Business Cases And Benefits Management
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Business Cases And Benefits Management

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  • Not a “how to climb a mountain” guide — more of a reminder on climbing security… i.e. not about what steps you should take, but how to avoid slipping off the ridge…
  • As research such as this indicates, high performing companies are more likely to use analytic information strategically. Companies that have a depth of analytic support, that use it across their entire organization, and value the insights they gain from their analytic solutions—these are companies far more likely to be high corporate performers. Finally, if you’re not measuring how can you be managing….
  • With limited investment available, we must be sure that we run projects that are likely to deliver the changes we need. So we must define that needed change and the benefits we expect from it. We must ensure that the benefits are as measurable as possible. The measures used will be as wide-ranging as the projects and will include performance indicators and financial benefits as appropriate.
  • Financial benefits are among the more measurable, but still require some judgement. Financial Services will use a standard method for calculating the value of benefits, so that we can compare figures across projects. We will calculate both Payback (best for shorter projects) and Net Present Value (NPV - best for longer projects). This is just one of the criteria when judging whether a project is worthwhile.
  • In addition, we will look for non-financial benefits. Any project must contribute to a corporate priority. We expect to be able to use existing measures in most cases, as new measures may be expensive to obtain and do not give us any historical information. We will then measure before and after to ensure the project delivers. Example: We measure the number of complaints received in the six months before and after a project designed to reduce complaints.
  • Finally, we want to change the way the organisation works, as described by the four pillars of the Organisation Development Vision. So each project in the Change Programme is expected to contribute to changing the way the organisation works, as described by the four pillars of Change. Example:
  • Some projects may deliver a capability, expecting later projects to exploit the capability. So benefits will only be realised by the later projects. There is the obvious danger that the later projects may not happen, meaning that the anticipated benefits are not realised. So we will ensure that the later projects are identified and funded when we commit to the capability project. Example: First project puts the technology in place to allow users to identify themselves on the internet, using a username and password. Later projects use this capability to provide services which require the user to be identified before providing access to personal information.
  • This is similar to the previous example, but in this case the benefits will only be measurable some time after the end of the project. So there is a need to link the achievement and measurement of the benefits to an ongoing process, with a named owner. Examples: A new project management system is introduced and staff trained. But the benefits are unlikely to show for at least 6-12 months, when the first projects to use the system are completed. So an evaluation of those projects needs to be scheduled in order to measure the benefits obtained from the new system. A new web service is introduced by a project. An evaluation of the benefits of that project would have to wait for several months in order to allow time for users to find out about and try the new service.
  • Any financial saving made by a project will be removed from the relevant budget(s) and made available for reallocation during the formal budget-setting process. If a project generates efficiencies that result in posts being lost, there will be a process, based on existing council policies, for finding new posts for the staff affected.
  • As the Change Programme progresses, we can expect to: Manage projects and their benefits so as to stay within the Council’s cost envelope Manage both headcount and budget, for example planning recruitment with a knowledge of what staff might become free as a result of Change projects When necessary, restructure so as to make best use of new technology and improved ways of working.
  • So, to the left we have the Business planning activities, and to the right we have the delivery side. The key here is that to develop a successful change programme (the right side), you need to understand the left side. So, lets put this theory to the test: Could we have a show of hands from the room on the number of organisations that use put Business case approvals in the context of an annual budgetting process? OK next do Business cases approvals/rejections for project take place within the context of a strategic framework (typically this is a three year development/investment plan…..Show of hand please…
  • Many of System Dynamics clients have central IT functions supporting Business Units, increasingly we are seeing IT moving toward operating in a shared service centre model. What does that mean? Some organisations operate this as an internal market with chargeback for IT resources Some have fully outsourced operations and projects to third parties Supporting competing, duplicated and sometimes contradictory Business unit goals as a central IT function is a key challenge. The common denominator in all this is cash… So, tough as it might seem - Benefits need to be measured on a like basis, this basis is the monetary value.
  • I think this quote is quite interesting at it appears to contradict the previous slide. On the one hand we’re saying that to prioritise between projects, that a quantified business case is an absolute necessity, on the other Gartners view appears to be that the evidence contradics this and that this could actually be creating the opposite effects on the ground. Perhaps this points at two possible causes: There is a skills/experience gap in IT and the Project management community in developing cohesive business cases Payback periods for investment decisions are too short. So again just to make sure everyone is still awake I’d like to ask for your opinion. A show of hands please, in your experience are Business case justifications in your organaistions presented over 1 year, 3 years, 5 years, more??
