Bcbok draft version by jorge santos

A Guide to the

BUSINESS CASE BODY OF KNOWLEDGE BCBOK速 GUIDE, draft version

Business Case Institute (BCI®) The Business Case Institute (BCI®) is an independent professional association, which strives to serve the growing need on the business cases competencies for professionals working in a wide range of management roles and industries particularly where investments decisions take place. BCI® will help our Association Members to leverage their knowledge, foster their contacts worldwide and enhance their professional performance to better succeed. BCI® vision is to be the leader institute worldwide for business case practices. BCI® mission is creating value through scientific management. BCI® seeks to develop and disseminate effective business case practices throughout organizations based on scientific management in order to create continuous value to stakeholders.

The Purpose of the BCBOK® Guide: A Guide to the Business Case Body of Knowledge The BCBOK® Guide aims to help organizations evaluate the impact of their investment management decisions for the creation of value and economic sustainability through scientific management processes. The BCBOK® contains the standard generaly recognized as a good practice for business cases. The Business Case Body of Knowledge is a methodology composed by a set of knowledge, skills, tools and techniques which, when appropriately applied in any given initiative, it enhances the chances of a successful management decision towards a project investment.

Contacts: Business Case Institute Address: Kemp House, 152-160, City Road London EC1V 2NX, United Kingdom Phone: +44 793 485 19 24 Email: info@businesscaseinstitute.org Website: www.businesscaseinstitute.org ©2015 Business Case Institute, Inc. All rights reserved.

Contents 1. Introduction ............................................................................................................................................. 9 1.1. Contemporary Challenges in Management .................................................................................... 9 1.1.1. Globalization ........................................................................................................................ 9 1.1.2. Technological Innovation ("Techonomy") .......................................................................... 10 1.1.3. Planned Obsolescence ...................................................................................................... 11 1.1.4. Social Networks ................................................................................................................. 12 1.1.5. Sustainability ..................................................................................................................... 13 1.2. Organizational Regeneration ........................................................................................................ 15 1.3. Competitive Advantage of Innovation ........................................................................................... 17 1.4. Value Creation .............................................................................................................................. 20 1.4.1. Benefits Dimension............................................................................................................ 23 1.4.2. Primitive and Instantiated Benefits .................................................................................... 28 2. What is a Business Case? .................................................................................................................... 31 3. Business Case in the Organizational Context ....................................................................................... 35 3.1. A Manager’s Mission .................................................................................................................... 35 3.2. Budgeting Process ........................................................................................................................ 35 3.2.1. Current Issue – The Budget Based on the Capital Available ............................................. 35 3.2.2. Future – Budget Based on the Value Proposals ................................................................ 36 3.3. Business Case in the CAPEX life cycle ........................................................................................ 38 3.4. Portfolio Priorization ...................................................................................................................... 38 3.5. Business Analysis and Project Management ................................................................................ 41 3.6. Benefits Tracking .......................................................................................................................... 42 3.7. Business Case Office ................................................................................................................... 43 3.8. Responsibility Matrix ..................................................................................................................... 44 4. Scientific Management Principle ........................................................................................................... 45 4.1. Business Research ....................................................................................................................... 47 4.1.1. Business Research Methods ............................................................................................. 48 5. Business Case Framework ................................................................................................................... 59 5.1. Project Request ............................................................................................................................ 61 5.1.1. Project Request: Inputs ..................................................................................................... 61 5.1.2. Project Request: Tools & Techniques ............................................................................... 63 5.1.3. Project Request: Outputs .................................................................................................. 68 5.2. Strategic Alignment ....................................................................................................................... 69 5.2.1. Strategic Alignment: Inputs ................................................................................................ 69 5.2.2. Strategic Alignment: Tools & Techniques .......................................................................... 70 5

5.2.3. Strategic Alignment: Outputs ............................................................................................. 74 5.3. Benefits Estimation ....................................................................................................................... 76 5.3.1. Benefits Estimation: Inputs ................................................................................................ 77 5.3.2. Benefits Estimation: Tools & Techniques .......................................................................... 78 5.3.3. Benefits Estimation: Outputs ............................................................................................. 82 5.4. Costs Estimation ........................................................................................................................... 83 5.4.1. Costs Estimation: Inputs .................................................................................................... 83 5.4.2. Costs Estimation: Tools & Techniques .............................................................................. 84 5.5. Parametric Analysis ...................................................................................................................... 85 5.5.2. Costs Estimation: Outputs ................................................................................................. 86 5.6. Economic Evaluation .................................................................................................................... 87 5.6.1. Economic Evaluation: Inputs ............................................................................................. 87 5.6.2. Economic Evaluation: Tools & Techniques ....................................................................... 87 5.6.3. Economic Evaluation: Outputs .......................................................................................... 89 5.7. Context Readiness ....................................................................................................................... 90 5.7.1. Context Readiness: Inputs ................................................................................................ 90 5.7.2. Context Readiness: Tools & Techniques........................................................................... 91 5.7.3. Context Readiness: Outputs .............................................................................................. 93 5.8. Final Decision ............................................................................................................................... 94 5.8.1. Final Decision: Inputs ........................................................................................................ 94 5.8.2. Final Decision: Tools & Techniques .................................................................................. 95 5.8.3. Final Decision: Outputs ..................................................................................................... 97 5.9. Benefits Measurement .................................................................................................................. 98 5.9.1. Benefits Measurement: Inputs ........................................................................................... 98 5.9.2. Benefits Measurement: Tools & Techniques ..................................................................... 98 5.9.3. Benefits Measurement: Outputs ...................................................................................... 100 6. Benefits Measurement: further considerations .................................................................................... 101 6.1. Statistics Independency in the Analysis of â&#x20AC;&#x153;Cross-Effectsâ&#x20AC;? ......................................................... 102 6.2. Control Group ............................................................................................................................. 103 7. Skills .................................................................................................................................................... 105 7.1. Problem-Solving Skills ................................................................................................................ 105 7.1.1. Ability to Question and to Be Curious .............................................................................. 109 7.1.2. Analytical Thinking........................................................................................................... 109 7.1.3. Decision-Making Ability ................................................................................................... 110 7.1.4. Continuous Learning ....................................................................................................... 110 7.1.5. Negotiation and Persuasion ............................................................................................ 111 6

7.1.6. Fairness and Integrity ...................................................................................................... 111 7.2. Soft Skills .................................................................................................................................... 111 7.2.1. Communication................................................................................................................ 111 7.2.2. Organization .................................................................................................................... 111 7.2.3. Leadership ....................................................................................................................... 112 7.2.4. Initiative and Persistence ................................................................................................. 112 7.3. Technical Skills ........................................................................................................................... 112 7.3.1. Domain in Financial Area ................................................................................................ 112 7.3.2. Ability to Manage Information .......................................................................................... 112 7.3.3. Ability to Assess Risks ..................................................................................................... 112 7.3.4. Ability to Manage Value ................................................................................................... 113 8. Glossary .............................................................................................................................................. 115 9. References .......................................................................................................................................... 118

Introduction 1.1.

Contemporary Challenges in Management

In the 21st century the business world lives at a fast pace of on-going transformation and high speed. Communication, transports and distribution channels all share this rapid pace of change, as well as the needs that arise, the new companies that come forward, and the new products and services that are launched. This effect in the economic world was leveraged by several combined factors leading to a highly competitive market and a growing demand for rationalization of resources and sustainable growth. The most noteworthy are the following: globalization, the technological innovation boom at the heart of the economy ("Techonomy"), the phenomenon of planned obsolescence adopted as a strategy of fostering consumption, the proliferation of social networking (online networking) and the growing concern with the social and environmental dimensions in business (sustainability).

