Lesson 05: Business Case, Part 1

Welcome back! This is the first lesson about themes. We start with the Business Case theme, which will be covered in six lessons. This theme is the longest of the seven.

Based on AXELOS PRINCE2^® material. Reproduced under licence from AXELOS. All rights reserved.
Note: PRINCE2 2017 edition is now called PRINCE2 6th edition.

00:07 – Welcome to the Business Case Theme.
00:10 – The exam contains many scenario-based questions.
00:14 – Therefore, I will run through a number of questions and Nader will comment on these questions as we go on.
00:20 – So let’s start at the very beginning, at the Starting Up a Project process.
00:25 – Nader, when does a PRINCE2 project first think about the Business Case and where does the information come from?
00:34 – As soon as possible.
00:37 – Could you elaborate on it a little bit?
00:41 – Well, preparing the Business Case is one of the first things we need to do in the project because we want to know if it is justifiable, if it makes sense to go on with the project and invest in it. Yeah.
00:51 – So, the first thing that we do in a project, what is it? It’s Starting Up a Project process.
00:56 – That’s where we create the Business Case.
00:59 – And for the information, it can come from many different levels of …
01:04 – layers of management in the organization, a part of it can come from the Project Mandate.
01:10 – Okay, so the Project Mandate, alright.
01:13 – Yeah. What I mean is that those sources in different layers of management in the company will reflect their information initially in the Project Mandate.
01:23 – Well, after that, the Project Manager can go on and ask many different people.
01:28 – Well, Executive actually, that’s prepared by the Executive in the Starting Up a Project process.
01:33 – Yeah. So the Executive is the main person who drags out the information. Yeah.
01:36 – If it’s not already there. Yeah. Yeah, okay.
01:39 – Well, the Project Manager also helps.
01:41 – Yes, yeah, okay, let me go into a quick summary then. Good.
01:46 – So, a project normally starts or does start with the Project Mandate, and this can include some business reasons.
01:52 – Then the outline Business Case is created by the Executive, which is actually a draft Business Case document and the Project Manager then can help out the Executive by gathering the benefits information from the Senior User.
02:06 – The estimated cost of the project at this time will most likely be far from accurate.
02:11 – You could say actually it’s a wild estimate at the moment.
02:15 – So question two, let’s consider the types of project that need a Business Case, okay?
02:22 – So, for example, an organization has to do a very urgent project, and it must start to create the product as soon as possible as users want the product yesterday, so it’s a bit like a normal IT project, I think, in a way.
02:37 – This is how many of them start to happen. Yeah.
02:40 – Therefore, the project has decided to start to create the highest priority products first, and have chosen to skip the Business Case so they can get started quicker.
02:49 – Is this appropriate, do you think? Absolutely not.
02:53 – But they’re in a hurry.
02:55 – Well, of course, that’s what happens. People skip planning and, well, preparing a Business Case is some form of planning, but that’s not a good idea.
03:04 – My usual example is that when you want to go somewhere that you’re not so familiar with, and you don’t have a lot of time, you’re already late.
03:12 – Would you skip setting the navigation on your car?
03:16 – Of course not. That’s the first thing we should do.
03:19 – That’s the same. Yeah, that’s really the same and you do it because you want to arrive there as soon as possible, not because you like to waste your time or waste your money. That’s the same here.
03:29 – For the Business Case, we have two main purposes, in my opinion.
03:34 – One is to know if the project is justifiable, it if makes sense to do the project. Yeah.
03:40 – That’s helpful in this case as well and also the other thing is that the Business Case helps us make high-level decisions in the project and those high-level decisions are still needed in the beginning of the project, even if we don’t have enough time.
03:58 – When you say high-level decisions, that’s another way of saying better decisions.
04:02 – Is that correct? When I was asking sort of why are we doing the project and the Business Case would guide us.
04:08 – Yeah, that’s our high-level decisions. We don’t use a Business Case in really detailed decisions.
04:14 – Alright, let’s compromise, on high-level decisions. Okay, good.
04:17 – So all projects need a Business Case, even very urgent projects, and look at the Business Case like the heart of the project, and you should always ask these questions.
04:29 – So what are the business reasons for doing the project, and is the Business Case aligned with the strategy.
04:34 – Now who knows the company’s strategy or who are you going to ask?
04:38 – And does the project make financial sense?
04:43 – One of the first documents created in the Starting Up a Project process is the Project Product Description.
04:48 – I like to call this the main product description because it’s the main deliverable, and it also contains the customer quality expectations.
