Lesson 08: Business Case, Part 4

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

00:06 – Okay, so scenario. We have a Senior Director in the company and he comes to you as the Project Manager with a change request and he’s very passionate about it, and you think, “Well, what a bad idea this is.” So as a Project Manager, how should you respond and still keep your job?
00:26 – Okay. As I mentioned in the previous lesson, I never say no because it creates a negative environment there.
00:34 – I say, okay, I will ask for more information about the change they have in mind and the benefits that it will create for the project, and then I will ask them for some time or maybe we can discuss it there.
00:50 – I will tell them about the consequences of applying that change, how much more time we need to finish the project and how much money we will need to add to the project, and what types of risks will be added to the project.
01:04 – I try to make it clear and then ask them, “Do you want to make this change? Okay.
01:11 – Do you want to increase the budget and time and so on to have this new feature, for example, in your project?” and they usually say no.
01:21 – Okay. That’s more proactive than my summary actually. Really? But it’s good, yeah, yeah. Okay. What do you do?
01:26 – Oh, I’m taking it very, very easy, you know.
01:29 – So, what I advise to do would be to say, “Sure, come on in, you know, and let me sit down with you,” and you help them to fill out the change request form, you’re excited to do it.
01:38 – You make sure to gather all the requirements including the quality requirements because often they might say, “Oh, it’s just something quick and dirty, something fast,” but, okay, what does that actually mean, and because you want to be … you want to deliver it in the way that they … the way we want.
01:54 – Then, of course, you gather the estimate. You say, “Now I will ask the Team Manager to estimate this,” because in a way you don’t always know and then we look at calculating the benefits, and we can double check these as well. And you keep smiling all the time, and then you give that forum to the Change Authority, and then you say, “Oh, I hope the Change Authority will now allow that through or not.” So you can keep smiling all of the time. Yeah, yeah, yeah. That’s a good idea.
02:20 – Well, I think that was the same answer, but you put it into a framework of PRINCE2 and used the different things, of course. Yeah. Yeah.
02:30 – That’s the whole idea, be positive. Don’t reject things.
02:35 – Just let them understand it and they will reject it. Yeah. That’s correct.
02:40 – The Executive, for example. That’s why you have an Executive.
0:44. – Next question is give an example of a Benefits Management document that will never be updated during the project.
02:54 – So give an example of a project where the Benefits Management Approach document will never be updated, except in the Closing a Project process where we have to plan the next meetings.
03:08 – Well, when we don’t have releases during the project, there are fewer reasons for updating the Benefits Management Approach, the new name. Okay, yeah.
03:18 – I always have this problem, I always want to say Benefits Review Plan.
03:22 – Anyway, when we have a release, we will use the Benefits Management Approach, and we will also make adjustments to it, but when we don’t have releases, we won’t use it during the project and we will have fewer updates, but not necessarily no updates because maybe something changes in the market and we can change our estimate of the benefits in the future.
03:43 – That’s correct. Yes, that’s something that we often forget, so even if you do like what we call a standard waterfall project, even though we don’t have benefits coming through the project until the very end, other things can change, you know. So, yeah, that’s true.
04:00 – So to recap, so this happens a lot or we think it happens a lot basically in non-IT projects.
04:07 – For example, if we build an apartment block with just four apartments, the idea is to rent them out at the end of the project, so the benefit is in the next years.
04:17 – People cannot move in while the apartment block is still being built.
04:22 – So there’s very little need to update the Business …
04:26 – Benefits Management Approach document. I have the same problem.
04:29 – Yeah, except in the Closing a Project process. Yeah.
04:32 – However, if market conditions for rent for the future changes, then of course, it’s a good idea to update that document.
04:40 – We talked about having different perspectives to the project and the fact that, for example, you may be a supplier and therefore have your own Business Case for the project from your own perspective.
04:50 – The same thing can happen with the Benefits Management Approach. Yes.
04:55 – You will have different benefits from your customer and it can be much simpler.
05:00 – For example, you’re just doing the project to get some money from the customer, and you will get the whole money at the end of the project, so that’s done.
