Building a Compelling Business Case Ken Fulmer Information Workplace Solutions 1.

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Building a Compelling Business Case Ken Fulmer Information Workplace Solutions 1

Transcript of Building a Compelling Business Case Ken Fulmer Information Workplace Solutions 1.

Page 1: Building a Compelling Business Case Ken Fulmer Information Workplace Solutions 1.

Building a Compelling Business Case

Ken FulmerInformation Workplace Solutions

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Learning Presentation Objectives

• 1. Understand the executive perspective about a business case – what makes one compelling?

• 2. How to prepare a business case – the basic methodology.

• 3. Understand how to use the business case throughout the project lifecycle.

• 4. Understand how a business case ties into the process of Benefits Realization.

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Most business cases do not clearly define investment benefits

Percentage of CIOs with no process to evaluate IT investment against business strategy

Percentage of CIOs who don’t compare actual IT project's benefits to original targets

Percentage of CIOs who do not track financial metrics after making an investment decision

51%

68%

74%

Data: Gartner Group

80%Percentage of CIOs who say lack of financial skills makes quantifying IT benefits difficult?

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Why are Executives Frustrated with IT Projects

• Many projects fail to achieve expected value

• Legacy of ROI business cases that are: unrealistically high unknowingly low or unconvincing

• Feeling of broken promises

• Projects often proceed even when the business case falls

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Reasons for weak Business Cases

BusinessCase

BusinessCase

Lack stakeholder involvement and commitment

Focus on technology, not people and process

Don’t identify all potential benefits

Lack alignment with business objectives

Ignore major risks and mitigation strategy

Don’t clearly and credibly document the facts

Aren’t leveraged

Aren’t focused on achieving benefits

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What most executives expect is a business case process that is...

• Driven by the Business and collaborative

• Recognizes stakeholder issues and gains buy-in

• Focused on Business Outcomes and Change

• Able to STOP a project that no longer has value!

Brilliant and convincing

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Executives think about strategy and outcomes for the business

• An organization’s strategy:– Sets the vision, or framework for desired

accomplishments, with associated timeframes– Defines how benefits will be quantified and

measured– Provides the link between project output and

delivered benefits – aka – Better Business Outcomes!!!

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What makes a business case compelling?

TraditionalBusinessCase

Rational investmentdecision

Describes investmentopportunity

Helps managementdecide

CompellingBusinessCase

• Describes investment opportunity

• Helps management decide

Owned by the business Drives Results Drives Subsequent Work Considers Risk

Gets ProvenResults

+

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Sample IT Project Process

Initiation

Genesis

Execution

Controlling

ValueAchievement

Planning

Close-out

Business Case review and elaboration / confirmation at each Approval Stage gate

Multiple Reviews-Per milestone

Benefits Realization Verified

Pre- Deployment Review

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Genesis Phase

• Problem and Solution Options• Current Situation and Do Nothing Case• Identify and Evaluate Options

• Business Case – Feasibility • Business – Strategic, Market, Economics• Technical – Architecture, Security, Tech Options• Financial – ROI, Budgets• Impact Assessment – Organization, Customers, Suppliers, Partners• Risks – Business, Project, External, Internal Ops

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Ensure each stakeholder is involved in the Business Case development process

Chief financial officer

Project manager

Business unit managers/Stakeholders

Investment committee

Chief information officer

Portfolio management

committeeChief technology

officer

Executive Sponsor

(Number/type of stakeholder based on organizational size/complexity)

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Project Types & Economic Targets

1. Distinctive Business Line ROI Economic Case

2. Enabling Technology Benefits Attribution

Example Business Intelligence see next slide

to calculate

3. Infrastructure Depreciation Replacement

4. Regulatory Requirement Pork-Barrel Avoidance

TYPE Method

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Benefit Attribution

• Select several areas and projects and do an assessment of potential benefit• Have users establish a range of potential benefits (best guess - +/- 100%)• Have owner assign a % of that benefit which is attributable to having the

new capability• Take Composite of average benefit X Attribution = Derived Benefit

Attribution - in example below = 9.5 is the sum of the Derived Benefits

Project Benefit Range % Attribution Derived Benefit

“A” 10-20 20% 3

“B” 50-80 10 6.5

Total 60-100 ---- 9.5

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Search exhaustively for potential benefitsand establish metrics for each UP FRONT

Improve workforce efficiency

Increase span of control

Develop process experts

Centralize customer service

Improve partner relations

People Process Product

Reduce transaction processing times

Eliminate non-value added tasks

Minimize errors/rework Standardize processes Implement self- service Implement best

practices

Increase reliability and quality

Reduce complexity Lower future

development costs

Reduce Inventory

Warranty Costs

Increase future scalability, flexibility and agility Technology Costs or Appeal Decrease facilities and management costs

Infrastructure

Business

Improve Market position/share

Create new revenue sources

Shorten product development

Enable premium pricing

React faster to business change

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Benefits beyond ROI measures

• Beyond Financial Gain – tie to Strategy Objectives • Competitive Necessity• Market Demand• Vendor / Industry Standards Changes• Improves Quality or ties to strategic program (such as Six Sigma)

• Strategic Relevance is the second major factor to weight on Benefits• Assign weighting to degree of clarity and fit to the enterprise strategy• Benefit Attribution concepts