  • So – you’ve implemented your project and everyone has taken a well earned rest. At the post implementation review you review the performance of the project against the baseline (Scope, schedule, quality), document lessons learned, etc etc. Is that when you check whether the Business case has been realised…….. Is that part of the scope of the project……. Is that the PM’s responsibility or the Business owner of the Project…..
  • Looks quite similar to a table of contents for a project initiation document/project charter doesn’t it? Perhaps the key difference is that a project initiation/project charter document describes the what and the how of the project, but doesn’t necessarily describe the justification for why the project will be delivered and the anticipated return in enough detail. I’d like to test that point if I may via a show of hands: 1) How many project initiation documents/project charters in your organisation include a costed Business case? Looking at the Pyramid to the right – note that the supporting analysis and information is supporting the business case, without it it doesn’t mean much. The key point here is to do your homework on the costs and benefits as well as understanding the scope, objectives, alternatives, risks, schedule, resources etc.
  • So what does the PMBOK guide on initiation recommend? Actually it does cover Business case/business justification. – page 53 PMBOK 2000. “ Initiation is the process of formally authorising a new project should continue into its next phase. This authorisation links the project to the on-going work of the organistion and should business need, market demand, Project selection methods also describe the need to measure value, and uncertainty (risk), PMBOK describes it as the decision model and calculation method. In my opinion, the level of detail in PMBOK doesn’t support the importance of the task, this is an area for more work in the standard.

Business Cases And Benefits Management Business Cases And Benefits Management Presentation Transcript

  • Business Cases and Benefits Management Alan McSweeney
  • Objectives
    • Why is Benefits management an important competency for organisations?
    • What is a Business case, how do you write one?
    • How should the Business case and Benefits be measured and managed during the project’s delivery?
    • Some differing perspectives…..
  • Scope
    • Draws on experience in providing services to Financial services and Corporate clients investing in Information Technology projects.
  • Hints and tips on Mountain Climbing, not a guide to Climbing Mountains…
  • Project Outcomes
    • 2004 Standish Group Report http://www.standishgroup.com/
      • 29% projects succeeded (delivered on time, on budget, with required features and functions)
      • 53% are challenged (late, over budget and /or with less than the required features and functions)
      • 8% have failed (cancelled prior to completion or delivered and never used)
      • Failures cost an estimated US$145 billion
  • Benefits Approach
    • How do we pick the winning investments?
    • How do we ensure that we are getting value from these investments and know that we are doing so?
      • Benefits do not just happen with delivery
      • Benefits rarely happen according to plan
      • Benefits realisation is a process that must be managed like any other business process
  • Four Questions
    • 1. Are we doing the right thing?
      • (Re)definition of business, program alignment
    • 2. Are we doing them the right way?
      • Organisational structure, program integration
    • 3. Are we getting them done well?
      • Organisational capability, support structure
    • 4. Are we getting the benefits?
      • Proactive management of benefits realisation process as a whole
  • Four Questions 2. Are we doing them the right way? 3. Are we getting them done well? 4. Are we getting the benefits? 1. Are we doing the right thing? Alignment Integration Capability/Efficiency Benefits
  • Benefits Management
    • A process of organising and managing such that potential benefits are actually realised
    • Benefits Management means maximising the benefits from projects, changes and initiatives
  • What is a Benefit?
    • Improve
    • Increase
    • Reduce
    • Eliminate
    • Stop
    • The value placed by a stakeholder on the performance improvement or new capability resulting from an outcome
    • Benefits are identified by asking stakeholders to articulate how they believe they (or the people they represent) will experience the value of the outcome, i.e. stakeholders answer the question “what’s in it for me?”
  • Benefits Analysis
    • What benefits do we want / could we get?
    • Identify benefits
    • Link to business objectives
    • Link to enablers
    • For each benefit:
      • How can you measure it
      • Can we quantify it
      • Is there a financial value?
  • Benefits Realisation Planning for Programmes
    • A set of activities to design and plan an integrated change programme to deliver quality and value benefits to patients, staff and local communities
    • Benefit realisation IS NOT only about whether the project delivered things on time to budget, etc.
