The Better Business Analysis Institute presence.
The Better Business Analysis Podcast with Kinsman Walsh.
Hi everybody and welcome back to the Better Business Analysis
Podcast, Benjamin Walsh. And today we are going to go
into something that some people hate, other people and you know
it's a lot of us are just somewhere in the middle as is.
It's kind of a means to an ends and that is the business casing
process. Look, we've touched on the
business case process, the fact that it fits in our strategic
and enterprise analysis phase and our delivery journey.
If you're following the bit of business analysis, delivery
journey which you should be by now because it's the best out
there. Now what we do when we do a
business case is we are trying to justify spending money or
doing a change. You know it involves doing
something we called cost benefit analysis and and that involves
variables around cost and also benefits And that that scenario
that BA as playing in terms of benefits realization and making
sure that we are actually getting benefits from any change
we want to do. But it also involves other
aspects in terms of different kind of sub cases in terms of
justifying the change. So we're going to talk about
business cases today. For some of you this will be
something that you can listen to later at night to help you sleep
and for others of you you're going to be sitting there taking
notes. So I appreciate this is not the
most exciting topic, but nonetheless it is quite
critical. B as who can write business
cases effectively, it will make your job easier and there are
actually roles specifically designed for people who can
write business cases. You can actually get certified
as well and they generally get paid very well for doing just
this one thing, which is pretty much writing business cases all
the time. And I know of consultants in New
Zealand who maybe would pick up four times the salary of a, you
know, a junior BA by just doing this, this one thing.
Well, very well. So they have to both be good at
business case writing and also the political sell, which is a
lot of what business casing is all about.
So Yep, this episode is all around business cases, and we'll
get started with defining what that actually means.
I guess one way of looking at a business case is the fact that
it's usually a document. OK, you can't get away from it.
So as much as agile and Better Business analysis has moved away
to visual techniques, kind of only minimum documentation.
Enough documentation to get the story across.
Not, you know, wasting our time on on action versus mode motion.
Of course action is just doing things and motion is moving
things forward and that's what we promote here at the Better
Business Analysis Institute is not just doing stuff, doing
stuff that adds value. Now, yes, but I'm sadly a
business case is a document, it's usually an official
document. Think contracts, think
procurement processes. Think all those things which
become regulatory and important. And there are good reasons for
it. We're seeking money in the
public service. It is taxpayers money.
It's your money and my money and it's justifying spending it.
So for me, some of those barriers for pulling down funds
or or accessing funds to do some stuff should involve some sort
of rigor. Now I say that and then you know
you're 100 days into trying getting a business case out of
the line and you hate the process completely.
But that's more around the process that the organization
has put in and the various checkpoints and and who's
evolved. And generally to be honest, most
of the time that's political bollocks.
So what we're actually going to focus on is the document itself.
It's a hard deliverable which is quite nice.
It is not the one of the good things about it is there is
generally A detailed template which you can work through.
You can download one off the Internet.
If you've never experienced the business case before, have a
look in the UK and in New Zealand and I'm sure there are
some in the states, but there is a process called the ironically
the bit of business case template.
Nothing to do with the institute, but also a nod
towards that when we named our institute the, yeah, the bit of
business case template and it is quite good in terms of having
scalable different templates based on the size of the ask of
money that you're asking for, the size of the change.
So that's quite, if you look at those templates, it will give
you an idea about what we're talking about today.
So I think that's really important.
OK. So we've just said that a
business case is a document and outlines the justification for
the proposed project or investment change.
I'm going to say this could be a product project, investment
infrastructure project. It needs to be persuasive and
well written. So there you go, Persuasive and
well written and should provide all the information that
decision makers need to make an informed decision.
So in terms of what a should a business case should feel like
read like they that is you've just defined the characteristics
of a Better Business analyst right.
Better Business analysts are persuasive.
They know how to write and when I say well written, it's not you
know we're we're not writing the next Booker Prize you know book.
