Effective business cases balance ROI, scope and Theory of Change, particularly in challenging economic times. A strong scope with minimal assumptions, backed by a compelling Theory of Change, will help lay the foundations for a successful project.
Business cases are a bit like the story of Goldilocks and the Three Bears: the porridge was either too hot or too cold, the bed was too hard or too soft, until Goldilocks found an option that was “just right”. Like the options presented to Goldilocks, business cases should avoid being too optimistic or too pessimistic, too risk averse, or too carefree with challenges.
Hard to get right at the best of times, the humble business case is even more critical in challenging economic times – particularly when you’ve already gone through the sometimes painful process of trimming and prioritising your project portfolio.
Business case writing is part discipline and part art. You must be able to calculate costs and benefits to demonstrate the ROI – that’s the discipline of knowing and applying the process of business case development. Then comes the artistic touch. You must also consider your scope and your theory of change – where ROI and benefits realisation is balanced with certainty; the art of telling the story, explaining your reasoning and delivering a convincing argument that inspires confidence and belief in your business case.
Let’s take a look at this now.
Building a watertight scope
Let’s be clear – even during the best of times, it’s always important to get your project scope right. It’s even more important when reduced budgets are heightening scrutiny and expectations of the project portfolio.
In general, the broader your scope, the greater the risk. You’re opening yourself up to the possibility of unknowns that impact the schedule and create budget overruns – not to mention the dreaded scope creep.
Aim for a scope that is detailed, well-planned and backed with data and evidence. Perhaps when the outlook is rosy, you might get away with a project scope based on collective instinct, with lighter governance and controls, because the tolerance for blow outs will be higher. This is unlikely to be the case if budgets are under the microscope.
Here are three scope perfecting strategies:
Minimise assumptions.
Assumptions are a hallmark indicator of a poorly developed scope, so avoid them as far as possible. The old saying “assumptions make an ass out of you and me” definitely applies.
Get granular.
Try breaking down your scope into two parts to increase granularity. First, by defining the overall ROI or benefits delivered; then a deep dive into the scope of your execution strategy.
Don’t skimp on the execution strategy.
Don’t skip the important step of thinking about how the project will be organised to deliver scope and effect the change required to realise benefits. It’s an often overlooked part of a business case, and many templates don’t have a section for it. Explain how you intend to approach delivery and what strategies are at play to deliver scope.
Now is the time to make the case for bringing external expertise into the execution phase. By enlisting someone who has worked on similar projects in the past, with all the experience and IP they bring with them, you’ll take a giant step towards de-risking your project. On paper, the numbers might look better if you’re planning for your BAU teams to deliver the project – however, in our experience this almost always leads to overruns and cost blowouts in the long-run.
Developing your “Theory of Change”
The most masterful business cases have one thing in common: they all include a compelling Theory of Change. Far from being a rigorous academic exercise, this should be a clear demonstration of how your scope will deliver your anticipated benefits. In the current environment, you’re aiming for a theory with as strong a link as possible between the scope being delivered and the benefit being realised – rather than just demonstrating ROI.
To highlight this, consider the example of playing the lotto. If you buy a $15 ticket (the scope) with the aim to win $60 million (the benefit), the ROI is astronomical. However, the link between the two actions (buying and winning) is incredibly poor. Yes, you have to be “in it to win it”, but if that is the plan to solve a major life problem, this is a very high risk strategy that is unlikely to work out.
Theories of change with little ambiguity and less dependent factors tend to have a stronger link between risk and reward, rather than outsized ROI. For example, decommissioning an old piece of technology will save you a certain amount of money in licence fees, with little impact on people. All the benefit might be in the turning off of the old solution and the termination of expensive licence agreements. It’s a relatively simple initiative with a high degree of certainty – delivering the scope will achieve the benefit.
In contrast, if you then implement a new piece of technology to replace it, the theory becomes more complex – simply because people and process change are introduced to the equation.
Theory of Change key takeaways:
- The best and most memorable theories are usually the shortest (E=MC2, anyone?). Aim for short, sharp and manageable – e.g. By increasing quality and reducing effort, this project will achieve this goal.
- Don’t confuse correlation and causation in your theory. Causation indicates that one thing leads to another; correlation only demonstrates that two factors are linked. Confusing the two veers dangerously into the territory of assumptions and can lead to flawed decision-making.
- Unlike E=MC2, your Theory of Change doesn’t need to reshape the world. Don’t be afraid to draw on past theories as a template, reworking them to fit your own unique factors. We’ve provided some theory of change thought-starters here.
Are high-risk projects off the table in this environment?
If simple theories of change are preferred right now, does that mean higher-risk projects should be avoided right now?
If your business is currently in the business of avoiding cost blow-outs at all costs, then yes – for the most parts, high-risk projects should probably be off the table (at least, for now). However, there are a couple of scenarios where a cost-constrained environment can actually be the right setting for a complex transformation agenda.
First and foremost, remember the saying to “never waste a good crisis”. If your business is nurturing one or more burning platforms (e.g. faltering public confidence or sentiment, regulatory or financial pressures), then your overall tolerance for risk is likely to be higher. Swift and decisive action to demonstrate a commitment to change, via wholesale transformation, may be the answer to survive the tough economic conditions.
Secondly, if you’re doing fewer projects because you’re capital constrained, it could be the right time to undertake a single complex project, rather than more, less complex ones. There’s a simple reason for this: with a slimmed down program of work, theoretically there will be less distraction and less project demand on the organisation.
It’s a bit like setting aside all of Sunday and enlisting the family to focus on a single, messy job that you’ve been putting off for a while (e.g. cleaning out the garage), rather than trying to co-ordinate them across five medium-sized jobs.
Whatever your motivation, if you’re prepared to tackle a more complex transformation project in the current environment, make sure you’re committed to the process and have the right support. A back-to-basic needs assessment will help lay the foundations for a successful business case, avoid assumptions and develop a compelling narrative for change.
Quay Consulting is a professional services business specialising in the project landscape, transforming strategy into fit-for-purpose delivery. Meet our team or reach out to have a discussion today.