04:56 – So the question, Nader, for you is what is the relationship between the Project Product Description and the Business Case?
05:04 – A good relationship. Happy?
05:08 – Yeah, happy together. Well, the Project Product Description tells us what the product is and to do that, it has explanations about the scope of the product and quality of the product.
05:23 – That’s the main two parts of the product.
05:25 – I think the word scope is very important there.
05:27 – It’s the first document that describes the scope of the project.
05:30 – Yeah, and that’s also the case for other product descriptions, smaller product descriptions.
05:35 – Again, we have the scope and quality. These two are always together, but anyway, in the Business Case, we want to primarily compare the cost of creating the product to the benefits that we will have by using the product.
05:50 – That’s the main thing. That’s the justification of the project, and when we want to do that, we need to know what the product is.
05:58 – So it mainly helps us with the first part, which is estimating the cost of creating the product, but also affects the second part, the estimated benefits because that depends on the features that we have in the product.
06:09 – So we are not able to check the justification of the project unless we know what product we are going to create and that information comes from the Project Product Description. Is that fine?
06:22 – Yeah. I like it so far. Okay, we’ll do a quick summary.
06:26 – So the project will deliver the main product at a certain cost and users will use this to realize the expected benefits.
06:34 – So the difference between the cost of creating the main product and the expected benefits is actually the return on investment, and this is the Business Case.
06:44 – In some cases, a Business Case may already be created before the project starts.
06:50 – So, for example, a program provides a Business Case with the Project Mandate.
06:56 – Then the Executive has little or nothing to do in the Starting Up a Project process.
07:00 – Now a question based on this.
07:03 – The Project Manager adds this Business Case document to the Project Brief without creating it.
07:09 – Do you think this is appropriate? Without creating or without checking?
07:12 – Without checking it. Without checking it. They just do like mainly a copy and paste.
07:15 – Just moving it from here. Yeah.
07:17 – That’s too lazy in a bad way. There’s sometimes lazy in a good way.
07:22 – But why should they check it? I mean what kind of things would have changed?
07:26 – Well, you know, the Project Manager has some responsibilities for the Project Brief.
07:32 – So whatever you put there, you should also check it.
07:35 – Maybe there is a mistake in the document.
07:38 – That’s the least they can do and on the other hand, in that outline Business Case, we still have information about the cost of creating the product and to know the cost of creating the product, we need to know a lot about the way the project will be run, and the Project Manager has a lot to do with that. Yes.
07:58 – They also have access to many of the team members probably.
08:01 – So those people in the program or the portfolio management layers have estimated the cost, but we can still go through it and see if it’s realistic. That, of course, really helps.
08:12 – Yeah. So, the program can provide a detailed Business Case and this happens a lot where you have similar projects.
08:18 – For example, if you roll out a software application to a new location, it’s similar perhaps to other locations that you’ve done.
08:25 – So, if the Business Case is provided by the program, then the Project Manager and Executive will just check that all is okay.
08:32 – For example, the cost can change slightly and that’s basically what they should be checking.
08:38 – What type of information would you expect to find in the outline Business Case?
08:45 – Okay. I’m not the type of person who can remember the things, and for the exam, by the way, when you have a question like this, you can easily go through the manual and check what the headings are. Yeah.
08:56 – But you still need to know or have a good idea of what it has to be.
09:01 – So for me, based on the things I know about PRINCE2, the main thing I can say is that our main purpose is to check the justification by comparing the cost of creating something to the benefits realized by using that.
09:15 – So that’s the main two pieces of information we have there, the cost, estimated costs and the estimated benefits. Yeah.
09:23 – And still there are some additional things for them, For example, the major risks in the project can change the cost of creating something and also the benefits realized by it.
09:37 – So we also need to include some information about the major risks. Yeah.
09:42 – And in most documents of this type, we have many assumptions.
09:48 – It’s always a good idea to document the assumptions.
09:51 – I don’t know if that’s mentioned in PRINCE2, but anyway it’s a good idea to have assumptions.
09:55 – Yeah, I think the Project Plan is where they put the assumptions.
09:58 – That’s one for the assumptions? Not in the Business Case?
