Why Projects Need A Business Case

The business case creates transparency, for investments and the benefits expected. Although creating transparency is the key purpose of project management many business processes such as the V-Modell XT neglect this project aspect. Projects fail because of mistakes made by management rather than technical issues, so why are we still applying processes that do not include a business case?

To explore this and to find out how important transparency of costs and efforts is for project success, I will compare PRINCE2 and V-Modell XT.

„The Stars might lie, but the numbers never do.” – Mary Chapin Carpenter, „I Feel Lucky”

Projects are investments

Projects cost money. Somebody invests money to reach a certain goals and to make a vision become reality. Effective project management means making the benfits of this investment as clear as possible. An investor should be able to instantly see how much money he or she has invested and what for, and how much money still needs to be invested to create certain additional benefits. This is exactly what a business case does.

The business case is the vision captured in numbers; well, a vision cannot only be expressed in numbers but for now I want to focus on them.

Why numbers? Numbers are a universal language, each project contributor knows what they mean, especially if they represent money. If the value to be created is tangible for all contributors the business case has fulfilled its purpose.

The business case makes options for action transparent for the purchaser, and there are at least two; doing nothing or carrying out the plan. But the business case is not only important for these general decisions. A business case provides orientation for all decisions to be made in projects, the small ones as well as the big ones.

Each project contributor must make decisions on a daily basis. These decision have direct impact on the quality of the final product. If these decisions are made with the added value of the product in mind the quality will inevitably increase. If the project member is unsure of his role in the process of creating this added value his decisions will be left to chance, which is unacceptable for me as a client.

All project members and stakeholders can bring their ideas, their creativity and their experience to the table in order to create a potential solution. But not all approaches to projects facilitate this. The business case must allow for all project members to contribute and to act, with the client in mind; which will maximize the quality of the product.

What is a successful project?

Business processes are supposed to make project execution easier and success more probable. But what does successful really mean?

A traditional definition for a successful project is the delivery of a finshed product including all functionalities and within the defined time frame and expected costs. An example: In the 1990s, Motorola developed the satellite communication system Iridium which was delivered on time, within budget and in the desired quality. The system went on sale, and stayed there. Nobody wanted it and Motorola didn’t make any money.

Another way to measure success is the ROI; does the project result create added value for the company? Production of the movie Titanic was a disaster from a project management standpoint, be it effort. costs, resources or dates. Still, the movie went on to become the most successful movie of all time, box office wise. I would argue that you may indeed call the project a success.

Business processes can be divided into two categories. Those that put emphasis on investments through the creation and maintenance of a business case, and those that place technical aspects in the foreground, e.g. requirements and traceability.

Business processes

A business process defines and structures the entire product development process. Creating a product results in costs; does looking at benefits and added value of business process make sense or is it out-of-scope? In my opinion it does ake a lot of sense.

An example: Years ago a California-based company called Apple brought a phone to the market that lacked a lot of features common for phones of its price tag. Since then, Apple has released a new version of this phone, all of which expended its feature range.

Obviously the people at Apple did not simply allocate money, elicit requirements and realize and test these requirements. Instead they put a lot of work into communicating the business case which made it clear to all developers that it is acceptable to neglect requirements if in return all existing details of a product are simple to use, intuitive, logical, accessible, elegant and stylish. Everyone was able to confirm that a positive use experience did indeed outweigh missing features.

The development process at Apple, the business process, is absolutely in line with the business goals. Had the business case not resulted in separating necessary and unnecessary features with the goal of early rollout, the specification would probably have been much more extensive. This would have resulted in less profit because the first iPhone would have entered the market much later.

This example shows that it is indeed possible to make money from “unfinished” products. It also shows that a business case makes sure that relevant product properties are realizes in a succession necessary for business success.

I look at the term business process as holistic, general and more success-oriented. After all, the aim of business processes is to ensure success. It is important to always see such a process in the context of a business it is applied in.

A business process is a way of standardizing information flows. A business process creates knowledge on two levels; knowledge about the process (i.e. people collaborating in companies) as well as about the product (i.e. the result).The knowledge results from the exchange of information between people. Business processes define ways of communication as well as the transport and storage of information. All insights gathered in this process are the basis for decisions made in the project, on many levels and by many people.

The following is a visualization of this information flow:

Information flows in projects.

This is of course a simplification; activities overlap and take place on a variety of levels. To ensure their positive impact on the value added all participants need a guiding line, the business case. This ensures and enhances the ability of all individuals to contribute to a high-quality of the end result.

The V-Modell XT

The V-Modell XT is the standard approach to projects in federal authorities and does not include a business case. There is the so-called IT-WiBe, the Wirtschaftlichkeitsbetrachtung (consideration of economic feasibility) which can be used in the project approval process sa well as for other uses. My experience is that it is rarely used and if it is, it serves more as an alibi. In reality, the V-Modell XT is a waterfall; this is even necessitated by the calls for bids as well as by the V-Modell XT itself.

The V-Modell follows a conformance to plan approach. Fitness for purpose is not part of the V-Modell world view. This causes two problems:

1. The V-Modell does not facilitate the planning of the actual product.
2. The V-Modell does not support the project contributors in their decisions.

From an economical point of view, the probability of success is not supported sufficiently or sustainably by the V-Modell XT.

PRINCE2

PRINCE2 is a business case model. All practices and processes in PRINCE2 aim at making the business case more transparent. After approval, the business case id revised and updated in each management phase while the work breakdown structure makes the vision of the purchaser a reality, based on the business case.

In each management phase a control cycle is passed through:

From planning to products to…

The business case template in PRINCE2 suggests that answer the following questions on a regular basis: Are the profit expectations justified? Are project plan and business case in line with each other? Are the reasons for this project in line with the business goals?

In contrast to the V-Modell, PRINCE2 does not at all regulate the work of specialists. Their work, information gathering and decision-making is regulated solely by the business case and the incremental work breakdown structure based on the business case. The feedback loops included in PRINCE2 makes it even more adequate from an economical point of view.

Conclusion

Projects need a business case. It guides management, project management and the entire team in their daily decisions and creates a transparent basis for project success by synchronizing individual efforts and orienting these efforts toward a common goal.

PRINCE2 institutionalizes the impact of the business case on the development of project results and uses feedback loops as well as the concept of continuous learning as a means of optimizing project results for added value. The V-Modell XT may well learn something from PRINCE2.