Build Better Business Cases to Get More Projects Approved
Rising business leaders should embrace standard approaches for success
A Business Case Evaluation (BCE) is a decision-making tool that assists in making value-based funding decisions. BCE documents are produced in the early capital and operating budget planning cycles as a standardized and systematic process to analyze the benefits and costs of various options to solve an identified problem or a cost-saving/revenue-generating idea.
Value-Focused vs. Alternatives-Focused
A BCE is different from studying various alternatives to the same solution, such as performed in a Preliminary Engineering Report (PER). BCEs are value-based, meaning that they are performed when an idea is generated and consider the full range of the organization’s values to determine an intended direction of action. PERs are alternatives-based, meaning that they are performed after an intended course of action is determined.
“With alternatives-focused thinking, you first figure out what alternatives are available and then choose the best of the lot. With value-focused thinking, you end up getting much closer to getting all of what you want.” — Ralph Keeney
One example is the decision to travel from one city to another — a BCE is used to determine which mode of travel should be taken (i.e., car, bus, plane, train). A study of alternatives would be used to determine which route to take once the mode of travel is selected.
A central component of a BCE is the inclusion of non-monetized values. An example is the Triple Bottom Line (TBL) that includes financial considerations, social impacts, and environmental benefits.
Relative Costs
One of the most valuable aspects of a value-based BCE is that relative costs can be used. In the travel example, it is unnecessary to know the exact cost of a plane ticket versus a bus ticket versus a car’s mileage because the relative costs are more important in the planning phase. The actual costs only matter when choosing between alternatives between different airline carriers. Focusing on the values-based decision saves time and avoids internal “analysis paralysis” when too many variations are available.
Tiered Approach
Tiered (or scalable) approaches are desirable by most organizations. Smaller investment decisions may not require a simple financial analysis and subjective non-monetized evaluation. One example may be to replace a piece of laboratory equipment with a similar one or to upgrade to a higher technology device with built-in analytics. Another example may include the evaluation of in-sourcing or out-sourcing routine maintenance activities. A lower-tier BCE may be prepared with a standard format in an email.
“A BCE gets you what you need. That may be a little different than what you thought in the beginning, but the process helps you get to the right place” — Capital Program Manager
Larger investment ideas require a more detailed financial evaluation (capital costs, operating costs, salvage value, time value of money, etc.) and a more structured approach to the non-monetized assessment (such as multi-criteria analysis with a group). The BCE would follow the same standard format but the higher-tier BCE would include two to four pages of text plus attachments.
Standard Process
Step 1 — Define the Problem or Opportunity
Step 2 — Executive Sponsor Assigns BCE Lead and Support Team
Step 3 — Hold BCE Kick-off Meeting
Step 4 — Develop Problem Statement
Step 5 — Formalize the Description of the Options
Step 6 — Confirm BCE Problem Statement and Options with Executive Sponsor
Step 7 — Complete BCE Analysis and Documentation
Step 8 — Presentation to Executive Sponsor
Moving Forward
Building better business cases enable business professionals to get more projects approved. Rising business leaders should master a value-based approach because they facilitate timely decisions and prevent analysis paralysis. Different opportunities may require varying levels of effort. Be disciplined in performing business cases regularly and stick with a standard format.