1.1.1. Globalization Globalization is the process of international integration, resulting from exchanges between markets, products, ideas, people and cultures. This phenomenon has been widely discussed in recent decades, especially since 1980s, due to the contribution of telecommunications and transports in the boost of the economic and cultural interdependence. The barriers that once prevented the interaction and communication around the world are now disappearing, affecting society in all aspects: economic, social, governmental and business. In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization: Trade and business; capital and investment movements; migration of people and dissemination of knowledge. From the increased competitiveness, until the uncertainty of the future and the impact of their actions, globalization has forced companies to change their strategy to operate and remain competitive. With increasing global economy, companies are faced with new challenges and opportunities that should be considered in strategic reformulation. Some globalization advantages include access to affordable and diverse resources, due to the approach of trade relations between countries and the speed of logistics and communication. This enables the design of new products and services, as well as a cheaper production. A practical example is the opening of the Chinese market, providing access to cheaper workforce and lower production costs. Besides, the reduction of trade barriers allowed the expansion of markets. Companies that only sold locally can open its horizons to new markets, increasing its radius of action and the number of target customers. This not only increases their sales potential, as it allows the achievement of economies of scale, by production in large quantities. Flexibility in commercial exchange also applies to the flexibility in the relocation of factories and offices to places with greater sales potential, better access to resources or lower costs. Organizations are now able to do outsourcing and offshoring of their sectors, taking advantage in terms of expertise, economies of scale, production costs, among others. The development of information technology in India has allowed many companies to create local subsidiaries, taking advantage of the know-how and low labor costs, making it an example of this phenomenon of relocation. One of the biggest benefits of globalization is the acquisition of skills and knowledge, increasing collaboration and innovation capacity. Organizations increase their knowledge both by world-wide recruitment of skilled labor as by the quick and massive dissemination of information facilitated by information technology. www.businesscaseinstitute.org | ÂŠ2015 Business Case Institute | A Guide to the Business Case Body of Knowledge BCBOKÂŽ Guide â&#x20AC;&#x201C; Draft Version

Another advantage arises from the creation and development of new ways of investment, such as mergers and joint ventures, which facilitate the entry into new markets and provide competitive advantages, by sharing expertise of the business or market. Big advantages mean big challenges. Managing the proportion and speed of globalization are an obstacle for many companies who are forced to keep pace or they may be left out of the so-called "global village". A major challenge relates to the management of human resources, at the level of cultural and ethical differences, in the difficulty of capturing talent and be competitive in recruiting, manage employees motivation on working globally, among others. In line with the availability of information, comes the need to manage this information (big data), which comes at growing rates of volume, variety and speed. The effect of globalization can also be harmful in the sense that it increases the competitiveness, making it especially difficult for the entry of new competitors facing multinational companies already established. On the other hand, local businesses operating in a limited geography are now competing with global companies. National borders are becoming less important, enabling the action of well positioned multinationals. This competitiveness is felt by the increasing demand from consumers, who have more choice and tend to be more selective in terms of quality, service and price. New challenges to product development arise because the adaptation of products and / or services to different markets requires a more complex management of the various areas of the organization. It becomes more complicated to meet the clientâ&#x20AC;&#x2122;s needs individually and it is necessary to weigh the correct trade-off between adaptation and standardization. All these factors lead to the need of innovation, either in new products, new markets and new business models that challenge the traditional market leaders. Companies are continuously presented with new opportunities, but must be able to identify them and absorb quickly, given the competitive market pace. This is not a solitary process, because only interdependent companies can increase the competitiveness of their value chains, which also turn to be global.

1.1.2. Technological Innovation ("Techonomy") The explosion of the Internet and mobile technology (mobile phones, tablets, laptops) revolutionized both the lives of consumers as well as transformed business models of organizations. This technological influence is strongly felt in the daily business operations, affecting both large and small businesses. The boom period of new technologies gave rise to the name of "Generation Y" (generation of people born in and after the 1980s) to classify the emergence of a new generation and a time of great technological advances and of the Internet. This revolution enabled to remove various trade and technological barriers that previously penalized free communication between people. Technological innovation has revolutionized both companies and consumers in their way of buying, ordering, paying, reading, consulting information and advertising communication.

Main impacts  

 

Cost reduction in sales processes and communication and greater efficiency; Improved communication to the consumer and vice versa - faster communication processes together with easier mechanisms – e-mail, texting, websites, mobile applications (apps). These new tools facilitated receiving feedback by consumers and the communication by the company to the consumer in "real-time" that is, almost instantaneously, also allowing the message to be passed along more effectively; Easier entry into new geographic markets (particularly internationally) through easier communication, advertising and new sales channels provided by new technologies; Promotion of business culture due to a better communication with teams located in other geographic regions.

Economic technology - Techonomy "Techonomy" is an expression that combines "technology" with "economy". The term "technomy" expresses the integration of technology in all parts of the economy and the creation of new opportunities contributing to better businesses, a better society and a better planet. Technology has become a central part of the economy in which we operate and in the society where we live in. In fact, the technology is entangled in any activity that humans perform on a daily basis. According to David Kirkpatric, the author of "The Facebook Effect" (2010), technology has become the central engine of any economy (individual, companies and organizations) giving a new empowerment by new tools that support the organization of information and ideas, facilitating the resolution of challenges and embrace new opportunities, more efficiently and effectively. In summary, technology has been revolutionizing the business world, in terms of efficiency, cost, culture and the relationship between employees, customers, suppliers and consumers, playing a key role in the competitiveness and sustainability of the business and continued ability to create wealth.

1.1.3. Planned Obsolescence The planned obsolescence is a strategy in which manufacturers program the life of their products so that they do not last long and become outdated after a period of time in order to encourage more market consumption. This strategy was triggered by the economic crisis of 1929 and with the consumption boom in the 1950s, changing the way companies operate. The focus is no longer on the durability and the quality of products, but the continuous and increasingly rapid production of new products with a reduced duration. The idea of reducing the time of products usage, appeared in 1925 in the lamp industry, by the Phoebus cartel, formed by the major lamp manufacturers in Europe and the United States. The cartel was organized to reduce the lamps duration from 2500 hours to 1000 hours of lifetime, in order to increase the market need to purchase lamps with the end goal of increasing the profit of the companies involved. This marketing phenomenon has been replicated in other industries until the today, where we witness the rapid technological change. The planned obsolescence is manifested in various ways either by forcing the consumer to buy it from necessity or as a habit. It is especially common in electronics consumer, home appliances and cars, which quickly break down after the warranty and whose repair costs are impractical comparing to the purchase of a new product.

This phenomenon is reflected not only in the intentional reduction of products performance causing them to stop working but also through the creation of new products with new features, encouraging the consumer to buy the latest generation (perceived obsolescence). This perceived obsolescence occurs when a new, more attractive product is launched in the market, leading the client to purchase, even if the previous model remains operational. There is also the phenomenon of functional obsolescence, where the products lose their usefulness due to technical incompatibility with new products version. This is the case of smartphones with accessories incompatibilities updates or with a lack of software updates, forcing the consumer to buy the new model. In some cases, this strategy is needed and used through value engineering, where organizations produce products with low durability and cheaper components so that they are more attractive to costumers pricewise. With the method value engineering the company can cut unnecessary costs not valued by the end user, usually through the use of cheaper components that may allow a satisfactory life cycle only. As a common practice, organizations end up following this trend, but it is necessary to not abdicate about the consumer value for money because otherwise he may stop buying at the same company. This risk should be managed, in the sense that the company should keep consumer confidence in their products, so they do not change to another supplier. Another problem associated with this theme is the environmental issue. In an era where environmental awareness and the problems of excessive consumption are increasingly discussed, planned obsolescence becomes a threat to future generations, who will face a lack of resources. This scenario led to a new challenge for organizations that are developing appealing products but with components that can be recycled or reused when discarded by consumers.