05:09 – Maybe you’ll have some other benefits, for example, increasing your opportunities in the future to get similar projects.
05:17 – Those are small things that sometimes don’t exist and sometimes are easier to track in the future.
05:26 – That will be much different from when people have internal projects or, for example, the example that you gave from the main customer’s point of view.
05:35 – Yeah, okay. Good. So, the next example, let’s say we’re in the Closing a Project process, and the Project Manager updates the Benefits Management Approach to plan future meetings, and after this then, the Project Board gives this document, this Benefits document, I should call it this then, it’s easier, I won’t make a mistake, the Project Manager gives the Benefits document to the program and not to the Senior User because the Senior User is responsible to realize the benefits.
06:08 – So, is this a good idea for the Project Manager to give the document to the program instead of the Senior User?
06:16 – I don’t know exactly what PRINCE2 says here but Senior User, well, one thing that I’m thinking about is that we won’t have those roles after the project is finished. Yes.
06:31 – There won’t be a Project Manager or Senior User or Executive anymore, but the Program Management or Portfolio Management is still there.
06:39 – Who normally follows up on the benefits for all of the projects that happened over the past couple of years? You have one body let’s say.
06:48 – That’s the Portfolio Management System. Voila! Alright, okay. That answers the question then.
06:52 – So they’re accountable. I wanted to say yes, but your question was somehow that I thought the right answer was the Senior User and I was afraid to say it. Oh, okay.
07:01 – But that’s fine. I had you anchored in the wrong direction.
07:05 – No, that’s fine. The same thing can happen in the exam, so we should be prepared for that. Yeah, that’s true.
07:11 – Yeah. That’s why we have Portfolio Management Systems.
07:14 – We do two main things in a Portfolio Management System.
07:18 – One is to select the best projects. Yeah.
07:20 – Best combination of projects that are beneficial and also balanced, balanced based on risks, based on short-term or long-term return on investments and things like that.
07:33 – That’s the first thing and the second thing is to resource the projects based on in a way that can keep everything, keep the benefits maximized.
07:44 – And so when we want to do it properly, we should have feedback from the projects that are already done about their profits, and it’s also important, you know, it’s not only about checking to see if we’ve done something properly, it’s also about learning from what we have done and use that information for the future projects, and also even more importantly, sometimes we see that the project is not generating all the possible benefits, but we can make some small changes. Yes, that’s a good point, yeah.
08:17 – Yeah, and let the product create more profits.
08:21 – Maybe we want to initiate a new project, small, simple project or maybe even a few activities.
08:26 – Yeah, based on customer feedback. They’re missing something and that can be easily added in order to still reach the benefits with minor costs, yeah.
08:33 – But the main problem with most companies is that they do the project because it was a great idea, and it was a great idea, but as soon as the project is done and the product is being used, they don’t do anything else with it. They don’t care about it anymore.
08:46 – That’s a good point. So to recap, this is correct for the Project Manager to do, to give this Benefits Management Approach document to the CPC as they call it, the Corporate Program or Customer, the level above because they are the ones who will follow up in the future.
09:02 – Most important, from the organization point of view is to follow up on the benefits from all the previous projects that have happened.
09:11 – So, they will interview the Senior User, like every 6 or 12 months, and they will ask them to show that they have reached the expected benefits, which they said they would do anyway.
09:22 – Great. The next scenario. So we’re jumping back to the start of the Initiation Stage.
09:30 – The Executive wishes to provide all the expected benefits as they are responsible for the Business Case and they have experience in doing this.
09:38 – Is this appropriate for the Executive to do this?
09:43 – I don’t understand it. The Executive at the start of the Initiation Stage? Yeah?
09:48 – They say they want to provide all the benefits information because they’re responsible for the Business Case and they want to suggest this. Okay, alright.
09:56 – Well, generally that’s the wrong answer. It doesn’t matter what we are talking about.
10:00 – We need to involve as many people as possible. It doesn’t matter what we are thinking about, and in case of Business Case, we can have a lot of useful information from the Senior User." Yes. The Senior User is the guide here, yeah. Yeah.
