
•  The purpose: why does the case exist?
•  Disclaimer: It's not always optional
•  The situation: Objectives, needs, problems, and opportunities
•  Bring in the core team
•  What's the difference? Subject vs. Purpose

Chapter 4 - Case Design II: Methods and Assumptions

A business case is like a scientific research report in one sense: it is not enough simply to present the results. Readers also need to know the methods behind the data and the analysis.

•  Who needs a "Methods" section?
•  Scope and boundary definitions: what's in and what's out
•  Financial metrics and other decision criteria
•  Major Assumptions
     –  To simplify
     –  To predict
     –  To clarify
•  Data Sources
•  Scenario design
•  Data structure
     –  The incremental case
     –  The full value case
•  Introduction to costs and benefits
•  Cost Terms
•  The resource-based cost model
•  The activity-based cost model
•  Benefits terms
•  The benefits rationale
•  Measuring costs
•  The benefits rationale: assigning values
•  What's the difference? Non financial vs. intangible

Chapter 5 - Analyzing Results

Case readers may look immediately for the "bottom line," but a good case in fact shows several important results and projections. Readers may need to see all of these, and they should also understand the risks and uncertainties behind the results.

•  The cost and benefit time line
•  Cash flow categories
•  The business case vs. accounting statements
•  Before tax or after tax?
     –  Structuring benefits and costs
     –  Benefits categories
•  Cash flow statement or Income statement?
•  Estimating costs 
     –  Estimating costs: quick and simple
     –  Estimating costs: spotlight on the core team
     –  Estimating costs: all the assumptions
     –  Estimating costs: activities as cost items
•  Estimating benefits 
     –  Cost savings and avoided costs
     –  Increased income
     –  Contributions to other business objectives
     –  Finding the target value
     –  How much does this benefit contribute?
•  Financial analysis: Putting it all together
     –  Net and cumulative cash flow
     –  Discounted cash flow
•  What's the difference? Precise vs. Vague understanding

Chapter 6 - Packaging, Presenting, and Using the Case

Conclusions and recommendations may be obvious to those who propose and develop the case, but for the wider audience, they need to be developed—clearly and concretely. Credibility and acceptance can be enhanced throughout the case-building project, but they still need reinforcement in the final presentation.

•  Making sense of the results
•  A time for silence
•  A single spreadsheet system 
     –  Spreadsheet skills and spreadsheet errors
     –  The dynamic financial model
     –  Spreadsheet implementation
     –  Cost and benefit item worksheets
     –  Cost item estimates
•  Benefit estimates
•  Cash flow statements
•  Financial metrics: The primary results 
     –  Net cash flow
     –  Cumulative net cash flow
     –  Discounted cash flow / net present value (NPV)
     –  Payback period
     –  Internal rate of return (IRR)
     –  Return on investment (ROI)
     –  Cost analysis
     –  "Cost per" metrics
•  Graphs
•  Sensitivity and risk analysis
•  Simple sensitivity analysis
•  Monte Carlo Simulation: The future played out thousands of times 
     –  An example for simulation
     –  Setting up the simulation
     –  Running the simulation
     –  Assessing risks: How likely are these results? Other results?
     –  Sensitivity analysis: What happens if assumptions change?
•  Comparing financial and non financial benefits
•  Learning from experience
•What's the Difference? Planning or Decision Support?

Appendixes

Additional resources include

•  Appendix A: Sample business case
•  Appendix B: Financial metrics 
     –  Cash flow, net cash flow, and cash flow stream
     –  Payback period
     –  Discounted cash flow (DCF) and net present value (NPV)
     –  Return on investment (ROI)
     –  Internal rate of return (IRR)
•  References and resources