1.1.4. Social Networks Social networks were another factor that came from the technological advance and took a driving position in the intensification of globalization of markets and business. The rate of social networks usage has grown blistering and revolutionized the marketing and communication models adopted by companies to contact current or potential customers. Along with technological innovation, with the launch of smartphones, tablets, laptops and the internet, social networks allow instant access to information and communication between the parties involved (business to consumer). Social media platforms allow organizations to carry out creative marketing and communication campaigns that encourage the word of mouth, a quicker brand image proliferation, and the adoption of a more customized communication. Social networks and mobile applications enable companies to create new loyalty models, "fans" pages to follow the company products and services, the possibility of rating the products and sharing Likes, in just one click. Nowadays there are tools that can help the process of customer or market identification with tracking capabilities of each â&#x20AC;&#x153;stepâ&#x20AC;? thus allowing for the management of each interaction, action, behavior and the adoption of marketing strategies in order to maximize business potential. New technologies combined with new marketing intelligence tools play a key role, especially in the collection of rich information for business managers â&#x20AC;&#x201C; nowadays most of the information is shared in seconds, almost instantaneously. Any click, access, online swipe, i.e. any transaction or interaction in the digital world, is translated to robust, powerful and high significance information for the understanding of the consumer and, as such, decisive for the definition of business strategies. This valuable information will later allow business insights, or in other 12

words, finding meaning in the data. In this sense, marketeers face a new challenge that involves creating great experiences to consumers: "the right consumer, get the right message, on the right device, at the right time, at the right price." There are also other possible synergies for taking full advantage of the social networks. When organizations think to define a marketing strategy via social media, it is relevant to think what the target to achieve is. Be aware that it is common to find a large number of users presented in social networks that may not necessarily represent potential consumers, but still have a strong impact on marketing purposes. The expert in social media, Augie Ray, had classified 3 categories for the types of influencers: Social Broadcasters, Mass Influencers and Potential Influencers (Figure 1).

Figure 1 – Pyramid of the three types of influencers in social media

Over 80% of this population is made of potential "influencers". It's worth the effort to identify these profiles and add them (connect) to the network in order to attract more "shares" and Likes. Competitive intelligence involves listening both employees and the market, where social networks have facilitated this "listening" approach, allowing external feedback gathering, win back customers and anticipate costumers’ needs. Some of the most popular social networks are Facebook, Twitter, Pinterest and LinkedIn.

1.1.5. Sustainability Sustainable development is generally understood as "development that meets the current needs without compromising the satisfaction of future needs" (Brundtland Report, 1987). The sustainability issue has gained greater proportions by the discussions around global warming, child exploitation, in poverty increase, pollution, among others. This was first outlined in the United Nations Conference on the Human Environment in 1972, which advocated the need to "improve the human environment for present and future generations." Sustainability applied to the companies comprises the triple bottom line management or business management in financial, social and environmental terms. These three impacts are also referred to as profit, people and planet (Figure 2). Thus, to have a sustainable industrial development, we need to address concerns such as economic efficiency (innovation, prosperity, and productivity), social equity (poverty, community, health, wealth, human rights) and environmental responsibility (climate change, biodiversity).

Figure 2 â&#x20AC;&#x201D; Triple Bottom Line

Many companies are now integrating sustainability principles into their business, with goals beyond reputation for clients. Issues such as energy conservation, developing green products, retaining and motivating employees are factors driven by the adoption of sustainable practices that benefit organizations. A sustainable awareness can mean a competitive advantage, if it is integrated into the organizational strategy. Some companies began to prepare the "Sustainability Report" that reflects its performance and sets objectives in that framework. The GRI (Global Reporting Initiative) reporting model has been adopted by many companies to structure and communicate this type of information, organized into four areas: economic, social, environmental and management. The adoption of sustainable practices create new opportunities for organizations, thus reducing costs, improving efficiency and increasing business; and allowing for the expansion of some markets, such as renewable energy. On the other hand, with the world population increase and the excessive consumption of fossil fuels, sustainability is no longer seen as an option, becoming a real necessity. In the course of the recession emerged the importance of doing more with less, cutting costs and maintaining the same levels of quality. Particularly in firms with non-renewable resources is expected a costs increase as they are becoming scarcer, so its sustainable performance becomes imperative. But a major obstacle to sustainability in business still relates to the generated benefits quantification and what practical consequences they will bring. Given the high investment and the uncertain return, companies step back on taking this course. Understanding the ROI of sustainability is an important step towards a competitive advantage generation (Kumar, Teichman, & Timpernagel, 2012).

1.2.

Organizational Regeneration

Within an environment of instability and unpredictability companies are challenged to adopt new strategic positions and find new ways to create value and exploit market opportunities or will be under the risk of losing competitiveness and decrease its value proposition to its stakeholders. The economic, social and technological context lead to a dramatic reduction of organizations life cycle either through mergers, acquisitions, bankruptcy or others, companies face a high dynamic that may put in risk its own existence, where management face the challenge of the business model continuous recreation, exploring and developing assets of an ongoing and fast transformation while obtaining dividends from current assets. The challenges of modern management demand companies to permanently change their value propositions to the market, since this reality turns the investment exploitation time and products life cycle increasingly short. So, it is in this competitive and continuously unknown environment that companies are able to quickly evolve in response to the market and assure an active and sustainable presence in the market (Piercy & Cravens, 2010). Taking advantage of business opportunities, anticipating them and making the right investments are imperative to gain a competitive advantage (Pereira, 2014). Moreover, we cannot ignore that customers were never so sought after and the competition for aggressive and often less ethical customer acquisition was never so fierce. Permanent attempts to conquer territory (market) have become a daily practice and competitors struggle, client by client, to gain market share. Supplementing and answering the call for this effort, loyalty practices emerge and the attempt to secure the customer. Under these circumstances, the customer life cycle is increasingly small and the need arises for satisfying the customer.

Figure 3 – Life-Cycle Reduction (Pereira, 2014)

Therefore, company prosperity is thus inevitably conditioned (when not protected within a monopoly) to permanent reinvention (Earley, 2013). According to Hamel (2000), organizations must reinvent their strategy, in a structured, proactive and continuous way and not reactively when there is a crisis. According www.businesscaseinstitute.org | ©2015 Business Case Institute | A Guide to the Business Case Body of Knowledge BCBOK® Guide – Draft Version

to Pereira (2014), when the strategic move is not permanent, but discrete and specific in time, the company typically goes through dangerous periods of uncertainty and competitive detachment, having enormous difficulties to stand out in the market after that. Only worse than this scenario, is the monopolistic protection, leading the organization for years or decades in a fictional and properly established paradise for interestbased groups, and when faced with a competitive environment has enormous difficulty to survive and remain competitive (Pereira , 2014). One of the objective consequences of this volatility and continued need for rebuilding the organizational mission is the movement of the organizational energy from the world of the operation to the world of projects and change. Thus, more and more operations are optimized, automated and robotized (recurring tasks where machines perform better and at less cost than humans) releasing and moving the human and financial capital for the creation, design and development of new products and services (tasks that the technology still has a hard time operating). And so, the amount of resources available to refound the organization grows exponentially.