What we are doing is that we're articulating the case in very
simple terms also well written meaning easy to understand and
it needs to provide all the information and and some BS get
caught on caught up on all so all meaning it doesn't have to
you. You don't have to have spent
three years writing this thing that decision makers and so it's
about knowing your audience. It's not you know every single
person or Bob and finance who loves a great spreadsheet even
though business cases generally do have a table and them and
refer to spreadsheets. It's not about that.
It's about generally a management team making a
decision. So what do they want to say?
And remember as you go up the food chain and any organization
here in New Zealand we're, we're quite small.
We're talking to a friend and and hungry about that.
But in say the States in America where a lot of my listeners are
and you know outside of New Zealand there's so many tears
that you get lost in the in the game.
And so by the time you get up to the tier, the top tier, you need
to talk in terms of you know, red, amber green, I I used to
talk about it. That is you almost need to go up
to kindergarten level because the not because necessarily the
people that run companies are stupid because they're not.
It's just that they're absorbing so much information.
So you need to be able to articulate your case very simply
in terms of is this going how does this hit the bottom line?
Is it going to save us money? Is it going to improve things Is
it going to reduce risk? Does it mean if the savings
doesn't mean me investing more doesn't mean getting more
customers. What lever?
That's always what managers say, what lever are we going to pull
and and a redam the green in terms of tracking where things
are and you know basically how much.
So if you can't articulate that in the business case then don't
worry about the rest of the rest of the analysis is is is
irrelevant. So the fact that you love your
30 tab excel spreadsheet that you know points to a number that
looks good, it's just the total that needs to go you know to or
or you know the the base numbers or ratio or cost and benefit
totals that need to go to management.
They don't really don't they have to trust you that you've
done that spreadsheet correctly. Obviously if something goes
wrong they might you know ask that you've done that work.
But just be aware that trends, putting, copying and pasting
that table into your business Case No one's going to look at
it. They're looking at the bottom
line. OK, cool.
So just I just wanted to touch on that in terms of some people
just going to the NTH degree, the steps to writing a business
case involve defining the problem and opportunity.
So B as problem statements and opportunity just being an
inverse of problems, how you're going to take take advantage of
the problem? Two, it's in identifying
alternative solutions. So generally three options and
sometimes we do a do nothing and then #3 is recommending A
preferred option. And then we describe the
approach for implementing the preferred solution and then we
analyze the financial impact of doing that.
Usually you've got an exec sum at the front, like I said and
then we then there's a process of approvals.
So that's basically the business case process.
Each template talks to other sections and ABA of course is
great at gathering the information.
You know, analyzing and gathering, collecting
requirements and just data. This is you know the true in the
business BA who's connecting data, looking at market trends,
customer needs, processes like really hard numbers that come
out of our analysis defining the problem or opportunity of course
identifying and and evaluating the different options and we'll
talk about solution options here.
They might not be necessarily and this is a hard point.
This is a bit of a gotcha sometimes in business cases
depending on where you are in the process and when we talk
about solutions here, it could just be a do nothing change of
process, you know go change of process a little bit or
completely rewrite the process. It may not just be IT system
excess rules versus dynamics for example or no serum.
So it depends on the type of business case.
We'll get to that point a bit in terms of evaluating solutions
and obviously you need an architect to do that and it's
technology recommend a solution how you came up with that has
been the option. So you provide basically cost
benefit analysis across each of your generally three options and
there's always a trick of three which we'll come back to.
And then you know the BA can you know do that.
And of course they can help work with a project manager generally
or a program manager outlining the resources needed, the time,
budget allocation risks, all the rest of it, basically a project
plan copying that in there. And then they generally a
project manager, maybe ABA will work with a financial analyst to
work out all the economic numbers like cost, benefits,
return on investment, break even points and all the rest of it.
And then the BA can write and put that all together.
And I have found and they can also present back and I have
found that like times the pin holder here is the project
manager, which is interesting because they just exist before
they get resources and the first bit resource they get is ABA.
But BA is a very much, very good at doing this process.
Actually they should own it in my view.
So I think let's we've covered briefly what a business case is
about how ABA can contribute, what the various steps are
generally in terms of writing a business case.