10:03 – Okay, so we don’t have it in the Business Case, but it’s a good idea to have it.
10:08 – Yeah, that’s about it or maybe some constraints for the project.
10:13 – If we have a deadline, for example, because it affects the cost of the projects.
10:18 – Okay. What else do we have?
10:20 – Well, I will go to them now. Okay?
10:23 – So the outline Business Case, first of all, can be tailored to suit the project, and I’ll just go over the most common sections.
10:30 – So first of all, we have an Executive Summary, just in case our leadership has a very short attention span.
10:38 – Then, as a reminder for the reasons for the project, and this will come from the Project Mandate document.
10:45 – Then we have the expected benefits, which you’ve said, and disbenefits, that is a reminder of who’s going to be hurt by the Business Case.
10:53 – Then an overview of the timescale. Now this is clever, it’s the timescale for the main output, but also the timescale for the benefits that we’re going to get in the future, so when these will be arriving, how far these benefits are away, and then, as you said, the costs for the main output to do that, which includes the future maintenance cost, which is actually a good thing to consider because it will help figure out which is the best approach to do as well.
11:22 – Then what kind of approach you’re going to do and, of course, the first question should here …
11:26 – should be, well, what happens if we do nothing.
11:28 – Then the investment appraisal, which is a summary of the cost versus the expected benefits and, as you said, then an overview of the major risks.
11:38 – I think two of the things that I didn’t say were really important.
11:41 – One was the approach in the project, the way we’re going to do it.
11:44 – For example, do it in-house or outsource it. That affects the cost a lot. So that’s an important option. Yes.
11:50 – And the other thing, you mentioned doing nothing and mentioning the other options that we have instead of doing the project as defined in the Business Case.
11:59 – That also helps understand the justification much better. Yeah.
12:04 – That’s a very fundamental part of the Business Case.
12:06 – Yeah, correct. I didn’t go into detail now because that comes up later at a certain another question, so we can go into a little bit more detail. Okay.
12:13 – Right. So the purpose of the Business Case Theme, as a reminder, is to provide a structure to judge whether the Business Case is desirable, viable and achievable.
12:23 – Now what do these mean?
12:26 – And I always, when I started to get into PRINCE2, I always had a big issue trying to remember the differences between them.
12:31 – So, I doubt if you know this because I always have to look it up, I think, but now I have a clue.
12:38 – There was a time that I knew this, but it’s the kind of thing I can never remember forever. Yeah. It’s not so easy.
12:45 – So maybe you can just go on and tell it.
12:49 – Okay, alright. This is where the manual comes in handy. Another sticker in the manual. Yeah, exactly, yeah.
12:54 – So desirable is focused really about the product.
12:57 – So is the product really needed, is it desirable.
13:00 – Viable is more of a technical thing, so asking is it technically possible to do.
13:05 – For example, if you want to build a Smartphone with a battery that will last two weeks, that’s not possible just yet, you know.
13:12 – It’s now 2017, so that’s probably, you know, just a reminder.
13:18 – And achievable, if you think, is the last one, you just think of benefits when you think of achievable and then you will have it.
13:25 – So are the benefits achievable, and actually this should be called benefits achievable and that will make it much easier to remember.
13:33 – So one of them is about the technical aspects, the other one is about money.
13:37 – Yes, the benefits, yeah. Okay. Which one was which?
13:41 – The last one. Desirable, viable, and achievable. So achievable must be the benefits one. Okay.
13:47 – Okay? So that’s a good way to remember it.
13:50 – So an organization has a big website and they register lots of people.
13:54 – Now there’s a big change in the European Law regarding privacy information, and the website must be updated because we’ve got to keep the data secure.
14:02 – So this is like a compulsory project and because it’s a compulsory project, the Project Manager says, “Well, there’s no need for a Business Case.” What do you think? I think that’s very common unfortunately, but that’s Yeah, sorry, go on. That’s based on an assumption.
14:21 – The assumption is that we have only one option.
14:24 – If you really think that you have only one option, then some of the reasons for having a Business Case will be removed, but we have two problems here. The first one is that that’s not the only reason we need to have a Business Case because it also helps us make the high-level decisions, even if we don’t have any other options, and the second one is that, always have options, more than one option. Correct, yeah.
14:49 – If it’s compulsory, you still can have different type of products that can satisfy that new regulation, for example, that’s one thing, and the other thing, you can just do nothing.
