What Is a Business Case and Why Does It Matter?

In 2015, Agile, Business Analysis, Disruptive product, Lean, Marketing, Product Management, Product Marketing, Product Owner, Product Teams, Project Management, Scrum, Take Charge Product Management, Uncategorized, User Experience by 2 Comments

Almost every week someone within earshot asks a question about a business case. The most common one is “why don’t we have one” followed by “I am not sure about how to create one. So in this blog post I am going to address what a business case is, why business case creation is variable, and what elements typically comprise the business case.

Let’s Start with Defining a Business Case

A business case is a well-written document that provides a justification for a product or product-related investment. It is designed to clearly articulate a demonstrable cost-benefit analysis which increases the odds your recommended solution to a market need will be funded. In organizations of scale the business case needs to be looked at against the context of the company’s broader investment portfolio and other available opportunities.

The actual format of a business case can vary from a spreadsheet to a comprehensive document that evaluates the opportunity from a variety of perspectives. Regardless of the format, a business case should address some or all of the following elements.

Key Questions That Must Be Answered

The combined elements of the business case need to answer several important questions.

  • Why are we focusing upon this product, capability or solution (as opposed to others)?
  • Why do we believe that this is the right way to go (the winning option)?
  • Is this the optimal timing for bringing this product, capability or solution to market?
  • What are the risks of this approach and how can they be mitigated?

Standard Components of a Business Case

While the components of a business case can vary from company to company based upon organizational needs they typically follow a fairly standard framework. These elements include:

  • A clear articulation of the market need and the size of the opportunity
  • A detailed summary of both the market and the competition
  • An explanation of how your solution aligns with the company goals and the product strategy
  • A detailed description of the product or a set of capabilities, a unique value proposition and how the new product or capability will be positioned in the market
  • The development path of the product (method, timeline, milestones, costs, etc.)
  • How the product will be launched
  • A detailed financial analysis justifying the investment
  • A summary of the identified risks (and risk mitigation’s)
  • A conclusion detailing open issues and/or recommendations

Why Doesn’t Every Investment Have a Business Case?

It often boils down to company culture. In many organizations a business case is generated when one or more of the following factors are in play; the investment is significant, the risks are high, or it is a new product or market.

Company size plays a role too. Large companies may require a business case for every investment. While mid-sized companies may require business cases only for costly or high risk product development efforts. Small companies may do the same or simply by-pass the business case all together.

At the end of the day a business case is a helpful tool to crystallize organizational thinking and to gain the support of the executive team in order to receive funding for the proposed effort. It also helps to ensure that your product development team has the needed context to understand what you are trying to achieve strategically as well as tactically. However, not every product investment warrants a business case as the time and effort required may not be justified.

What has been your experience?

 

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Comments

  1. This article rang very true with me. Everytime a business case is not used too much is left to interpretation and this leads to late changes or miscommunication.
    Thank you for sharing

    1. Author

      Hi Philippa, as you rightly point out, the more “fuzzy” things are upfront the greater the chance that lack of clarity will lead to expensive changes or inopportune clarifications later in the process. Or in the worst case derailments. Thanks for your comment.

      Greg G.

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