Figure 4 — The Economist Intelligence Unit. A.T. Kearney Excellence in Capital Projects (2014)

According to Pereira (2014), the life cycle of organizations is therefore affected by several factors that determine their longevity:     

The entrepreneurial vision and his permanent dissatisfaction The capacity for innovation and enterprise change management The dynamic, distinctive, and high-performance skills of the team The value proposition of products and services that the company offers to the market The company's relationship with its stakeholders on an ongoing sharing of a Win/Win relationship

The underlying prize to this challenge is high risk, particularly because if the company survives, it is typically prepared, robust and therefore more immune to external volatility, finding its Blue Ocean, even if temporary. If the company does not adapt, it will be difficult to stay in business, and so it is discontinued or acquired. 16

To achieve organizational success, organizations must therefore seek to be leaders in innovation, ensuring investment in projects that bring wealth to the organization.

1.3.

Competitive Advantage of Innovation

A company with a good operational performance but that is not oriented to innovation is a vulnerable company, because it is not prepared to face the future, losing interest in time for the context in which it operates. A company oriented to innovation but whose operational performance is reduced, may not be solvent in case it does not bet on the efficiency and effectiveness of its operations, having difficulty on staying in the present, in most cases for treasury difficulties. Today's innovations will be the products/services of the next three to five years. If innovation fails, inevitably the medium-term competitiveness fails. If organizations do a retrospective of what they were offering five years ago and compare that with their current offer they will find a substantive change. Similarly if we verify the amount of projects formulated in portfolio five years ago and observe the amount of projects formulated today we will also find a high increase in proposed changes. We conclude that change occurs increasingly in accelerated time (lower life cycle of products) as well as in accelerated substance (increased number of proposed projects). It is however imperative that each proposal is effective in value to the organization in order to maximize and leverage the most the available resources.

Figure 5 – Organizational Success (Pereira, 2014)

According to Pereira (2014), the new paradigm of business management defines three key factors for the sustainability and success of a company:    

Internal efficiency in the scope of the perspective of human capital Investments that create wealth, in a financial capital point of view Permanent renewal of the portfolio of products and services Permanent adaptation and reinvention of the business model and organizational structure

Therefore, it is understandable that organization’s capacity for continuous regeneration is essential in order to differentiate itself from the competition and create value for its shareholders. In an environment where new business models quickly become obsolete, the innovation must go beyond the products / services and

incremental efficiency gains. Innovation means a change in full operating mode and set new management practices, processes and structures (Hamel, 1998). Innovation and regeneration in organizations is a process that is necessary to manage and structure. Given the importance and relevance of the topic, innovation management is typically addressed to top management, since they are responsible for communicating a shared vision, support change, reduce complexity and develop an organizational culture innovation oriented (Vaccaro, Jansen, Van Den Bosch, & Volberda, 2012). Birkinshaw et al. (2008) say these "agents of change" are essential to identify new market trends and the needs of the organization, conducting innovation management deliberately. According to Pereira (2014) one of the greatest barriers to organizational success that typically leads companies to the abyss is the permanent insistence on assumptions, based on empiricism, in emotion, in the personalization of merit. Projects arise by chance, completely ad-hoc, without an intelligent process that causes them in a rational and effective way. The portfolio of current projects is the portfolio of products/services in the coming years, thus we can conclude that these have a random basis in most cases, which dramatically affects the organization. The systematic process of continuously provoking the organization in a rational and intelligent way is a critical and vital competence today. Typically this process stems from the permanent dissatisfaction and nonconformity of top management in continuously ensuring surpassing itself and the competition, which is translated in Competitive Intelligence, which is ability of reading the external environment and internal environment of the organization permanently. In market terms, it is necessary to anticipate trends, the competition evolution, identify and assess threats and opportunities in order to develop offensive and/or defensive actions. This external scanning should include the entire value chain, considering, among others, suppliers, competitors, regulators and customers. On the other hand, internally, it is imperative to know the needs of the organization, its difficulties, capabilities, uneficiencies and resources available, so that strategies are adapted to the organization development. It is through these two external and internal â&#x20AC;&#x153;hearsâ&#x20AC;?aligned to the organizational strategy that the company formulates value proposals and reinvents itself, continuously. The goal of Competitive Intelligence is to generate sustainable competitive advantages by leveraging opportunities and mitigation of identified threats, accomplished through investment projects while seeking for a lean organization. Since the available resources (human capital, financial capital and time) are limited, organizations must make options while always considering the opportunity costs of those, for two main reasons: 1. Maximize the application of available resources and assets 2. Minimize projects that become sunk costs and generate negative results to the organization If intelligent proposal formulation is a critical competence to the organization, it is absolutely pertinent that we can measure value propositions in an exempt, rigorous and impartial way, in order to make choices and to convert ideas into value, relegating to the background the origin of the proposals or the effect that it is "strategic" and therefore not measured. This is how the need to establish the scientific evaluation of innovation through organizational processes of project evaluation arises, or in other words, to do Business Cases.

Figure 6 sinthethizes this process which will be further explained ahead

Figure 6 - CAPEX Life-Cycle (Pereira, 2014)

Along with the corporate intelligence, rigorous evaluation of the projects’ value proposition, the need to move from paper to product / service arises, only doing this transformation innovation really happens and becomes effective (Pascale, Millemann, & Gioja, 1997). In the majority of organizations, change management is an obstacle rather than an accelerator of the process and therefore it becomes critical to ensure the stakeholders "buy-in". It is understood by stakeholdes "all groups or individuals who can affect or be affected by the action of a particular company or entity” (Freeman, 2004). However, these are also "the base and the pillar of survival and success of any organization". It is therefore essential to create win-win relationships between the organization and its stakeholders, providing a favorable environment for the process of change and the achievement of objectives. In order to involve them and minimize objections, it is essential to delineate effective communication strategy for each group or individual, since the interests, behaviors and priorities are usually different between them. Alongside the resistance to change, it is typical in organizations that projects often serve "excuses" or as a "ride" for budget allocation to implement emotional ideals or conforts which value is questionable thus distorting the project mission, increasing its cost and delaying the delivery of the asset for exploration. The lack of quantitative benefits is the motto and the condition typically used for such a phenomenon to happen and penalize the organization. This has a higher incidence in projects of legal compliance character where some managers “refuge” themselves to implement their ideals.

1.4.

Value Creation

This whole panorama of challenges, along with the recessive effect of the economic contraction, lead to an increased level of demand in investmentsâ&#x20AC;&#x2122; projects in order to drive business growth as there is no margin for error. However, the vast majority of companies continue to invest in projects with uncertain outcomes that result in failed initiatives, non-met goals and unnecessary costs. Investments have to be more predictable, avoiding deviations to scope, budget and time frame, otherwise facing the risk of not creating value to the organization. Furthermore, this requirement is also reflected in a higher value for money, seeking to extract the maximum value from investments, otherwise the opportunity cost will be extremely high. Learning on how to invest in the right projects is synonymous to organizational regeneration towards prosperity. Considering that managers goal is to maximize wealth and create added value, organizations have to identify the projectsâ&#x20AC;&#x2122; benefits, rather than looking exclusively for its financial value. There are five main typical mistakes withing organizations and their managers when making this evaluation: 1. Trying to assess the value of "things" by the object itself, rather than the effect it generates in the organization. 2. Only give value to "things" when we do not own them or we are left without them, not conveniently exploring them when they are owned. 3. Trying to measure the value of projects through primitive benefits instead of instantiated benefits (see section 1.4.2). 4. Trying to measure dozens of benefits which besides primitive would require more evaluation process time than the completion of the project itself. 5. Protect projects with an aura of "strategic" because they come from the top and therefore are considered unquestionable. These phenomena result from a vision of modern capitalism and its effect on society, having developed easy quantification formulas, endangering one of the noblest principles of management and exploration of assets, the principle of utility.