But we're going to look under the covers a little bit both in
terms of the sections of a business case, but also some of
the stage gates that we go through.
If you are from a project management background or maybe
maybe you're not. So you've worked in a what's
called a Prince Two environment or even APMP environment.
Prince Two and PNP are project management methodologies and
both of them have a concept of kind of different stages that
you go through. It's heavily linked to the
business casing process or stages or work packages within a
a project basically saying there are different stages or phases
that a project goes through and we should justify the spending
or the continuation of the project at various points.
So if you from ABA perspective, you know there's the kind of
there might be a feasibility study, there might be the high
level analysis, there might be the detailed analysis and then
there might be the implementation phase for
example. And those they generally align
with what we what we those project phases generally align
with business case phases to seek more money to continue on.
And so your analysis is sometimes used for that.
So high level analysis, BA analysis combined with maybe
architectural analysis if it's an IT project and possibly even
some quotes for cost on implementation that might go
into your high level analysis pack.
So they might, they may that your work goes into the business
case and the business case is kind of saying well we have we
know a bit more now thanks for the money that paid for that
previous phase which we also justified in a business case.
We have now done high level analysis, you know and and the
problem with high level analysis is of course you're not
producing anything at the end of it in terms of an asset.
So sometimes getting this funding is hard and that's why
this high level business case process, high level business
analysis process is sometimes best done by what I would call
an enterprise BA or someone who's across the business who
that's their job, right. So they're a permanent employee
and they do that. And then once you've justified
it, you might hand it off to contract BAS to actually
implement the project once you've justified that it's worth
doing. So sometimes this phase is used
for feasibility. You've done some high level
analysis, is it worth doing you know what are the proposed
solutions And then you know at the end of this phase you should
really be giving a a go no go approach for doing the full, the
full project. I think when I was in vendor we
used to guesstimate 20%, So 20% of the time of the total time,
sorry of the project would be BA time is a good estimate.
So the upfront analysis will be a portion of that and so you
could come in and maybe it's a fixed price.
So you might say, OK, we go to spend 2 weeks, you know, two
weeks Sprint doing high level analysis and then we'll come
back to you and tell you it's worth doing this project.
And then that that sets the signs of what benefits would you
get out of doing this piece of work, what are, what are the
costs involved And of course a lot of those costs people cost,
but they are usually associated with implementing a solution of
some description. And so you are, you know, using
your, you've got your requirements which are applied
to by an architect and the architect will say how they're
meeting those requirements. And each one of those replies
equals the sum of money and then the total of that equals the sum
of money. And then that goes into this
kind of cost model. So that's how much it cost to
meet the requirements. Generally technical components
come from that and then the project manager says I need 1BA1
architect, you know, three division, a Partridge and a pear
tree and my own cost and then that gives you the total.
So that's the cost of the project.
And then the capital cost is the cost of meeting the requirements
if it's a new thing that you're introducing a new asset, a new
product. And then the benefits is what
you should have modeled before you even started the process
back in strategic and enterprise analysis, which was the why.
So why are we doing this? We're reducing the number of the
time it takes to answer customer queries by implementing A serum
system by 20%. And if you were an organization
that went down the FDE saving route, which we'll get to in a
minute, but effectively a lot of projects never result in
actually removing staff or they usually result in reallocating
those staff. But let's say you had a call
center 100, a hundred people in there or getting paid 100,000 a
year and you reducing that by 20%, that 20 staff 20 * 100,000
equals $2,000,000 per annum. OK.
This is what we're talking about over a five year period or
ramped up over a five year period is $10 million.
Sometimes the asset might last for five years of its IT.
So the CRM system lasts once you've implemented it which
takes five years at the end of the once you've got it in there
at the end depreciates over five years.
I'm, I'm probably losing you some of you at the moment but
this, this is kind of the point. So we've got 10 million there
and then another five years of that.
So, so this is kind of how it's calculated.
So the $2,000,000 saving by ripping out those resources will
ramp up over five years because you haven't actually implemented
the saving of 20% until year five.