    • Identifying benefits will not make them happen
      • Preparation
      • Objectives and Outcomes
      • Benefits and Measures
      • Validation and Completion
      • Support, Manage and Update
  • Benefits Realisation Management Process Develop/update business case; time-phased cost, benefit flows;plans Perform to plans Benefits being realised? Assumptions still valid? Determine corrective actions Yes Yes No No
  • Benefits Management Challenge
    • Technology driven
    • Value for MONEY
    • Expenditure proposal
    • Loose linkage to business need
    • IT implementation plan
    • Business manager as on-looker
    • Large set of unfocussed functionality
    • Stakeholder “subject to”
    • Trained in technology
    • Do a technology project audit
    • Benefits driven
    • VALUE for money
    • Business case
    • Integration with business drivers
    • Change management plan
    • Business manager involved and in control
    • IT investment sufficient to do the job
    • Stakeholders “involved in”
    • Education in exploiting.
    • Obtain business benefit then review
  • A Benefits Driven Approach Will …
    • … Allow you to:
      • Build the case for your investment
      • Forecast benefits and business impact
      • Identify key business changes
      • Gain buy-in to the project from all participants
      • Identify early wins and prioritise the application portfolio
      • Reduce risk by having better understanding of expected outcomes and barriers to success
  • Silver Bullets
    • 60-80% of projects do not deliver benefits
    • Success is usually measured in terms of delivery time and cost
    • Is the system in use or useful is rarely examined
    • Failure = Blame = Bad Press = Punishment
    • Lots of projects become disconnected from the business need, processes and people that created them
    • Benefits Management reconnects project to benefits
    • Structured approach that will
      • Make the link between the enablers and the organisation’s strategic objectives
      • Build the case for investment
      • Gain buy-in to the project from all participants
      • Maximise the benefit from investment
  • The Why: A Benefits Led Approach to Project Selection…
    • Is a critical success factor for organisations who are seeking to obtain best in class performance
      • Assuming that you assess/understand your market position relative to market…
    • Aligns the delivery of change with business objectives and strategy
      • Assuming there is an agreed strategy to align with…
  • The Why: A Benefits Led Approach to Project Selection…
    • Enables decisions to be made around portfolio management and prioritisation
      • Not who shouts loudest…
    • Creates a culture of accountability and measurement in service delivery.
      • Or gives the Business back control over the portfolio of projects…
    • High performing companies are 50% more likely to use analytic information strategically
    Best in Class Performance: the Evidence…. Source: Competing on Analytics, Thomas Davenport Low Performers High Performers Have significant decision-support/analytical capabilities Value Analytical insights to a very large extent Have above average analytical capability within industry Use analytics across their entire organization
  • Benefits in Projects
    • We invest in projects because of the perceived Benefits they bring
    • The Benefits justify the project
      • Linked to Corporate Objectives & Priorities
      • Can be wide-ranging
        • Statutory, Social, Economic…
      • Often financial (but not exclusively)
      • Sometimes hard to measure
  • Financial Benefits
    • Time saved, posts lost, costs avoided, costs reduced…
      • Calculate a £ figure
      • Work out timing (investment & saving)
    • Payback (in years)
      • When Savings equal Investment
    • NPV (Net Present Value)
      • A common measure of a project’s value
      • Cash flows adjusted for time they occur
      • Using a 5% discount rate
  • Non-financial Benefits
    • Is this a Corporate priority?
    • Look for a performance measure
      • BVPI
      • Other PI
    • Measure
      • Value at start of project
      • Predicted value at end of project
      • Actual value at end of project
  • Organisation Development
    • The four pillars of Change
      • Driven by the Customer
      • Improving our Performance
      • Learning & Developing
      • Optimising our Finances
    • These describe the type of organisation we want to be
    • Each project has to contribute
  • Later Benefits
    • Project puts a capability in place
      • To be exploited by a later project
    • Must link these projects
      • Is funding in place for later project?
      • Are we committed to later project?
      • If not, investment in first project may be wasted
  • Later Benefits
    • Project delivers as expected
      • But Benefits only measurable later
    • Need to link to process
      • What process?
      • The owner?
      • When and how to measure?
  • Realising Benefits
    • Financial saving
      • Remove £ from next year’s budget
      • Saving included in formal budget setting process
      • Clarity about what was saved where
    • Posts lost
      • At risk register
        • Identify the staff affected, communicate
      • Process based on existing Council policies
        • Consultation, redeploy, retrain … redundancy
        • Minimise redundancy costs
      • Affects timing of realisation of Benefits
  • Tough Decisions
    • Cost constraints
      • We must stay within this
    • Headcount and Budget
      • We need to manage both
    • May require restructuring
      • New ways of working may mean changes to some organisation structures
  • Strategy Alignment to Change Management
    • Strategy
    • Business Vision
    • Strategy
    • Goals and Objectives in a 3-5 Year Investment Plan
    • Products and Services
    • Annual Budget
    • Change
    • Project and Programme Design
    • Business Case
    • Programmes and Portfolio Projects
    • Benefits Management and Realisation
  • Prioritisation: Follow the Money
    • All Project investment decisions should be based on a Financial justification.
