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A business case captures the reasoning for initiating a
project A project (or program) is any undertaking, carried out individually or collaboratively and possibly involving research or design, that is carefully plan A plan is typically any diagram or list of steps with details of timing and resources, us ...

project
or task. It is often presented in a well-structured written document, but may also come in the form of a short verbal agreement or
presentation A presentation conveys information from a speaker to an audience An audience is a group of people who participate in a show or encounter a work of art A work of art, artwork, art piece, piece of art or art object is an artistic creation ...

presentation
. The
logic Logic is an interdisciplinary field which studies truth and reasoning. Informal logic seeks to characterize Validity (logic), valid arguments informally, for instance by listing varieties of fallacies. Formal logic represents statements and ar ...

logic
of the business case is that, whenever
resources Resource refers to all the materials available in our environment which help us to satisfy our needs and wants. Resources can broadly be classified upon their availability — they are classified into renewable A renewable resource, also know ...

resources
such as money or effort are consumed, they should be in support of a specific business need. An example could be that a software upgrade might improve system performance, but the "business case" is that better performance would improve
customer satisfaction Customer satisfaction (often abbreviated as CSAT) is a term frequently used in marketing Marketing is the process of intentionally stimulating demand for and purchases of goods and services; potentially including selection of a target audien ...
, require less task processing time, or reduce system maintenance costs. A compelling business case adequately captures both the quantifiable and non-quantifiable characteristics of a proposed project. Business cases can range from comprehensive and highly structured, as required by formal
project management Project management is the process of leading the work of a team A team is a group of individuals (human or non-human) working together to achieve their goal A goal is an idea In common usage and in philosophy Philosophy (f ...
methodologies, to informal and brief. Information included in a formal business case could be the background of the project, the expected business benefits, the options considered (with reasons for rejecting or carrying forward each option), the expected costs of the project, a
gap analysis In management Management (or managing) is the administration of an organization An organization, or organisation (Commonwealth English The use of the English language English is a West Germanic languages, West Germanic ...
and the expected risks. Consideration should also be given to the option of doing nothing including the costs and risks of inactivity. From this information, the justification for the project is derived.


Reasons for creating a business case

Business cases are created to help decision-makers ensure that: * the proposed initiative will have value and relative priority compared to alternative initiatives based on the objectives and expected benefits laid out in the business case. * the performance indicators found in the business case are identified to be used for proactive realization of the business and behavioral change.


Development and approval process

The business case process should be designed to be: * adaptable – tailored to the size and risk of the proposal * consistent – the same basic business issues are addressed by every project * business oriented – concerned with the business capabilities and impact, rather than having a technical focus * comprehensive – includes all factors relevant to a complete evaluation * understandable – the contents are clearly relevant, logical and, although demanding, are simple to complete and evaluate * measurable – all key aspects can be quantified so their achievement can be tracked and measured * transparent – key elements can be justified directly * accountable – accountability and commitments for the delivery of benefits and management of costs are clear.


Key elements of the business case report

A good business case report, which brings confidence and accountability into the field of making investment decisions, is a compilation of all information collected during enterprise analysis and the business case process. The key purpose is to provide evidence and justification for continuing with the investment proposition. Here is a recommended structure:Source: Messner, W.: More on Making the Compelling Business Case
GloBus Research, accessed: 5 May 2013 and Messner, W. (2013)
Making the Compelling Business Case
Houndmills: Palgrave Macmillan.
* Preface * Table of Contents * Executive Briefing ** Recommendation ** Summary of Results ** Decision to be Taken * Introduction ** Business Drivers ** Scope ** Financial Metrics * Analysis ** Assumptions ** Cash Flow Statement ( NPV..) ** Costs ** Benefits ** Risk ** Strategic Options **
Opportunity Costs In microeconomic theory Microeconomics (from Greek prefix ''mikro-'' meaning "small" + ''economics'') is a branch of economics Economics () is the social science that studies how people interact with value; in particular, the Produc ...
* Conclusion, Recommendation, and Next Steps * Appendix


Review and approval

At various stages in the project, the business case should be reviewed to ensure that: * The justification is still valid, * The project will deliver the solution to the business need. The result of a review may be the termination or amendment of the project. The business case may also be subject to amendment if the review concludes that the business need has abated or changed, this will have a knock on effect on the project.


Public sector projects

Many
public sector The public sector (also called the state sector) is the part of the economy composed of both public service A public service is a service Service may refer to: Activities :''(See the Religion section for religious activities)'' * Administ ...
projects are now required to justify their need through a business case. In the public sector, the business case is argued in terms of
Cost–benefit analysis Cost–benefit analysis (CBA), sometimes also called benefit–cost analysis, is a systematic approach to estimating the strengths and weaknesses of alternatives used to determine options which provide the best approach to achieving benefits while ...
, which may include both financial and non-financial cost and benefits. This allows the business to take into account societal and environmental benefits, allowing a more comprehensive understanding of economic impacts.


See also

*
Business plan A business plan is a formal written document containing the goals of a business Business is the activity of making one's living or making money by producing or buying and selling products (such as goods and services). Simply put, it is "any ...

Business plan
* Case competition *
Innovation Innovation is the practical implementation of ideas A mental representation (or cognitive representation), in philosophy of mind Philosophy of mind is a branch of philosophy that studies the ontology and nature of the mind and its relation ...

Innovation
*
Optimism bias Optimism bias (or the optimistic bias) is a cognitive bias A cognitive bias is a systematic pattern of deviation from norm (philosophy), norm or rationality in judgment. Individuals create their own "subjective reality" from their perception of th ...
*
Planning fallacy The planning fallacy is a phenomenon in which predictions about how much time will be needed to complete a future task display an optimism bias and underestimate the time needed. This phenomenon sometimes occurs regardless of the individual's knowl ...
*
Reference class forecasting Reference class forecasting or comparison class forecasting is a method of predicting the future by looking at similar past situations and their outcomes. The theories behind reference class forecasting were developed by Daniel Kahneman and Amos Tv ...
*
Win-win In game theory Game theory is the study of mathematical models of strategic interaction among Rational agent, rational decision-makers.Roger B. Myerson, Myerson, Roger B. (1991). ''Game Theory: Analysis of Conflict,'' Harvard University Press, ...


Notes


References

*Bentley, C.: ''Practical Prince2'' (The Stationery Office), .
Five elements to include in a compelling business case
*Messner, W.: ''Making the Compelling Business Case. Decision-Making Techniques for Successful Business Growth.'' Houndmills: Palgrave Macmillan, 2013
book companion website
*OGC Guidance and templates o
'Business Case'
*Schaltegger, S. & Wagner, M. (Eds.): ''Managing the Business Case for Sustainability. The Integration of Social things, and Economic Performance''. Sheffield: Greenleaf, 2006


External links


Business Case article in PRINCE2 wiki
{{DEFAULTSORT:Business Case Project management Evaluation methods ru:Технико-экономическое обоснование