15:03 – That’s always an option. You won’t be able to use … to have the service anymore, but maybe the service after that change won’t be justifiable. Yes.
15:13 – So you will stop that service and do other things in your company, other lines of business as usual.
15:19 – Another option might be in this case, just as an example, will be to hold less information about the users, maybe you’re gathering too much information that they don’t actually need.
15:29 – I mean what do you need besides a user ID and a password. Yeah, that’s right, yeah.
15:33 – And forget them. Then you can, not escape the policy, but you can Remove the question. Yeah, you can remove the question. Instead of answering them. Yeah, that’s also good.
15:44 – Yeah, good. Okay. So, first of all, all projects need a Business Case, and the first question to ask is, normally you should ask is, what happens if we don’t do the project? And this case could be, well, 98% of our clients will no longer be able to access our database.
16:00 – So, 98% of our customers will no longer be able to access our service.
16:05 – This actually is your Business Case because 98% of your clients will be affected.
16:11 – So, example, let’s say of a poor Business Case, let’s say that you have another database where you were keeping information, but only 2% of your clients will not be able to use the service, and this can have a value of about, let’s say 20,000 Euro, but if you update it, it could cost you 200,000 Euro.
16:32 – So, it can really show here that continuing with this project would be not a very, very good idea.
16:39 – So we should consider this as a very, very bad project and a bad idea and just shut it down.
16:44 – So, one of the first things is to think about options. Yes, yeah.
16:48 – People don’t do it properly. No, no.
16:50 – They just pick the first thing they have in mind. Yeah, they run with it, yeah.
16:54 – Okay, so let’s look at which project or which principle best supports the Business Case Theme.
17:01 – You would like this one. Okay.
17:04 – So in an automotive company, the Executive says that Manage by Exception best supports the Business Case Theme and the reason is that if the Business Case is not in tolerance, then the Project Manager must alert the Project Board.
17:19 – Is this correct? Is this the main principle for the Business Case Theme? Manage by Exception?
17:25 – It’s correct that there’s a relationship between the Manage by Exception principle and the Business Case Theme, and we usually have relationships among all of them, but the main thing is having a Continuous Business Justification.
17:38 – That’s the principle that is almost the same as the Business Case Theme. Which sticks out.
17:45 – Yeah. That’s looking at the same thing from two different angles. Yes.
17:50 – But still it’s important to understand that almost all principles and themes and processes are related and they support each other.
17:59 – Yes, yeah. That’s often, I get confused on which theme best supports or how many principles best support the different things because there’s always a link, you can always find a link between them. Yeah.
18:11 – But here it’s a bit obvious.
18:14 – So, the principle Business Justification best supports the Business Case Theme and it states that there must be a justifiable reason to first of all start the project, and then this must be checked throughout the project.
18:28 – The Manage by Exception principle is more about delegating authority from one level to the other, and each level can … so each level can continue with their work and get their work done.
18:43 – That’s question nine. I think that’s enough, is it?
18:46 – Yeah. I think we need to have coffee. Yeah, okay.

Discussion of the Business Case theme continues in the next lesson.

Scenarios/questions we’ve discussed in this lesson

When does a PRINCE2 project first consider the business case, and where does the business case information come from?
Scenario: An organization has to do a very urgent project and it must start to create the products ASAP as users want these products yesterday. Therefore, it is decided to tailor the project and skip the business case. Is this appropriate?
What is the relationship between the project’s product description and the business case?
Scenario: A detailed business case is provided to the project with the project mandate, so the executive has little to do in the SU process. The PM adds this business case to the project brief without checking or modification. Is this appropriate?
What type of info would you expect to find in an Outline Business Case document?
The purpose of the business case theme is “to provide a structure to judge whether the business case is desirable, viable and achievable”. What does “desirable, viable and achievable” mean?
Scenario: An organization has a website with 500,000 registered users. There has been a recent change in the law and the website must be updated to protect customer data. As this is a compulsory project, the executive says there is no need for a business case. Is it correct for the executive to think like this?
Scenario: During an automotive project, the executive says that the “Manage by Exception” principle best supports the business case theme. Is this correct?

Lesson 05: Business Case, Part 1

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