This document is a presentation on writing business cases. It was presented by Venkadesh Narayanan from Fhyzics to the IIBA Chennai Chapter. The presentation provides an overview of key components of a business case, including defining the problem, analyzing costs and benefits, identifying risks, and presenting the analysis in a business case report structure. It emphasizes that a business case should demonstrate value to stakeholders and use metrics like net present value, return on investment, and benefit-cost ratio to evaluate investment options.

1. www.fhyzics.com | cs@fhyzics.com | 900-304-9000 | 900-305-9000 | 900-306-9000
Writing a Business Case
EEPTM of International Institute of Business Analysis [IIBA®], Canada
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Presenter
Venkadesh Narayanan, BSME, MBA, CBAP®, PMI-PBA®, CBPP®, CPRE-FL
Principal Consultant
Former Indian Civil Servant [IRAS 2001 Batch]
LinkedIn Profile
This webinar is
brought to you by
IIBA® Chennai Chapter
29-Oct-15

2. Thank You Note
Mr. Kannan Santhanam
President
IIBA® - Chennai Chapter

3. BA-TODAY.COM
The Business Analysis Magazine

4. Knowledge
Areas
Foundation
Chapters
GaNeCaSA
PRABaSCo
PCDC
VaVePOSA
PQRST
VaPeTOPA
5
6
4
6
5
6
56-46-56 = 32 Tasks
BABOK® V2 Overview

5. Enterprise Analysis

6. Define Business Need
Assess Capability Gaps
Determine Solution Approach
Define Solution Scope
Define Business Case
BABOK® V-2 : Enterprise Analysis

7. Vision-Goal-Proposal-Business Case-Project

8. Setting The Stage
At the end of this session,
1. You will become a master in writing business cases
2. In any business case presentations you will be the winner

9. Setting The Stage
At the end of this session,
1. You will become a master in writing business cases
2. In any business case presentations you will be the winner
But you will learn
the necessary
ingredients of a
BC
Not the question
of winning or
losing

10. Setting The Stage
Template
Creativity
Pragmatic
Pragmatic: dealing with the problems that exist in
a specific situation in a reasonable and logical
way instead of depending on ideas and theories -
http://www.merriam-webster.com
Document
Process
People

11. The BC Writer's Mind Set
Cost + Risks Benefits + Risks

12. Direction for the Organization
When one sets himself on a wrong road,
It is not possible to reach the right destination
At least not at optimal cost!

13. A 2009 survey of information technology-related
investment success by the Standish Group
shows that 44 percent of all projects are
somewhat challenged; while they may be
completed and operational, they may be over
budget, not on time, or providing fewer features
and functions than originally specified. Twenty-
four percent of projects get cancelled
somewhere during their lifecycle, leaving the
corporation with no results but only costs.
These percentages are certainly improved from
1995, where 53 percent were challenged and
31 percent cancelled, but it still only leaves a
success rate of less than one third. Various
other studies over the past 30 years have
confirmed this picture.
Survey from Standish Group

14. Capacity Vs. Capability
Scenarios Capability Capacity Decision
1 No NA Go ahead
2 Yes No Go ahead
3 Yes Yes Return

15. KIN Phone from Microsoft – A Case

16. KIN Phone from Microsoft
• In order to support the younger market to use the social
networking sites Microsoft designed KIN phones.
• After a two-year development project, they were
manufactured by Sharp and sold through Verizon Wireless
in USA.
• After just 2 months in the market in the first half of 2010,
Microsoft pulled the plug. It is rumoured that only 503
phones were actually sold. Also the overall project costs of
designing, producing and marketing the KIN phone were
reported to be around US$1 billion.

17. KIN Phone from Microsoft
• The failure can probably be attributed to tough competition,
which made a new entry difficult.
• Many people never even heard about the KIN phone,
showing a lack of marketing and suggesting also a lack of
senior management support.
• Reports also indicate that the phone lacked some basic
function required by users (such as calendar or the ability to
run games).
• The high cost of the data and texting plans may also have
been a factor.

18. Definition of a Business Case
Business Case describes a document delivering a cost-benefit
justification for an investment proposition; it may also be called
a benefit analysis, a ROI study, a payback investigation, or a
value finder.