10:14 – They represent the users who are going to use the product and by that usage, they will create benefits. Correct, yeah.
10:23 – So that’s incorrect then. So to recap, know the Senior User has to present the requirements and the expected benefits because they are responsible for the benefits in the future.
10:35 – So they are the ones that will be interviewed or held to account for reaching those benefits.
10:40 – So, in order for them to be accountable, they must be allowed to present them as well.
10:48 – But still, you know, that’s some type of official answer and the Senior User is a primary source of information about the benefits, but anyone else can contribute as well. Sure.
11:00 – For example, I was just thinking about Senior Supplier.
11:02 – For example, they can come up and say that, Okay, I just realized that when we do this project, which we are doing for the first time, we have to spend a lot of time designing the product and things like that, but then after that, we can use almost the same design for many other projects for many other customers, which can be great and that can decrease the cost of the project a lot." So that’s a profit, that’s opportunities for the future and that’s something we can consider in our Business Case.
11:33 – Yeah. Okay, but I think the reason why PRINCE2 says it is because they were promised so many benefits and they need to have somebody accountable for those, so that’s what they are getting at, accountability for realizing the benefits and they need a person to be able to make that happen and who can provide resources to make that happen as well, who can support the application or whatever is delivered to make sure that ever body is behind it because too many projects start where the Senior User department loses interest halfway during the project and that’s not a good idea either.
12:07 – So, it creates accountability, which is nice.
12:10 – There’s something about PRINCE2, you know.
12:13 – I sometimes feel that PRINCE2 was created primarily from the customer point of view, when you have the project for yourself.
12:26 – For example, when you’re talking about PRINCE2 or when you’re even thinking about PRINCE2, I think, you’re mainly seeing everything from that perspective and that’s natural, but for me, my experience was that I’ve been always working for the supplier part for external customers.
12:44 – So the first thing that I think about is from that perspective, yeah. From a delivery point of view, yeah.
12:51 – So we could say that PRINCE2 is based on a customer-customer environment instead of a customer environment.
12:57 – But you know for you it’s a customer-supplier environment, but for me it’s a supplier-customer environment. Yeah, okay. It balances.
13:06 – So, next let’s move on to another one here.
13:09 – So during the project, it’s normal for the Project Manager to review new issues and risks, and one of the first questions the Project Manager will ask seeing a new issue or risk is what effect will this have on the Business Case, that’s a normal thing.
13:26 – So the scenario then. So let’s say we have a project, and their goal is to develop a GPS location device which can plug into the back, let’s say, of an e-bike.
13:38 – So, it’s kind of a technology project then and they have already spent about 40% of the budget so far, but however now, they have just learned that they have an 80% chance that the project will not succeed.
13:54 – They just realized that people have Smartphones and there they have GPS.
13:58 – I don’t know, but other things as well.
14:01 – No, I don’t think that’s the reason, but something else, yeah, it could be something like that. Okay.
14:04 – So, you as a Project Manager, what would you advise the Project Board to do in this situation?
14:09 – Alright. What should happen normally, I think, in this situation is to have an Exception.
14:20 – So you’re tracking everything as the Project Manager and suddenly in a certain, well, the next time we can turn off our mobile phones. That’s fine. You can understand it.
14:32 – So you’re tracking everything based on the work packages, you combine the information …
14:39 – we will turn it off next time …
14:42 – you will combine everything and come up with the performance of the stage and the whole project, and then you will compare it with the tolerances set for the project and one of them relates to the justification … the benefits. Okay.
14:55 – And if it’s above that, then you will have an Exception. Yes.
14:59 – You will create an Exception Report, send it to the Project Board, and you will wait for them to tell you what to do.
15:05 – Okay. So, yeah, thanks for that. What kind of information, though, would you put in the Exception Report. I mean, as sort of advice that you would give based on what just happened.
15:17 – Well, normally we explain the situation and then different options that we have to proceed with the project, and the Project Manager can also say which one they think to be the best option.