Figure 7 â&#x20AC;&#x201C; The value of Something Principle (Pereira, 2014)

In this sense, when conducting a business case the viability will be analyzed on the basis of the economic value generated (principle of economic value), so the financial/accounting dimension is relegated to the background. Thus, economic value is not measured by the cost but by the economic impact that the initiatives generate, therefore in the process of conducting the business case, namely benefits identification, it is critical to keep in mind the principle of the value of things (Figure 7). 20

In addition to this principle there is the technique The Futures Wheel (explained in Chapter 5.1.2.4) which assists in the schematization of the solution’s impacts, or in other words, the expected benefits due to the effects on the organization's income statement. This technique consists in visually representing the direct and indirect consequences of the project to the organization, that is, to derive the project's impact to the income statement. This is a structured brainstorming in which the potential impacts of the project are registered, offering a future perspective. Hence, the cost of money is relative. A project with an 10k€ investment can be very expensive compared to a 1000k€ project, because everything depends on the value that each project generates. If we only generate 5k€ from 10k€, this project is very expensive and harmful to the organization;but if we generate 200k€ from 100k€, this project is very cheap and highly beneficial to the organization. Therefore, the budget allocated to projects must be set against the benefits they provide, not the reverse. If we define our trip based on the petrol put in the tank, we may travel to a location that is not of our interest that probably it be better not travelling to.

Figure 8 – Budgeting based on Benefits (Pereira, 2014)

It is also pertinent to mention that most organizations have great difficulty in measuring the value of their projects, because the list (hypothetical and based on assumptions) of the amount of possible benefits inhibits the organization of measuring them assertively and effectively, even if it is one only, questioning the principle of relevance, of pragmatism and of assertiveness proposed by the Pareto Law. Therefore, this strategy is often used as a refuge for the project and to be protected until the time of its implementation. When there are no quantitative benefits, the budget is always too large at the beginning and the discussion is focused on how to crush this component to the maximum, in most cases endangering the project’s benefits, with its success being evaluated by keeping or not keeping to the budget established. The fact that we are evaluating success by the means and not by the ends or objectives inhibits the organization of focusing in its core mission — generating economic value. After this initial moment, the scourge of permanent changes to the scope and the consequent diversion of budget arises. Since there are no quantitative benefits, the changes become permanent because the limit in which the project continues to make sense and to return economic value to the organization is unknown. It is therefore critical that organizations start to evaluate the success of projects not by the budget deviation but by the difference between the initial ROI proposed and final ROI verified (Pereira, 2014).

Figure 9 â&#x20AC;&#x201D; TimeBudget Box (Pereira, 2014)

Figure 9 illustrates how a projectâ&#x20AC;&#x2122;s budget should be defined. First, the benefits of the project must be calculated (economic value), and only from these is the budget to be deducted and adjusted, in a dynamic equation of maximizing generated value. It is common practice in organizations with more maturity that one should aspire to a ROI of at least 50%, a value for which one should compete in gaining resources for its implementation. ROI is thus a tool that allows organizations to evaluate their projects based on the estimated benefits against the investment required, establishing a decision-making based on benefits and not the on available budget. However, the ROI calculation should be rigorous and impartial, in order to ensure the indicator accuracy. Again, if we want the investments to be predictable, it is necessary that the assessment tools are robust and appropriate. Besides ROI, another relevant indicator is EVA (Economic Value Added). This indicator represents the value generated by an economic reality after paying all the factors involved, including the average net investment (economic capital employed or capital invested). đ??¸đ?&#x2018;&#x2030;đ??´ = đ?&#x2018; đ?&#x2018;&#x2019;đ?&#x2018;Ą đ?&#x2018;&#x201A;đ?&#x2018;?đ?&#x2018;&#x2019;đ?&#x2018;&#x;đ?&#x2018;&#x17D;đ?&#x2018;Ąđ?&#x2018;&#x2013;đ?&#x2018;&#x203A;đ?&#x2018;&#x201D; đ??źđ?&#x2018;&#x203A;đ?&#x2018;?đ?&#x2018;&#x153;đ?&#x2018;&#x161;đ?&#x2018;&#x2019; â&#x2C6;&#x2019; [đ?&#x2018;&#x2DC;%1 Ă&#x2014; đ??źđ?&#x2018;&#x203A;đ?&#x2018;Łđ?&#x2018;&#x2019;đ?&#x2018; đ?&#x2018;Ąđ?&#x2018;&#x2019;đ?&#x2018;&#x2018; đ??śđ?&#x2018;&#x17D;đ?&#x2018;?đ?&#x2018;&#x2013;đ?&#x2018;Ąđ?&#x2018;&#x17D;đ?&#x2018;&#x2122;2] â&#x2C6;&#x2019; đ??źđ?&#x2018;&#x203A;đ?&#x2018;?đ?&#x2018;&#x153;đ?&#x2018;&#x161;đ?&#x2018;&#x2019; đ?&#x2018;&#x2021;đ?&#x2018;&#x17D;đ?&#x2018;Ľ

k% is the weighted cost of capital rate between the opportunity cost of capital and the interest rate of the funding structure. K% represents the organization cost of capital. 2 The invested capital is the net investment required for the business. It is composed by the Tangible and Intangible Fixed Assets plus the Working Capital Needs (Clients+Inventory-Suppliers) (Borges & Rodrigues , 2008) 1

One of the main EVA goal is to demonstrate whether an organization is creating wealth effectively, enabling the evaluation of decisions, the better projection of future scenarios and a deeper knowledge on identifying the causes of value creation or destruction. A negative EVA means that the reality analysed (e.g., Company, product, market, group, or other) is unable to add value – in fact it is destroying value because it can not generate enough cash to cover all the operational costs required (Borges & Rodrigues , 2008).

1.4.1.

Benefits Dimension

From an economic perspective there are only four ways to create value in an organization (Pereira, 2014), which classify the four types of benefits of a given project and instantiate the value of a business strategy:

Figure 10 — Pereira Diamond (Level 1l), (Pereira, 2014)

These dimensions should be the basis of the justification and formulation of any project. They should follow the principle of the value of "things" being measured according to the impact generated in the organization. Therefore an initiative typically arises due to the need to increase the business, the need to increase efficiency, the need to reduce costs or because there are legal obligations that require meeting compliance standards. In order to instantiate and organize the benefits of the analyzed initiative, each of these dimensions may consider different hypothesis depending on the problem being addressed. 

Increased Business. Means the increase in revenue for the organization, either by way of attracting new customers, by increasing the relationship with existing customers (whether by way increasing the volume of commercial transactions, whether by way of portfolio diversification in the relationship with each customer) or by increasing the permanence or loyalty of customers, avoiding its abandonment. Any of these dimensions generates revenue directly to the organization and increases its relationship with its external stakeholders. If the rate of attracting new customers is less than the rate of abandonment by current customers, the company is losing market share and thus competitiveness. This dimension should represent more than 50% of the organization's

project portfolio and therefore its energy should be directed to the permanent delivery of (new) value to the market. 