  • Benefits Realisation Principles
    • Benefits realisation is the pre-planning for, and ongoing management of benefits promised to be enabled by the successful implementation of a project
    • Sound project management can only enable a business owner (program) to realize intended benefits
    • Accountability for the realisation of intended benefits must rest with the business function, not with the IT project
  • Outcome Management
    • What is an outcome?
      • An outcome (benefit) is the desired result of an initiative undertaken to meet a need or solve a problem
      • Outcomes are final results supported by intermediate outcomes (benefits milestones)
    • Background
      • Outcome Management is focused on the outcomes or results side of an initiative or program
      • Outcome Management methodology is based on internationally recognized project and risk management techniques that has been refined
      • Outcome Management is an evolving discipline
    • Details
      • Cost benefit analysis is a subset of Outcome Management
      • Outcome Management is the potential link to existing tools or other sources of performance indicators
  • Portfolio Prioritisation
    • “ One of the key contributors to poor IT investment performance is an unbalanced approach taken by executives at the project approval stage.
    • Too often, the overriding emphasis is on quick payback or demands for the return on investment (ROI) to be demonstrated in financial terms.”
      • Gartner.
  • Business Accountability and measurement
    • The Business is responsible for ensuring that the Investment made yields the return calculated.
  • Recap: Why do we need Business cases
    • A Critical Success Factor
    • Ensuring Strategy alignment
    • Prioritisation
    • Accountability and Measurement
  • What is a Business case, how do you write one?
    • A Business case should describe the proposition in terms of:-
      • Scope and out of scope
      • Objectives
      • Options
      • Schedule
      • Risk
      • Investment and return.
    • In short, it should describe the reason and justification for initiating a project and explain how the organisation will get there.
  • Identifying Benefits
    • Deliverables or outcomes
    • Cashable v non cashable
    • Efficiency
  • Business Case
    • Features of a good business case
      • Description of benefits – quantified
      • Cost benefit analysis
      • RoI
    • The business case is a logical argument to spend money and Benefits Management creates a compelling reason for the Sponsor / Champion to act
    Is it worth spending this amount to achieve this result?
  • Benefits Management
    • Assigning benefits
      • Benefits manager
      • Service managers
    • Metrics
      • Financial
      • Non-financial
      • Proxies
  • PMBOK: Project Initiation
    • Product
    • description
    • 2. Strategic Plan
    • 3. Project selection
    • criteria
    • 4. Historical
    • information
    • Project Selection
    • Methods
    • 2. Expert Judgement
    • Project charter
    • Project Manager
    • identified/assigned
    • 3.Constraints
    • 4. Assumptions
    Inputs Tools and Techniques Outputs
  • Business Case Activities
  • Presenting a Business Case
  • Exec Summary Name of project Responsible Board Member Project owner Project manager Objective Value Drivers Market launch Estimated cumulated investments Present Value
  • Market Opportunity Region/maturity of market*
    • Targeted region …
    • Description of maturity of market ...
    Competitors*
    • Main competitors (incl. market shares)
    Customers/needs*
    • Targeted customers and their key needs
    • ...
    • Current market volume (as of …)
    • Future market volume (growth / market potential by ...)
    Products/substitutes*
    • Description of products/services
    • Possible substitutes (existing / expected)
    *) Current status Opportunities ... Threats ...
  • Opportunities and Threats Threats
    • ...
    Opportunities
    • ...
    market
  • Description and Analysis of Proposed Offering/Sales Sources What are our products/ services? Who are our customers? What demand is met? How is the money earned (revenue driver, pricing) ?
    • Text
    • Text
    • Text
    • Text
    Our offer
  • Strengths and Weaknesses of Proposed Offering Key Differentiation Factors Compared to Competitors’ Weaknesses
    • ...
    Strengths
    • ...
    Our offer
  • Key Success Factors of Product/Service Offering <Success factor 1> <Success factor 2> <Success factor 3> <Success factor x>
    • Text
    • Text
    • Text
    • Text
    Our offer
  • Strategic Fit and Risk Assessment Corresponding strategic objectives ... … are reflected in initiative ... Potential strategic conflicts or risks ... … are mitigated by ...
