Lesson 09: Business Case, Part 5

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

00:04 – A common question in the Business Case Theme is to recognize statements or which statements belong to the different parts of the Business Case.
00:13 – So I have five statements and we’ll go through them one by one, and we’ll recognize in which section they belong in.
00:19 – The first one is sales are falling 4% each year.
00:25 – So in which section do you think that will go in?
00:28 – That sounds like a reason for starting your project and changing that thing to something better. So, reasons.
00:35 – Correct, yes. It’s a reason and it’s a good example of a reason, and it’s something that’s a pain, why the project started and obviously we want to find a solution for that.
00:45 – The rest of the Business Case will answer this and how we can get our sales back up.
00:50 – The next statement is continue to lose 4% of our clients each year.
00:56 – Where could that be? It’s a bit weird, but …
01:01 – No, I think it’s fine. Yeah?
01:03 – It’s the “do nothing” option. Just one of the options.
01:07 – Voila! Okay. Maybe the word ‘continue’ helps there. Yeah, yeah. Yeah, maybe.
01:12 – Yeah. But that’s good, yeah. So one of the first questions that we said we should ask is what happens if we do nothing?
01:19 – So, if we do nothing, we continue to lose 4% of our clients each year. Okay, good.
01:26 – The third one is increase sales by 10% for three years. In which section does this belong to?
01:35 – It’s about benefits you expect from the product of the project.
01:42 – Yeah. So it’s a real benefit and we have said we’re given we’ve made it measurable and we’ve also given a timeline on when that’s possible as well, so that’s a clear benefit that we can measure for three years.
01:58 – Next one statement, lose 1% of clients.
02:05 – Well, it depends. Is it a good thing or a bad thing because if that’s a good thing, then we can consider it a benefit and if that’s a bad thing, then it’s a disbenefit.
02:16 – I’ll give you a clue that it’s after the project, so once we deliver what the project has promised, we will, yeah.
02:23 – No, I was joking actually, but well, that’s a disbenefit.
02:28 – Yeah. That’s a good example of a disbenefit and many projects I’ve seen don’t bother to do this at all.
02:34 – They’re just so focused on the positives that Well, they also think that it’s unacceptable to have disbenefits, so if you can think of a disbenefit, then you shouldn’t do the project. That’s not like that.
02:46 – Any change has some benefits and some disbenefits.
02:50 – The only point is that the benefits outweigh the disbenefits.
02:53 – Yeah, okay, good. The next one statement, technology that we wish to use may not work.
03:02 – Where do you think that might be? That’s a risk.
03:07 – Yeah. That’s a clear risk. Yeah, and if it’s a major risk, then it will be included in the Business Case.
03:13 – Yeah, but it’s a good idea to make it clearer.
03:15 – Yes, of course, yeah. What the impact will be on the risk. Yeah, that’s true.
03:21 – Okay. So, that gives an example of some statements and which case or which section they belong, and please go over that and make sure that you recognize and, of course, you can use the manual during the exam as well. So definitely do that.
03:37 – Next question, the next exercise actually concerns both the Business Case and the Organization themes.
03:45 – So please take about 5 minutes to do this as well.
03:48 – The scenario is there’s a project in a town of about 5000 people and they want to widen about half the city’s cycle paths.
03:58 – So they want to become a more cycle friendly town.
04:01 – So, therefore, the town will remove parking places and probably other things in order to achieve this.
04:10 – Now, so I’d like you to give an example of at least two groups of stakeholders that will find disbenefits with this project, because I want to focus on disbenefits.
04:22 – So, could you even think, you understand, the project disbenefits? Okay.
04:27 – Yeah. So first we should think about the disbenefits and then about the stakeholders that are involved. Yeah.
04:35 – Well, one disbenefit is that there would be fewer parking places. Yes.
04:40 – Or other things like that and, well, in addition to that, some people maybe we can imagine some people are not happy with having more bicycles in the streets, maybe the taxi drivers.
04:56 – So that can be one option. True.
04:59 – Yeah, or people who are driving cars all the time, they would like to have more parking places. What else can we have?
05:08 – Maybe people are addicted to petrol fumes and they will have an allergy to bicycles.
05:14 – Maybe we can think about those as well. Yeah. There might be some.
05:17 – There are all types of allergies nowadays, yeah. Yeah. It’s a strange town, so.