Cost Reduction. Effectively means decrement in the organization costs account, or at least preventing new costs from appearing. Typically this dimension is confused with organizational efficiency, which from a technical point of view does not reduce in the short term the organization's costs. The cost reduction can focus on multiple cost natures, such as outsourcing, materials providers, equipment, services such as electricity, fuels, water, rent, financial costs, among others. The ROI of cost reduction projects are directly compared with the ROI of revenue growth projects because the effect is direct and identical in the income statement. In periods of economic recession this dimension is of high preponderance, because the fact of not being able to increase the market share leads to act on the (re)cut of the organization’s internal costs, however this practice should be permanent and continuous in the organization.



Efficiency Increase. Means freeing capacity (time) of the organization’s internal employees. Therefore, there is no immediate cost reduction or revenue growth effects. Instead it’s observed that people spend less time with a given process. As the company continues to pay the same wages to people, the effect is not direct in the income statement. It is absolutely recommended that the valuation of efficiency is made in the direct or immediate effect and not on the collateral or secondary effects, thus valuing efficiency through cost time multiplied by the number of hours delivered by the project. The ROI of efficiency projects thus takes on "virtual" capital which cannot be compared directly with revenue growth or cost reduction projects, of "real" capital. It is also important to note that in a technological age as the one we are living in, the organization is permanently envisioning projects on automation and optimization of internal processes, neglecting and relegating to the background business and stakeholder relationship initiatives.



Legal compliance. It means that the organization must ensure it operates within the required legal standards and therefore consistent with the regulator and / or the business group to which it belongs. The volatility of the current economic climate requires regulators to be constantly setting new standards of conduct in order to try to prevent fraud and ensure healthy market conditions. The value of legal compliance can be seen as a penalty / fine that is avoided by the project be implemented, which in the limit the company may risk the license to operate or setting monetary value (fine) payment from failing to comply. It is important to note that in certain areas and sectors of activity such as Banking and Telecommunications, the annual number of projects implemented of legal character are superior to several dozen, where the organization must spend a high level of energy for this purpose while paying a high opportunity cost.

From the point of view of projects formulation in terms of benefits it is recommended that they are instantiated on the second level of value creation in particular required if the project is to increase business in terms of major benefit. It is possible that a particular project has benefits in more that one dimension, but the more dimensions the project pursue the greater its size and the longer it takes to deliver the benefits to the organization which is not recommended in the context of high volatility periods.

Figure 11 — Pereira Diamond (Levels 1 and 2), (Pereira, 2014)

1.4.1.1.

Business Growth

If a project’s ambition is to increase business, then the project is connected to the “outside” and to the relationship with the market. A project within this dimension, its inherent goal is to increase the company's results, on the revenue side, through: A. Increase market share by portfolio diversification or increase in new geographic areas (product development or market development, respectively). It aims to increase sales volume by attracting new customers. B. Increase cross-selling (selling more of other products/service to current customers). It aims to increase sales volume through the satisfaction of current customers. C. Increase up-selling (selling more of the same product/service to current customers). It aims to increase sales volume through the satisfaction of current customers. D. Increase customer loyalty (increase customer life cycle). It aims to increase the time the customer stays in the company by retaining them for longer, i.e. avoiding disruption of the relationship.

Figure 12 — Pereira Diamond: B, (Pereira, 2014)

1.4.1.2.

Cost Reduction

In the costs reduction dimension, the main initiative’s goal is to obtain an effective decrease in the expenses (costs) account of the company. This costs decrease is reflected on a financial reduction, and not on teams’ hours of work (effort), unlike projects classified on the efficiency dimension. As a benefit, the costs reduction is quantified by the amount of the cost decreased in the existing organization or by the cost avoided in the future as a result of this initiative implementation. In order to determine the benefit, it is only required to identify the costs in the current process and the costs likely to be eliminated, while bringing impacts in a short-term period.

Figure 13 — Pereira Diamond: Costs Reduction

1.4.1.3.

Efficiency Increase

The projects withing the efficiency dimension do not have an economic or financial implications, such as a direct impact on the company expenses (costs) account. They do instead, have an impact on human abilities by optimizing processes which release time. The benefits quantification in this dimension are based on reducing the time of a particular process or in projects that will prevent a future increase in the time of a process. Once the process or task has reduced its time of execution, resources can be released or moved to another process. 26

Figure 14 — Pereira Diamond: Eficiency Increase, (Pereira, 2014)

1.4.1.4.

Legal Compliance

Projects under the legal compliance dimension are projects that seek to comply with the regulators entities and/or policy group instructions. Once these initiatives are mandatory, projects usually move forward without the requirement of prior benefits quantification.

Figure 15 — Pereira Diamond: Legal Compliance (Pereira, 2014)

However, there should be paid special attention so the legal character od projects are confined to the legal scope imposed, that is, limit the scope only to what is only legally required. One can use the In/Out Scope, also known as the technique of "contradictory", to validate the scope boundary. This validation is done questioning: "If this component is not included in the project, is the primary objective of the project affected? What is the cause-effect relationship between the component and the legal compliance benefit? ". It is meant to exclude scope “for free” ("by the way", "it would be interesting to have…", "it would be useful to…"), because they imply deviations in the project in terms of scope, cost and time, which are not planned.

The following table summarizes the four benefits classification characteristics:

Impacts

Time

Strategy

Capital

Business Increase

New Clients Up-selling Cross-selling Retention

Increase position (past-present) Avoid lost (future)

ShortMedium term

Financial

Costs Reduction

Release financial capital

Eliminate (pastpresent) Avoid (future)

Short-term

Financial

Efficiency Increase

Release capacity (â&#x20AC;&#x153;virtualâ&#x20AC;? money)

Eliminate (pastpresent) Avoid (future)

Long term

Human

Legal Compliance

Penalties Structure (image)

Eliminate (pastpresent) Avoid (future)

Short term

Financial Reliability

Table 1 â&#x20AC;&#x201C; Benefits Classification, (Pereira, 2014)

1.4.2. Primitive and Instantiated Benefits In order to turn benefits into something quantifiable it is required to instantiate them. It is not enough to mention that the project will reduce customer dissatisfaction because the reduction of dissatisfaction, per si, does not translate into any benefit in the income statement. This primitive benefit has to be transformed into an instantiated benefit, e.g., increase in the customer's life cycle through a better relationship/engagement, i.e. increase in satisfaction. While reducing customer dissatisfaction does not allow to conclude the value which the project provides, the increased customer life cycle is measurable, or alternatively, an increase in employee satisfaction does not mean that conflicts will reduce directly, that errors will be avoided and that the effort in execution is smaller. In conclusion, when identifying and quantifying the benefits, they can not be calculated in an assertive and objective manner if the benefit does not instantiate the effects / has an impact on the income statement. One of the main reasons on failing to quantify benefits in organizations is exactly this one, the no formulation of effects in an instatiated form.

Primitive Benefits

Cause

Efect

Instatiated Benefits

Increase the process quality

Reduce the process rework3 due to the no. of errors

Reduce clients dissatisfaction

Increase the client lifecycle through a better relationship

Increase employees motivation

Reduce the processes time through employees’s motivation increase

Table 2 – Primitive Benefits vs. Instatiated Benefits (Pereira, 2014)

Based on the Pareto principle, the estimated return on investment should consider 20% of the main benefits generated (ideally up to 3 benefits), since they represent 80% of the value generated. The remaining identified benefits should be classified as intangible for its residual weight due to its small contribution taken in the final decision upon deciding whether to go ahead or not with the initiative implementation or by decision of not being calculated to justify the initiative.