• If no ROI or direct strategic relevance –• Meet Regulatory Standards – such as air quality• Legal Requirements – such as email record keeping or file retentions• Ensure business continuity – such as implementing new software if old is not supported

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Intangible BenefitsCan be more emotional – less

Measurable

• Company Reputation • Customer retention and customer satisfaction• Social Commitment• Better Management Information• Better Job Satisfaction• Cost Avoidance

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Brilliant business cases give decision makers all the information they need

BusinessCase

Business Case Table of Contents Executive summary Opportunity/problem definition Options Considered – include do nothing Recommended solution Define Success Criteria & Measurement Impact Assessment – by Stakeholder Cost Benefit Analysis - Risk Assessment Financial analyses - summary Implementation approach/timeline for Business Case

– Value Achievement – Benefits Realization Plan

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Tips on Packaging the presentation

Package for the audience

Executive Summary (two to three pages)

Business language, not technical terms

Financials in the enterprise’s standard format

Body + Appendices for supporting detail

Convincing – use stories & graphics18

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Sample Sunoco Presentation - How to Read the ROI Slides

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Description:

ProcessesProcess As-Is To-Be ROI

Impact

SunocoDealer/Franchise Price Notifications

POS Email Portal L

Coastal Dealer Price Notifications

Fax Portal L

Distributor/Rack Price Notifications

DTN Portal L

Co-Op/Optima Price Notifications

Fax Portal L

Dealer/Franchise Price Surveys

Manual/Phone Portal H

Co-Optima Price Surveys Fax Portal H

Rack Price Surveys OPIS OPIS NA

SunocoNet Implementation

Estimated ROI

Channels Impacted: Dealer/Franchise Distributor Co-Op Optima Internal

A brief description of the process area and key areas of expected ROI will appear here.

Pricing Module: Rack Price and Pump Price Components. Anticipate some modification.

Integration with Sunoco legacy pricing systems required.

Price Surveys: Utilize SunocoNet Online Form Functionality. Medium complexity to interface with legacy system (vs. email to form recipient)

Process Est. Annual Savings

Eliminate DTN for Pricing $XX.XX

Eliminate Fax for Pricing/Surveys $XX.XX

Eliminate POS email for Pricing $XX.XX

Eliminate Survey Data-Entry $XX.XX

Total $XX.XXBusiness Impact

Customer

Sunoco

Low Med. High Complexity/Phase

M/1

Indicates which channels are impacted by the processes. Also indicates whether Sunoco is impacted (Internal).

Indicates which channels are impacted by the processes. Also indicates whether Sunoco is impacted (Internal).

Discusses some of the key technical approaches/issues for integrating SunocoNet to support the identified processes..

Discusses some of the key technical approaches/issues for integrating SunocoNet to support the identified processes..

This area indicates the key processes identified during the ROI assessment and interviews. Indicated are the current As-Is process and the To-Be process. ROI Impact is shown as Low-High (H,M,L). High ROI is >$50,000 in annual savings, Medium is defined as $25,000-$49,000 and Low ROI is <$25,000 in annual savings.

This area indicates the key processes identified during the ROI assessment and interviews. Indicated are the current As-Is process and the To-Be process. ROI Impact is shown as Low-High (H,M,L). High ROI is >$50,000 in annual savings, Medium is defined as $25,000-$49,000 and Low ROI is <$25,000 in annual savings.

Shows the relative amount of business change impact on the customer (Dealer/Franchisee, Distributor) and Sunoco. This is based on subjective industry experience.

Shows the relative amount of business change impact on the customer (Dealer/Franchisee, Distributor) and Sunoco. This is based on subjective industry experience.

Indicates the integration complexity (Low-High) and the planned implementation phase.

Indicates the integration complexity (Low-High) and the planned implementation phase.

This area shows the tangible ROI annual savings by process area.

This area shows the tangible ROI annual savings by process area.

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Use the business case to guide project execution

Project timeline

Scope change

Schedule/cost trade-off

Phase review

Phase review

Change to the business environment

Change in management structure

Portfolio re-prioritization

Phase review

Risk assessment/mitigation

Schedule/cost/scope trade-off

Execution

BusinessCase

BusinessCase

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Harvesting Benefits – Value

• Value Achievement – Realizing Benefits after the Project

• Governance Process should include ownership of Post Project

• Create a plan during project close-out for benefits realization

• Establish benefits measurements up front and review

• Post Audit Review should be done by non-project staff (Team)

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Benefits Realization

• A process that ensures project benefits are realized as anticipated

- Intended benefits are identified at the project proposal stage

• Cost Benefit Analysis with timeframes

• “Benefit Owner” is responsible for benefit

– Ends with post-implementation measurement to see if the project delivery matched expectations

• Business case is intended to fit within the Benefits Realization Process

• It is all about getting “Better Business Outcomes”

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Recommendations

Develop business cases collaboratively with all the stakeholders

Carefully document business cases so they are clear, concise, credible, connected to business objectives and cognizant of risks

Create a Benefits Realization Model – ROI, Strategic Fit, Risk, and Impact are typical components.

Leverage the business case throughout the project life cycle to achieve the payoff – progressively elaborate benefits and costs as the project learns them.

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QUESTIONS & Comments

• Ken Fulmer• Former CTO – Sunoco, Inc• Former CIO – Delek, US • Principal – Information Workplace Solutions, Inc.• Current – Vice-Chair, IIBA Board of Directors• [email protected]

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