05:23 – Well, if there are manufacturers who are involved in something here.
05:30 – For example, car mechanics or those who supply spare parts for cars because this may reduce the number of cars on the streets.
05:41 – That’s true. Could be less cars in the town if you had a petrol pump.
05:44 – Yeah. Also that. Yeah, good idea. Okay. Good. What else?
05:51 – Oh, that’s okay, that’s okay. I mean it’s on the spot, so I don’t expect you to come up with 20 all of a sudden.
05:56 – So, let me go through the ones which I have.
05:59 – So there can be many different types and I just have three here from me.
06:04 – One of them is what you got already. So, people who will find it harder to find parking, so that group could be called the town or city car owners.
06:14 – So some of them will not be happy.
06:17 – Of course, they can have a permit or a car permit, parking permit, and maybe they can park down the street.
06:23 – The next one is the shops that had quick-stop parking places outside their shop, where people could stop like for 10-20 minutes and they won’t be happy if they find that these are gone and people have to park maybe 5 minutes' walk away, so that group could be called town shops, yeah, town shops, and then the third one could be delivery trucks in the morning.
06:49 – So they’ll come in and deliver to the shops, maybe they’ll find it hard to navigate through the town because of all the bicycles which are there or maybe they have to take detours or things like that.
06:59 – So, that’s an example. So it’s good to recognize …
07:03 – and actually a follow up question. Why do we bother recognizing all these disbenefits?
07:07 – Well, I was going to say something about that. Yeah.
07:12 – In the PMBOK guide, we don’t have a lot of information about the sequence of activities.
07:17 – It’s more about the integration of the processes, the project management processes, but one of the few things that has a certain timing to it is the process for identifying the stakeholders, and it has to be done in the beginning of the project.
07:32 – It’s very important in the PMBOK guide and the reason is that when you don’t identify the stakeholders, you will miss some of their requirements, and later on, it will be too expensive to make changes and add those new requirements.
07:48 – Yeah, that’s a very good idea. Yeah. We want to have a complete list of stakeholders when we start the project and use all that information to design the product.
08:00 – Also, one thing, in the IT industry, many people are used to call the customers stakeholder. Yeah.
08:10 – So they believe that the stakeholder and customer are the same thing, but in the project management literature, stakeholder has a wider meaning.
08:17 – A stakeholder is anyone that has an interest in the project, they will be affected by the project properly, and they can influence the project. Correct. Yeah.
08:27 – So you are, as the customer or supplier, a stakeholder, your competitors are stakeholders, your neighbors sometimes are stakeholders.
08:37 – The governmental agencies many of them. So that’s it.
08:42 – This is important because it impacts the way we have to create the product.
08:47 – So my question was why do we bother to examine the disbenefits then?
08:53 – Or did you answer that? Because it helps us identify more stakeholders and when we identify more stakeholders, we can consider their requirements as soon as possible in the cheapest way.
09:04 – And how to respond to them. Yeah. So to turn …
09:06 – I think what PRINCE2 would like is recognize the people who have disbenefits and then think of how you can move them from disbenefits into benefits, like for example, an example with the 20-minute parking, the shops, the 20-minute parking.
09:25 – So we could say, well, as part of the project, we have different parking places around the town, so now people can park and park there for an hour or two, so that when they come into your shop, they can spend longer, they don’t have to rush out, you know, and we can show them where parking is all around the city. So that will make them more comfortable.
09:43 – That’s the kind of things that we can do. Make all stakeholders happy.
09:48 – Yeah, that’s the idea. Of course, we’ll always find some that we cannot, but a lot of them, we can do things like that with. Good.
09:57 – The next scenario. So the Executive and the Project Manager want to calculate the true cost of the project after the first delivery stage.
10:08 – So they have a good idea now because the first delivery stage is over, they can see how the teams work, and from then on, they tell the program, this is exactly how much the project will cost and they give this to the project or to the level above, which is the program in this case.
10:24 – Is that appropriate for them to do? If they can foresee the future.
10:30 – Yeah. Maybe they have a crystal ball as well to know about the project management crystal ball.