Figure 16 — Pareto Histogram Example

The principle behind this decision lies with the fact that if the three main benefits reason of project's mission) do not justify the investment, then quantifying each benefit is literally forcing the project to happen, and not for the main reason, but instead by its side effects, in an emotional attempt to justify it and consequenlty undermining the organization. In chapter 5.3.2.2 you can find more details about the Pareto Analysis technique.

Rework consists on performing the same task twice, usually caused by inefficient processes / tools that trigger the creation of errors and consequently the need to re-do the same activity. 3

What is a Business Case?

The growing need of showing work, initiative and promise to shareholders and top managers, apparently, fantastic results, leads many organizations and managers to the development of baseless justifications, maladjusted and even hidden behind the scenes. Most Business Cases in our organizations are nothing more than an Excel Games (“Excel Mania”) loaded with addicts’ assumptions, dipped in a dubious and higly questionable logic to ensure the “yes” of the project and the appropriate budget provision, in which the Excel is sacrificed in order to give the results that the game has to give. In a general way, projets are justified with qualitative benefits, listed in the format of tempted promises or axioms based on deductions, inferences or assumptions whose degree of truthfulness is at least questionable and many times driven by imediativos, vanity or even the need for leadership and power. In addition to this less responsible practice in many organization, the validation of truthfulness and accurancy becomes more difficult because the variabes and the context are so volatile that when the the time to measure the results comes, or we do not mesure them, or we anchor our justification in exogenous conditions in which we are immersed and that it was very difficult to predict any kind of change. It is thus essential to guarantee that the initial moment of Business Case configurantion does not stand on assumptions or emotional expectations, but on estimates obtained trough proven and free processes. Business Case is an independent and rigorous evaluation process of an initiative that aims value creation in the organization throught the application of its financial, human and time means. So the Business Cases arises in order to assist organizations in enhancing competitive intelligence, while supporting the management in projects decision-making process that foster wealth for the organization and maximize the potential of resources. It is important to highlight that to take advantage of the business case tool, it is crutial the development of a benefits management culture, management by objectives and continuous regeneration and organizational reinvention that continually supports decisions based on the generated incomes (benefits) and not on costs (budget). Then, the Business Case is a reliable process for initiatives’ assessment based on several well-defined stages combined with reliable indicators allowing to estimate the solution’s ROI with good confidence level. By following the business case methodology and appropriate tools and techniques, it will be possible to justify and select initiatives based on an accurate, objective and rational process. Besides the project justification task, economic analysis and the decision-making to proceed with the implementation, the business case allows to create a baseline for future benefits management throughout the project's exploitation period. Thus, the business case becomes a key element for measuring the results of the performed by the benefits in comparison with the previous estimated data, promoting the principle of lessons learned and continuous improvement as well as managers’ accountability for their decisions. Besides the scenarios previously refered, it is common to use Business Case to decide which of the best alternative solutions is most effective in terms of value for the organization to solve a given problem. Thus, the starting problem is unique, but the alternative solutions are multiple and each one of them can set a different solution in terms of proposal, having each alternative scenarios a set of conclusions (SWOT, strategic alignment, indicators of enconomic and financial analysis, context indicators, etc). Technically a Business Case can fail due to the non observation of three informations (estimates) that have ben established since the beginning: www.businesscaseinstitute.org | ©2015 Business Case Institute | A Guide to the Business Case Body of Knowledge BCBOK® Guide – Draft Version

  

The benefit under explotation that are observed are lower than the estimated; The real costs relating to the initial budget were higher; The operational costs of operation monitoring were higher than the estimated.

It is noteworthy that the business case process is based on the organization’s strategic planning. According to Gantt, strategic planning involves the use of resources and company capabilities, directing it to obtain a higher profitability against competitors and through creation of competitive advantages (Grantt, 1991). Most commonly, an investment takes origin in response to a need or market opportunity (to increase business volume through new customers or current customers) or in response to internal organization needs (increase efficiency and/ or reducing costs). The investment is a business driving factor because it is through it that organizations can innovate and respond to new market trends. However, the ability to create competitive advantage depends on the features and unique capabilities that the organization brings to the market and therefore essential to discover and manage these resources and capabilities within the organization, in particular scarce, valuable and irreplaceable resources difficult to imitate by competitor as they will strongly contribute to business sustainability (Barney, 1995). The internal management of resources, encourages creativity and employee’s participation which allied to the continuous market “reading” (customers, suppliers, competitors, regulators) will provide innovative responses towards business success. The ability to foster this intelligence in the organization where ramdom pieces of data and information is systematically transformed into strategic knowledge and actions is classified as Competitive Intelligence (Competitive Intelligence) (Tyson, 2002). In summary, a business sustainability depends on a trusteful business case process based on the principle of economic value generated (the impact generated by the investment) and the adoption of a continuous competitive intelligence organization.

1. Project Justification

Strategic Planning 3. Benefits Measurement

2. Project Execution

Figure 17 — The three phases of a Business Case (Pereira, 2014)

The Business Case is composed by three main phases, all held equally relevant and supported by the the organization’s strategy: Phase 1: Project Justification Phase 2: Project Implementation Phase 3: Benefits Measurement Having the three phase’s execution allied to the good business case practices, the organization will be able to achieve the following objectives: 32

a. Provide the organization with technical and managerial highly proven tools within the business and scientific worlds b. Avoid / Restrict any the human component of initiativesâ&#x20AC;&#x2122; analysis, by implementing an effective business case where two different people or teams, in the same circumstances, will reach the same conclusion about the project return. c. Minimize assumptions and projects subjectivity during project analysis d. Get the organization to read, interpret and anticipate market needs, leveraging the number of initiatives proposed e. Ensure projects proposals are aligned with the strategic objectives and contribute to achieve them f. Support the decision making process in order to be fair, rational and able to ensure the creation of value, avoiding unwanted outcomes in project resultsâ&#x20AC;&#x2122; at the benefitsâ&#x20AC;&#x2122; realization stage g. Support business managers on how to apply resources to maximize creation of wealth and organizational efficiency h. Encourage and increase the corporate intelligence through proposals and initiatives that add value. Promoting a culture of participation is an essential step for the continuous process of value proposals i. Stimulate the a culture of benefits management by setting the available budget based on value propositions submitted by departments and the estimated benefits j. Provide the ability to measure the project benefits during the exploitation period The ROI calculation of a project consists of three main components which must be accurately estimated and obtained through proven processes: 1. Investment Plan. It is the budget required to implement the project and develop the asset for exploitation. If the cost realized is higher than the budget, then the ROI is smaller. 2. Benefit Plan. It is the impact observed in the value creation dimensions (revenue growth, cost reduction, efficiency and legal compliance). If the benefit realized is lower than the estimated, the ROI is lower. 3. Plan for New Operating Costs. It's the new operating cost and recurrence in which the organization has to incur to ensure that the product or service are properly exploited. If the new operating cost realized is higher than estimated, the ROI is lower. Hence ROI is calculated as follows: đ?&#x2018;&#x2026;đ?&#x2018;&#x201A;đ??ź =

