Within the government, there are often heard reasons not to make a business case: “This project must go ahead due to European regulations,” “this is not about the costs” (we hear this argument less and less often), and “this project is necessary to give to the policy.” In our view, these critical voices arise from a limited view of business cases as a balancing of benefits and costs, emphasizing the financial side.
This article discusses a model in which various kinds of projects are distinguished. In our view, there is no ultimate business case. The ultimate business case depends on the type of project. We support this with examples from our consultancy practice.
The type of ICT investments is determined on the one hand by the degree of strategic impact and on the other by necessity. The ‘visor’ of 4 quadrants is created by contrasting these two dimensions. The circular arrow in the center symbolizes the third dimension in the crosshairs; an investment can progress from one quadrant to another over time. There is a central question for each quadrant that must be answered in the business case.
Main question: Does the investment yield efficiency benefits for me? This quadrant includes savings projects, the (partial) automation of labor-intensive processes, saving on ICT budgets by consolidating ICT (centralization and scaling-up), and replacement investments. In this type of project, the financial trade-off between costs and benefits is essential for the business case.
Quadrant: ‘Business Critical’
Main question: Do I need the project to survive? In business, it concerns projects necessary to maintain a position in a particular market. Within government bodies, these include projects that give substance to legislation imposed by higher governments or from Europe. Relatively much attention is paid to (political) risks.
Main question: Does the project provide me with a direct strategic advantage? The advantages are often difficult to express in monetary terms, so the focus is on qualitative advantages and disadvantages. This concerns, for example, projects that give substance to (new) policy.
Quadrant: ‘High potential’
Main question: Will the project provide me with a strategic advantage in the future? Explanation: This concerns the vision anchored in programs and gives direction to many projects. Due to the long term, the pros and cons are uncertain. An essential part of the business case is a mutual comparison of various future scenarios.
The controller asks the project manager: “What is the payback period for this project?” The project manager indicates that the project concerns investments to limit the risks of infrastructure failure and the possible political consequences thereof. The benefits of this strategic project are difficult to express in monetary terms. After the controller insists that the budget request for this project should include a payback period because this is important for determining which projects receive a budget, the project manager gets to work. The project manager expresses the risks using “soft” figures about possible claims in monetary terms. By dividing the complex investment amounts by the soft savings, he calculates an excellent payback period.
All’s well that ends well. Certainly not! By flattening the prioritization of projects to several financial criteria, such as payback time, the distinction between hard and soft benefits disappears in this case. As a result, a savings project with a more extended payback period and hard committed benefits can lose out against a project with a shorter payback period and uncertain benefits. To overcome this, organizations often fall into the trap of using complex scoring cards and calculations to arrive at a fair and explainable prioritization. It is a deadly path because there will always be cases where the scoring method developed does not lead to a prioritization that is experienced as fair according to all those involved. In addition, the system becomes more challenging to explain as complexity increases.
It is better to distinguish several types of projects at the highest level and allocate a budget per type. The 3D visor can help with that. You can then apply prioritization between projects of the same type at a lower level. Strategic issues, such as determining the balance between optimization and genuine innovations, determining the scope needed to implement legal measures, and the extent to which risks are covered, remain at the highest level. At a lower level, the possibility remains for substantive consideration between the projects that best define the direction, as set out at the highest level.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.