10:34 – Yeah, it’s really useful in project management. That’s the first thing people need.
10:39 – Yeah, unfortunately it’s not so common or realistic. No. It’s a pity! There’s an open market there for that.
10:47 – Some people overdo estimations and planning. They put too much effort on it.
10:54 – They make the values too accurate. We don’t need it to be too accurate.
11:02 – Well, first of all, it’s sometimes not possible to do it most of the time, almost always never accurate because at least some of the things in the external environment will change, but you spend too much time making it from a plus or minus 20% accurate to plus or minus 10%.
11:23 – The question, is it justifiable? A lot of times it is not.
11:30 – The important thing is for the Project Manager and the whole management team is to understand what they need and what they’re going to do with those values and numbers. That’s the most important thing.
11:41 – So to prevent the waste of energy and effort and the other thing that PRINCE2 mentions, I remember I read it in the manual, maybe I’m wrong, maybe it was somewhere else, that it also creates a false illusion of accuracy. Yeah.
12:00 – Which is also harmful. You think that just because you’ve spent too much time preparing the numbers, they’re absolutely, exactly true, but they are not.
12:11 – You should always be ready to update the values and add more information, use the things you’ve learned in the project and consider the changes in the environment and get a better number.
12:21 – But I can see why maybe some Project Managers are pressured into doing it because maybe they have an old-fashioned Executive who comes maybe from a financial environment who likes to have all the data upfront.
12:34 – So they’re pressured to do this, but they should have enough confidence to say, “No, there’s no point in going into too much detail,” as you said, you can give a best estimate now and it’s never accurate.
12:46 – It’s the best estimate at that particular time.
12:50 – One other thing that I’ve seen is that many Project Managers come from … are actually engineers.
12:56 – They used to be engineers and now they’re responsible for managing the projects, and that’s a habit for engineers, to be more precise.
13:05 – Many of the things in engineering is very precise when you compare it with what we do in management area and they bring that habit in.
13:13 – That’s something you should change if you want to change your career from engineering to Project Manager, and that’s a change in career.
13:21 – I see. So just to do a quick summary.
13:24 – So during the project, there can be many attempts to estimate the cost of a project and each estimate should be an improvement on the last because we’re learning all of the time, but when do we know the full cost of the project?
13:38 – We don’t actually know it until right before we turn the budget off and that’s not until the very, very end of the project.
13:45 – There’s probably one exception maybe.
13:49 – It’s where the customer has a contract with the supplier.
13:53 – So the customer will know or has a contract and a penalty clause in there and then they have a better idea on the cost of the project. That’s the only exception.
14:01 – Well, it still may not be exact. Maybe the supplier just cancels the contract and pays the penalties and then they have to have another contract with another supplier.
14:13 – Correct and then a big delay, let’s say. Yeah, and a more expensive contract.
14:19 – Good. The next scenario. So during the Initiation Process or the Initiation Stage, the Project Manager insisted to gather all baseline information because of the Benefits Management Approach document, and because there was a delay in getting this information, they actually delay completing the Initiation Stage until this is done.
14:46 – So they kind of stop the project. Is this appropriate for the Project Manager to do?
14:52 – Not to allow the Initiation Stage to finish and try to gather this baseline data for the Benefits Management Approach document?
15:04 – But it’s not only for the Benefits Management Approach, it’s also the baselines you need to run the project, right?
15:11 – It’s the baselines we need just to compare the benefits for the future.
15:17 – Just the things related to Benefits Management Approach.
15:23 – So, for example, when we’re let’s say that 12 months after the project, we have sales we’re supposed to have a sales increase of 20%, and so we need to be sure what was that percentage at that particular time before the project started?
15:43 – So then we compare and that’s written down and it’s known and it’s signed off some place because information can change, you know.
15:50 – We might find out later that sales have only increased by 10%, but now there’s been some manipulation of the figures back-dated, we can say that, yeah, we can show a 20% increase, but it’s not actually so.
