Cost Benefit Newsletter 93: Business Case Competency: What´s Your Maturity Level?

Everyone involved in building a business case or ROI estimate is likely to have serious questions in mind about the case building process.

The project manager, the outside consultant, and senior management all want to know what they are in for and whether or not the results are going to be worth the effort.

You might expect the answers to depend on such things as the complexity of the project or investment under analysis, or the level of funding involved. Answers are surprisingly predictable, but they usually depend little on those factors. Those involved in building the case will want to know, specifically:

How long will it take to prepare the business case?
How many hours of work and other resources will be needed?
Will the results be accurate?
Will the results give us confidence that we're making the best business decision?

When planning a case-building project and trying to "scope" the requirements and likely outcomes, we start by measuring the case building competency, or maturity level, of both the organization and the individuals building the case.

As maturity level increases, the time, effort, and other resources needed for building the case decreases.

As maturity level increases, the quality of the case—the credibility, accuracy, and practical value of business case results—increases.

Where do your own people and your organization stand on the maturity scale? Here are the important criteria based on Solution Matrix Ltd. research and recent client projects. We'll start at the bottom:

Maturity Level 1. Unaware

There is little or no awareness of the value of business case analysis in decision making and planning.
Proposals and funding requests do not need to provide financial justification, cost benefit analysis, or return on investment projections.

Maturity Level 2. Aware but Uninformed

There is an awareness that the company needs business case competency, but only that.
"Customer ROI" may figure prominently in the company's marketing messages.
The company still makes bad, costly decisions that could have been avoided with good business case analysis.
No one knows ROI on training, marketing, R&D, or projects.
No one knows gross profit or contribution margin by product, product line, or service offering.

Maturity Level 3. Ad-Hoc

Business case analysis is performed for planning and decision support, but it is not standardized and not re-usable.
Elaborate Total Cost of Ownership (TCO) models are developed, but only cost savings are captured and strategic benefits not quantified
There is much talk of business case analysis and ROI but most people don't know how to do them.
Financial results are modeled in Excel, but the results are not re-usable, not standardized.
There is a recognized need for business case training.
ROI on training, marketing, R&D, and projects are partially known, from a few ad-hoc case studies.

Maturity Level 4. Standardized

There are established internal business case standards.
ROI on training, marketing, R&D, and projects are partially known from case studies, but not through established, continuing monitoring.
Business cases measure risks and identify critical success factors, using dynamic financial models and Monte Carlo simulation.
There is a cross-functional, cross-organizational "Core team" with business case expertise.
Funding requests above a specified level require business case support.

Maturity Level 5. Optimized

Business case results are reviewed by top management, and people are held accountable for results.
The company contracts with its customers based on service level agreements and projected customer business performance.
Business case projections and models are used for management and control throughout the life of the project or investment.
There is a library of previous business cases and business case resources accessible to all.

Why Does it Matter?

Does it really matter where your people and your organization stands on the maturity scale? The benefits from achieving higher maturity levels are tangible, measurable in financial terms, and large. There is, in other words, a strong "case" for building case building competency. At the highest maturity levels, we find...

Fewer bad decisions, which result in projects over budget, late, and missing targets.
Much less effort on business case analysis, developing decision support and planning information.
Decision makers act with a high level of confidence.
Projects and programs are successfully managed for lowest risk and maximum return.

What's your maturity level? Take action and find out by attending Building the Business Case seminar, or by downloading the Business Case Guide.

Marty Schmidt
6 July 2006
mschmidt@solutionmatrix.com
www.solutionmatrix.com