    • ...
    • ...
    • ...
    • ...
    • ...
    • ...
    • ...
    • ...
    Strategy/Risk
  • Sales drivers project/product/service
      • (a) Number of Customers*
      • (b) Average quantity per customer*
      • (c) Average price per unit*
      • (d) Sales volume (mn €) *
      • xxx
      • xxx
      • xxx
      • xxx
      • 2008
      • Market share
      • xxx
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      • 2009
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      • 2010
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    <Bubble to add important remarks> *) Generally: (a)*(b)*(c)=(d); (c) in line with pricing model
      • xxx
      • xxx
      • xxx
      • xxx
      • 2012
      • xxx
    Sales drivers
  • Cost drivers: N ame of project/product/service
      • FTE
      • ...
      • ...
      • ...
      • xxx
      • xxx
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      • xxx
      • 2008
      • xxx
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      • 2009
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    Bubble to add important remarks
      • xxx
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      • 2012
      • Quantities or mn €
    Cost drivers
  • Differentiation of project scope and handling of project risks Project Potential project risks and mitigation
    • <Risk 1> ...
      • mitigated by …
    • <Risk 2> ...
      • mitigated by …
    • <Risk 3> ...
      • mitigated by ...
    Aspects not in project scope
    • ...
  • Project phases, milestones and required budgets/resources Budget/resources (mn €, man days) Milestone (interim result) Responsibility Delivery date
    • Project Phase 1
    • Text
    • Text
    • Text
    • Text
    • Project Phase 2
    • Text
    • Text
    • Text
    • Text
    • Project Phase 3 ...
    • Text
    • Text
    • Text
    • Text
    Depedencies
    • Text
    • Text
    • Text
    Implementation
  • Summary of Strategic fit
    • XXX
    • XXX
    • ...
    • ...
    Comments: Strategic Planning
  • How should the Business case and Benefits be measured and managed during the project’s delivery?
  • Project and Benefits Lifecycle
  • Change Management
    • Change requests should assess Business case impact.
    • The approval of scope changes, budget changes, schedule changes should be mapped back to the Business case
    • For Larger projects and programmes, stage gate Business case reviews as part of key phase end milestone reviews
    • Consider changes in the wider Business environment (e.g. the current recession), as drivers to re-assess the in flight portfolio
    • Consider changes in products and solutions as drivers to re-assess the in flight portfolio
      • E.g. Vendor consolidation, changes in Vendor product strategy
      • E.g. New products that might improve solutions/invalidate previous architectures
      • Changes in Organisation structure or composition (mergers/takeovers/sales/joint ventures)
  • Benefit Realisation
    • Most Business cases have a time horizon which extends over a period from 1 – 5 years.
    • So Benefits are often fully realised only after the project has been closed.
    • Who measures the effectiveness of the investment when the project is gone?
      • Project Management Office
      • Business Management
      • IT Management
      • Project Manager
  • Project Management Office and Benefits Management
    • PMO’s are often located in IT, not embedded in the Business
    • Terms of reference for PMO are often quite narrow
      • Focus often on methodology, resourcing, governance and reporting
      • Is there an appetite to extend the PMO into this role…
  • Conclusion: Recap of Seminar Objectives
    • Why is Benefits management an important competency for organisations?
    • What is a Business case, how do you write one?
    • How should the Business case and Benefits be measured and managed during the project’s delivery?
    • Some differing perspectives…..
  • Some Closing Thoughts
    • What are the Critical Success Factors for Benefits Management?
      • If they arent in place what does this mean?
    • Should Benefits management be part of the PM’s remit?
      • If not the PM then who?
    • Should Benefits realisation be placed in a more general Management framework
      • Cobit?
      • PMM Maturity assessment?
  • The Success of Benefits Management in Organisation and projects is
    • Linked to the ability of the organisation to
      • Clearly define strategy and business goals
      • Determine priority of activities
      • Measure costs and success of implementation
    • So to be truly successful Organisations must
      • Understand their customers needs
      • Understand and quantify revenues by customer and product
      • Understand and quantify their cost base (activity costing/unit costing)
      • Understand their relative competitive position
      • Have processes and policies in place to support a Benefits led culture when introducing change
  • Relationship to Other Management Disciplines …… ..Is Benefits Management a core competence of a Project Manager? ……… Should the PM be involved? PMBOK Application Area Knowledge and Practice General Management Knowledge and Practice
  • COBIT
  • Maturity Models
  • More Information
        • Alan McSweeney
        • [email_address]