15:33 – However, when it’s about the benefits of the project, the Project Manager may not really know everything related to the benefits. Yeah, that’s correct, yeah.
15:41 – It really has to go to the Project Board and even from the Project Board to the Portfolio Management System, make a good decision and then bring it back to the project system. That’s what I think.
15:53 – Yeah. Okay, good. So let me just recap then.
15:55 – So, one important point that I want to get across here is to forget about the money already invested. So that money is gone and we will refer to that as a sunk cost.
16:05 – So we should be asking, well, what’s the best decision from today?
16:10 – You know, so if we just suddenly discovered because of our advances with technology, our slow advances, that we have an 80% chance of not doing it, then probably that should be the main driving force behind our decision.
16:21 – So in this case, I think the Project Manager should be able to suggest perhaps to shut down the project because it’s a very, very high risk project.
16:31 – So in these cases of high risk projects, they should only be allowed to continue if the expected benefits are really, really huge compared to any costs, you know.
16:42 – For example, if someone was working on a project with only a 10% chance of finding a new hair cream for baldness, then I think that that would be a very good idea to go for this project, you know.
16:54 – It’s a lot, 10% chance.
16:59 – Well, it seems like your question was a little bit different from what I understood, but that’s very important.
17:05 – Most people, when you say something like that, most people say that, “But we can’t cancel the project?” Yes.
17:12 – “What about our customer? They will hate us. They won’t give us any other projects in the future.” And I think that’s something we need to talk about.
17:22 – Yes, and sorry to cut you out, they also might say that the project then has failed, you know. Yeah. Yeah.
17:31 – And so people will be blamed for wasting that, but if we keep going and finish it, then it will just die out naturally.
17:38 – So, it’ll be seen as a success and that’s also an issue. Sorry, I cut you out.
17:44 – No, no, no problem. The fact is that when you’re thinking about the justification, your opportunities for the future and your relationship with the customers is also part of the benefits you consider for the project and remember when we say that you need to check the benefits and see if the project is still justifiable, it’s not only about the money you’re going to earn, it’s about everything, and don’t think that it’s not possible to stop the project.
18:17 – Just consider everything, sometimes considering all of that, you will still see that it’s best if you just cancel the project. That’s all PRINCE2 says.
18:27 – Just think about it and consider all aspects and it’s really sometimes a good idea to stop the projects.
18:35 – And from the other point of view, for the internal projects, I was mainly talking about external projects. For internal projects, that’s much easier.
18:43 – You just need to be honest with yourself. Yeah, right.
18:47 – And finally, there’s a saying that I really like, that canceling projects is a sign of good project management, because if you don’t have a proper project management system, you will never know that the project is not going well, and you will just keep going and going and going.
19:05 – When you see a company that cancels a project, it means that they know what’s happening there.
19:10 – Yeah. So they should be free to cancel the project. That should be in the local the organizational environment. It should be people should be able to do that if it was the right thing to do.
19:21 – Now a question. Yes? What about coffee?
19:24 – Good idea. We’ll take another coffee. So see you after that.

Discussions on the Business Case theme continue in the next lesson.

Scenarios/questions we’ve discussed in this lesson

Scenario: During a project, a senior director in the organization presents a change request. They are very passionate about it, but the PM thinks it’s a bad idea. How should the PM deal with this kind of situation?
Give an example of where the Benefits Management document will never be updated during a project except during the Closing a Project process.
Scenario: At the very end of the project, the project board gives the Benefits Management Approach to the program and not to the senior user, even though it is the senior user role that realizes the benefits. Is this appropriate?
Scenario: A project has just entered the initiation stage and the executive wishes to provide expected benefits information, as they are responsible for the business case and they have experience. Is it appropriate for the executive to do this?
Scenario: An organization has a project to create a GPS tracking device for e-bikes. The project has already spent 40% of the budget and there is an 80% chance the project will not succeed. As a PM, what would you advise the project board?

Lesson 08: Business Case, Part 4

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