19. One Sentence Business Case
In order to improve ___________ we are doing __________ ,
Which is worth __________ and can be measured by ______ .
Business
pain point
Proposed
investment
Net present value Bottom-up metrics

20. Business Case Impact & Process
Business Case Box Selected Rejected
Correct Investment Excellent Benefits Opportunity Lost
Wrong Investment Disaster Risk Avoided
Understand
Analyse
Costs
Discover
benefits
Evaluate Present Measure

21. Questions to Stakeholders
1. What goals and priorities does the stakeholder have?
2. What past experience does the stakeholder have with
similar investments?
3. How can the stakeholder benefit from the investment?
4. What expectations about the project does the stakeholder
have?
5. What input is required from the stakeholder during the
business case phase and during implementation?
6. What questions and doubts does the stakeholder have
about the suggested investment?

22. Main Components of a Business Case
StrategicFlexibilityOptions

23. Cost Stages
Decommissioning
Operation
Commissioning
Pre-commissioning
Pre-business case

24. Cost Types
Hidden Costs – come up after the investment is approval and
were not thought about during the initial business case.
Knock-on Costs – are often underestimated when changes in
one part of the organization have effects on other parts of the
organization.
Soft Costs – (e.g. productivity decrease during transition) are
difficult to estimate; but they are directly attributable to the
investment.

25. Cost Types
Sunk Costs – have irreversibly been incurred before the
investment idea came up; not to be included into the business
case.
General Overhead Costs – are typically not included, as a
business case builds on marginal costs and benefits.
Opportunity Costs – are related to missing other mutually
exclusive investments. Should be mentioned in the business
case, but must not be included in NPV calculation.

26. Cost Types
Sunk Costs
General
Overhead Costs
Opportunity
Costs
Hidden
Costs
Knock-on
Costs
Soft
Costs
Always to be included into NPV calculation of business case
Not to be included into NPV calculation of business case

27. Investment Characteristics
By Scope
Response
Option
Large and
Small
Must-do
Diversi…n
Expansion
Cost-
Saving
R&D or
Corn-
seed
Independent
investments
By dependency
Mutually exclusive
investments
Contingent
investments

28. Time Value of Money
A dollar today is worth more than a dollar tomorrow
$100
$110
$121

29. Time Value of Money
Future Value Function
FV = x * (1 + r)n
x – denotes the investment value
r – denotes the interest rate
n – denotes the number of future periods

30. Benefit Taxonomy

31. Features vs. Benefit
• Feature only represents an element of functionality
• Benefit relates to the business outcome
• Feature is what we use and benefit is what we get
• Feature and benefit have cause-and-effect relationship
• Feature yields the benefits
• Features need not have to be part of the business case
• But benefits must be listed in the business case

32. Return on Investment (ROI)
𝑹𝑶𝑰 =
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐧𝐞𝐭 𝐩𝐫𝐨𝐟𝐢𝐭𝐬 𝐨𝐟 𝒊𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐛𝐨𝐨𝐤 𝐯𝐚𝐥𝐮𝐞 𝐨𝐟 𝒊𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕

33. Profitability Index (PI)
𝑷𝑰 =
𝑵𝒆𝒕 𝑷𝒓𝒆𝒔𝒆𝒏𝒕 𝑽𝒂𝒍𝒖𝒆
𝑼𝒑𝒇𝒓𝒐𝒏𝒕 𝑰𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕

34. Benefit-Cost Ratio (BCR)
𝑩𝑪𝑹 =
𝑷𝒓𝒆𝒔𝒆𝒏𝒕 𝑽𝒂𝒍𝒖𝒆
𝑼𝒑𝒇𝒓𝒐𝒏𝒕 𝑰𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕

35. Hazards & Risk
Fortuna – The Roman goddess of randomness
Hazards are things that can go wrong and cause
harm to the investment project.
Risk is the chance, that the investment project
could be harmed by a hazard.
Risk Identification | Assessment | Treatment
Business Risks | Financial Risks
Technical Risks | Implementation Risks

36. Structure of a Business Case Report
Preface
Table of Contents
Executive Briefing
Recommendation | Summary of Results | Decision to be Taken
Introduction
Business Drivers | Scope | Financial Metrics
Analysis
Assumptions | NPV-CF Statement
Costs | Benefits | Risks
Strategic Options | Opportunity Costs
Conclusion

37. Question & Answer

38. www.fhyzics.com | cs@fhyzics.com | 900-304-9000 | 900-305-9000 | 900-306-9000
Thank You
28/10/2015 V1.0
This webinar is
brought to you by
IIBA® Chennai Chapter
You can download this presentation from our
BLOG at http://bacourse.com/blog
You can access this recorded presentation from
IIBA® Chennai Chapter’s YouTube Channel