So that goes into a spreadsheet over time ramping up and then
for the next five years from there you're actually banking
year on year the saving of that $2,000,000.
So that last five years of asset is 10 mil.
So somewhere in the region up there you work out a figure
which works out, you know let's say $50 million in cost saving
by doing this piece of work and that is your kind of cost,
sorry, that's your benefit. That's how much you're
benefiting from reducing those staff numbers.
Basically getting rid of staff by putting in the system in, but
of course putting in the system in costs money and that needs to
be maintained. So you might have an ongoing,
you know, I don't know if it's Salesforce, Salesforce
administration teams and other five resources, hence the
reallocation. You may be getting rid of
contacts into staff which are 100,000 and you're hiring 5
Salesforce staff that are on double that salary, right.
This is this. This is the interesting factor
with technology that generally you need people to you know
operate it and that goes. The cost is generally more
expensive, but either way the the cost of the project may be
$40 million. So you take the $40 million of
the money that it cost that that's the resources, buying the
cap, buying the licenses over that same period and it cost $40
million, but you get to save $50 million.
So it's a net positive, which is 50 -, 40 = 10 million in savings
over 10 years. And that's your cost benefit
analysis. So really you're you're doing
this and I probably lost you. There's a lot of techniques and
ways of doing this and it gets to an accounting level, but
effectively you're working out to simply a balance sheet
equation of how much are you going to gain.
So how much you know what's the benefit, how much you're going
to get by doing this generally in staff reduction or time or
you know not paying licenses or removing something and that
equals an amount that's the benefit and then you'll and then
there's going to be a cost to do the thing and support it
ongoing. So it's called CapEx and OpEx
and you and you take the first number you minus the second
number and if that's a positive number then that's very good for
you. And that basically means the
case, the business case, it's where the word comes from for
doing this bit change for actually supporting this project
is positive. And so therefore generally if
that number is is is positive. Then your project should be
justified from a financial point of view.
And of course it's not all financial for it's not all about
finance and some. Right at the moment I'm helping
write a business case for for a government department and it's
an it's a need to uplift their infrastructure and their data
space. And the benefit is in the data,
right. Forget about the, you know
removing staff and the doing the thing and adding up.
So the the cost benefit analysis I've just talked about is less
is less positive and you know you can play with numbers, but
one of the, one of the the positive return that's really
hard to quantify financially and of course business cases, this
is only a portion of the of the of the story is that the value
will be the access to information.
And because they're a public service, they're not selling
this information, they're using it to make better public
services and make informed decisions and answer requests
and things. It's hard to quantify how do you
quantify that in terms of money. And there are models that are
now being introduced to modify that to talk about that talk
about information value. And you know we can maybe show
that as well as our financial model maybe it's not positive we
can have this model and show hey this is the model we use to show
how that credit our information is and how long it takes to
access that information. When we when we implement you
know this new CRM system, if that's what we're doing, this is
kind of like the audit and and it's got a score of you know,
it's a got a bad score, a red score and if we do it, it's got
a green score and it's a good thing and you know and and and
don't and then that's the other part of the business case and
this is what we talked about in terms of the exec.
They want to see the positive cost benefit analysis, generally
positive and they generally want to see things like, you know,
happier staff retention, time saving and you know, quality
information to make informed decisions.
And any leader who's got a digital background or at least
understands great data, they should realize that that does
translate into financial benefits or at least optionality
when it comes to resourcing or building their team because if
you don't have information, you know it's very hard to to do
anything else. So anyway, that was my side rant
around information value and I think I've given you a pretty
good rundown on purpose, complex example of cost benefit analysis
and that's a large part of the business case and how your
analysis feeds into that. And as I said you would do this,
you generally come up with really rough numbers for the
first business case. It's usually, sometimes they
call it an appraised business case, sometimes they call it an
initiation business case to like initially justify even looking
at this problem. And your business case is
generally in a stack, a pile against another 50 or whatever
or you know in some businesses 500.
So that you know it might be a one page that the exec team
looks at and they work out OK. Well, this is a problem for us.
Data is bad. We had some data breach that's
really bad. OK.