16:04 – The whole idea will be to baseline the information at the beginning.
16:08 – So we’re sure of that information on that date and then we can actually compare correct data with the future. That’s the idea.
16:18 – Yeah, but I have a problem here. I cannot imagine that we don’t have some information that only impacts the Benefits Management Approach and nothing else.
16:29 – For example, we can complete our Business Case, I mean compose the Business Case and baseline it and we can also have the plans and everything else, and still we cannot have everything for the Benefits Management Approach.
16:44 – That’s the problem I have, but assuming that it is like that and the only and only thing we cannot deliver now is the baseline for the Benefits Management Approach.
17:01 – It doesn’t look so good, but I would say let’s go on.
17:05 – If you don’t … if you will have it prepared before the first time you want to use it, not before the end of the project. Okay. I forget what it says in the manual, but I think that’s the reason I’m asking the question because I did ask the question beforehand, is that know the baseline data should be gathered, it’s part of the requirements information, like if the Senior User does not actually know what the data is, what the current status is today, how can we expect them to forecast accurately in 6 months or 12 months' time.
17:39 – So we should have that data today in order that we can do a proper comparison in the future to see if they got there.
17:46 – So I would say that the Project Manager has to get that information now and it should be written in the Benefits Management document and signed off to say that is the data that we have today and it will be approved by the Project Board.
18:02 – Yeah. The main problem is with the assumption in the beginning.
18:06 – I think they are all connected to each other. Yeah.
18:08 – So if you don’t have enough information to compose your Benefits Management Approach, you cannot create your Business Case or any other things.
18:17 – Voila! Exactly. So the Project Manager is right to hold it off?
18:21 – Okay. Good. So yes, to recap then. So in the years after the project, the Senior User has to prove that they have realized the expected benefits and these benefits should be compared to the baseline data from the start of the project, and baseline information are required then by the Benefits Approach Document and they should be gathered in the Initiation Stage.
18:46 – Another benefits question. So some Senior Users may have over-exaggerated their future benefits, as they do, you know, because this would increase their chances of getting funding because they have to fight with other projects.
19:05 – So the Project Manager feels that a Senior User is over-exaggerating their benefits to get funding.
19:12 – So as a PM, what would you do in this situation? If you had this case?
19:17 – Before that, it may also be the confirmation bias. They may be biased.
19:20 – They may not be able to see everything as they are.
19:23 – Okay. You mean the Project Manager or the Senior User? No, no, the Senior User. Yeah. Of course, yes.
19:27 – It may not be intentional, but it may happen.
19:30 – Okay, so what should we do as a Project Manager when we see something like that?
19:36 – Okay. What if we talk about it after another coffee? It’s time." Okay, I think you better drink tea. Tea is fine. Yeah.
19:43 – You’re drinking too much coffee. Alright. Okay. Ask me again.
19:47 – What if we do it after having a cup of tea? Good idea.
19:50 – Alright. So see you after that.

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

Scenarios/questions we’ve discussed in this lesson

To which section of the business case do the following statements belong?
- Sales are falling by 4% each year.
- Do nothing and continue to lose 4% of our clients each year.
- Increase sales by 10% for 3 years.
- Lose 1% of clients.
- Technology that we wish to use may not work.
Scenario: A town of 10,000 people is running a project to widen half of the town’s cycle paths. They will create one-way streets and remove parking places to achieve this. Give an example of two stakeholder groups that will oppose this project.
Scenario: The executive and PM calculate the true cost of the project after the first delivery stage. The executive presents the project costs to the program. Is this an appropriate thing for the executive to do?
Scenario: During the initiation process, the PM insists on gathering baseline information for the Benefits Management Approach and delays the completion of the PID until this is done, so the project is unable to continue. Is it appropriate for the PM to do this? Explain your answer.

Lesson 09: Business Case, Part 5

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