So the data project looks good. We know that customers are
really important. We know that the contact center
is too big. Reducing customer, OK.
One of our problems is the number of staff we have in that
area. We need a cost cut and you know
we don't have an integrated serum system.
So you know, responding and getting back to customer
requests has cost us a lot of money across the enterprise.
That project there and implementing the serum, that
looks like a good idea. OK, cool.
Kind of neutral cost benefit analysis.
Cool. Oh, no, no, it is positive Cool.
OK, well, that's going to make the cut and then they whittle it
down till they have their five, you know, business cases they're
going to support. That's going to cost us, I don't
know, 500 million to invest in all these things.
It's generally billions of dollars when we get to this
level, even in a small country like New Zealand.
And then you're going, Yep, OK, we're going to invest in that.
Sorry. And what they say is they're
going to commit to how much it would cost over the whole life
of the of the business case. So what I'm trying to say there
is the first business case says, look, if we do this project,
it's going to cost us $50 million.
Sorry. In that case, we said 40 million
before. So I'll say $40 million to do
this project. OK.
And they'll say cool, you can't, you have approval.
Thank you. You've done a great job
explaining why this is a problem.
Here's 40 million. We commit to giving you $40
million if you can, at these various stages along the
project, continue to justify that what you've said upfront is
true and that you can show the benefits and get very, you know,
you can start to show us how you can do this project.
You keep to the budget, the $40 million budget and that that $50
million in savings, it starts to get realized along the way and
so that that is the business case process, OK.
And you you basically take the the first business case you
write the justification for even doing the analysis, high level
analysis and then you evolve it. So it just gets bigger and
bigger and bigger as you go through various stages.
And as I mentioned upfront with the the Better Business case
process, for example, depending on how much money you're asking
for, you may have to write more, justify more or you might have
to justify less. And I'm, I'm going to throw a
side note here, which is something I've talked about
before and I'm really passionate about if you're on a startup
company, right. And so this, this process
matters the the bigger the company or the OR the money the
source of funds you're spending. If you're in a startup business
or a medium sized business, you do this process anyway, you
should be doing this process and I wouldn't necessarily mean the
integrate you might need to if you're seeking investment from a
financial firm and like I said, it's really you're just doing,
you know how much money we're spending, what's the benefit?
That's it. So could the fact that we're
thinking about you know when you get to corporations and you're
writing fifty 100 pages plus you know 200 spreadsheets, the lean
business case, lean or lean business case or lean canvas,
there is a lean business case as well is the same thing.
It's just much more cut down and you've got a lot less variables
to talk about, a lot less risk, a lot less assumptions built in
because you're so small there's only you know three or four of
you you can the the numbers will be more accurate.
Therefore you don't need to justify your models as much and
you know it could be A1 pager. And I'm also very, very keen on
this process that first Phase I talked about that even
justifying spending money to even look to see if the problem
is what we thought it was and how much it was going to cost to
solve the high, what I call strategic and business
enterprise analysis. That should be cheap, that
should be cheaper. I mean at the end of the day the
exec team is looking, if our audience is having to look at
500 of these to widdle them down to the five they're going to
invest in. You know a one page business
case should be enough at that start point as long as it's
consistent and the analysis behind it.
You know, maybe again as consistent and valid.
Then maybe all they need to see is A1 pager to justify looking
at this problem. Then you know, then you might
move into a five page which is this case.
And then as you get further down you might get moved to a 20 page
business case for example. And you know if you're if you're
taking, if if you're a business and you're taking 10% of your
revenue and you're investing it in terms of these projects, then
you know you don't you you need to make an informed decision and
that's what it's all about. So hopefully I've explained to
you what a business case is. I'll point you to the Better
Business case templates. Look online, you'll find them
either here in New Zealand or in the UK.
Some of them are scary. We could work.
I don't, I don't want to work through a template today.
I think we can do that if you want to, that that's almost
something we do in the Level 2 course.
But I think I've given you a good justification about what a
business case is for why we do it, what stages are that we go
through and ultimately, hopefully you as ABA can see the
value that you can add.