đ??ľđ?&#x2018;&#x2019;đ?&#x2018;&#x203A;đ?&#x2018;&#x2019;đ?&#x2018;&#x201C;đ?&#x2018;&#x2013;đ?&#x2018;Ąđ?&#x2018; â&#x2C6;&#x2019; đ?&#x2018;&#x201A;đ?&#x2018;?đ?&#x2018;&#x2019;đ?&#x2018;&#x;đ?&#x2018;&#x17D;đ?&#x2018;Ąđ?&#x2018;&#x2013;đ?&#x2018;&#x153;đ?&#x2018;&#x203A;đ?&#x2018;&#x17D;đ?&#x2018;&#x2122; đ??śđ?&#x2018;&#x153;đ?&#x2018; đ?&#x2018;Ąđ?&#x2018; â&#x2C6;&#x2019;1 đ??źđ?&#x2018;&#x203A;đ?&#x2018;Łđ?&#x2018;&#x2019;đ?&#x2018; đ?&#x2018;Ąđ?&#x2018;&#x161;đ?&#x2018;&#x2019;đ?&#x2018;&#x203A;đ?&#x2018;Ą

Note that the cost of the Business Case development process must not be considered in the ROI analysis, as it is a sunk cost, i.e. it is a cost that has already occurred and it was essential for the organization to make a decision. It is thus positioned as a cost management, overhead.

www.businesscaseinstitute.org | ÂŠ2015 Business Case Institute | A Guide to the Business Case Body of Knowledge BCBOKÂŽ Guide â&#x20AC;&#x201C; Draft Version

Business Case in the Organizational Context 3.1.

A Manager’s Mission

In which way will Business Case give support to organisation managers in accomplishing their role? What is the manager real mission? The mission of a manager, in every profit-making organisation is to create wealth by ensuring an intelligent application of resources and actives available. To ensure this, the Business Case tool is assumed as an essential instrument for achieving the objectives and decision-making, aligned with the strategic guidelines focused on achieving sustainable competitive advantages The manager evaluation should thus be based on this elementary and critical process, relegating to a secondary plan any qualitative goals or good use of the means available, regardless of the reached results. Therefore, we should not emphasize the means and value them inconveniently converting them into management goals. In fact, can we positively evaluate a manager for not spending more than what was available to him, if he obtained none or low value with its application? Or, how do we evaluate a manager that spent more than 20% of the budget and was able to generate more than 50% of value through its application? The future of management goes through getting decision-making support tools to serve as a laboratory to be discussed, optimized and simulate their effects, in order to get more cautious and more effective manager actions on his daily basis.

3.2.

Budgeting Process

Business Case methodology stands in two fundamental paradigms for the organisation to set the appropriate and necessary budget for initiatives that enhance the maximum value creation.  

Firstly, investment must be seen has a mean to reach benefits, so the definition of budget should be based on the income generated by the proposed initiatives; Secondly, the ultimate goal is based on the measurement of ROI, whose indicator should follow a rigorous and rational process in order to make the decisions based on valid assumptions.

3.2.1. Current Issue – The Budget Based on the Capital Available Nowadays most organisations focus their efforts on the “budget month”. So, typically there is a month to think, define, and estimate initiatives and projects, focusing all time left on their execution and implementation. This discrete process is highly harmful to the organisation as it condense and limits, in terms of time, the future of the organisation with all the consequences of uncertainties, assumptions and incrementalism or decrementalism vague and uncertain in its substance. The only certainty that exists about scope definition is that this is undefined and regarding cost and time for the projects is that estimates are far away from reality. Concerning benefits, they are typically speculations, most of the time axiomatic. Besides the “budget month”, another problem is the budget seen as an objective by managers, and not as a vehicle to reach the results. The manager’s concern is most of the time focused on the objective of reaching the stipulated budget, often falling in the problem of not generating value for this investment. Another issue is that while making the budget available, many managers no longer have to justify the reason of the next projects, having the risk that these projects will be a major failure of management, for not adding

any value. In the limit, the manager “spends” the whole budget so that the next time no cuts are made on the available amount.

In addition to all mentioned problems, it is common the attribution of budget “shares” based on the assumption that certain departments or directions are required to create greater value for the organisation, regardless of value propositions that will be later presented, leading to the illusion that other areas can no longer implement high-value initiatives because they were not assigned with sufficient budget or because they are back-office. The last major issue stands on the fact that budgets are set within a remote timeline that will hardly allow the project portfolio to be fulfilled within the prescribed period due to the rate of change of market needs or because of the increased demands imposed by regulators.

Figure 18 – Change of Paradigm (Pereira, 2014)

3.2.2. Future – Budget Based on the Value Proposals It is in this sense that the Business Case methodology requires the change of paradigm: instead of being cost oriented and being benefits oriented, the organisation creates a healthy competition by budget allocation based on concrete proposals for creation of wealth (Business Cases) throughout the fiscal period and typically in quarterly stage gates, regardless of the areas or directions that propose or manager who formulates the initiative. The one that proposes more value creation is the one gaining more budget. This way the process of budgeting should be an on-going process to avoid the company thinking on a unique moment or period of the year, but in a continuous way so the scope of projects is well defined, with requirements well specified and consequently with estimates more realists, in terms of costs and income. Besides this, while adopting a “rolling-wave” budgeting, the company will have flexibility to adjust or introduce new projects necessary for the context that will face giving continuous agile transformation, adaptation to the market and context. The paradigm based on the income allows organisations to explore more ambitious ideas and with greater return avoiding their anticipated exclusion due to pre-defined budgeting limitation. There should not exist a budget approval without the existence of concrete proposals for quantitative benefits formulation, since the budget should be established according to these benefits (not exceeding the healthy debt ratios). In a simple way, each project must justify its budget, including inflation, debt of cost or its best alternative, as well as the premium risk, in which the budget should be allocated based on the value creation propositions, based on a rigorous analysis process of scrutiny and validation.

On the budget scope, organisations should therefore follow the principle of zero-based budget approach which relies on the planning and decision process reverse to the traditional budgeting process. Typically, the traditional process is based on historical budgeting, where the department managers only justify the expected change in relation to previous years, based on the assumption that the “baseline” is automatically approved. On the contrary, according to the principle of zero-based budget, each “line”/variable presented in the budget has to be approved, and not only changes from previous years. As such, zero-based budget requires a redefined revaluation from its foundation. This process is independent of the fact that the total amount of the budget or some specific items increase or decrease. The following table presents the main differences between this two types of budgeting, according to the authors (Wetherbe J. C., 1976) (Wetherbe & Montanari, 1981):

Advantages in the budgeting process based on zero-based principle:     

Efficient allocation of resources because it is based on the necessity and expected benefits, instead of just following historical record Encourages managers to find cost-effective ways to improve operations, eliminating costs and operations that do not promote value creation Allows the identification of inflated budgets Increases employees motivation by leveraging the initiative spirit and responsibility in the process of decision-making Promotes communication and coordination inside the organisation

Some disadvantages in the budgeting process based on zero-based principle:   

Consumes more time then the incremental budgeting process Justify each item can be challenging or problematic in some areas In a large organisation it can generate friction and misalignment

Budgeting based on zero-based paradigm leads to a healthy competition among managers in maximum effort to add value to the organisation. Organisations with high maturity challenge all the organisational

pyramid to think the organisation and to share part of the ROI with employees in a logic of rewarding the merit, regardless who has submitted the proposals (top management or the operational departments).

3.3.

Business Case in the CAPEX life cycle

If the business case must be justified with the benefits of the initiative and not with the budget (costs) available from the investment, it is fundamental to differentiate two important elements when it comes to budgeting: the OPEX and the CAPEX. The budget intended for the daily operations, for the current activity to guarantee the operational functioning and for the execution of the processes that support the business, is labelled as OPEX (Operational Expenditure). Without it, the company stops, does not subsist and does not explore its available assets. The challenge lies in rationalizing the budget to achieve continuous innovation, to create new ideas and to stimulate competitive intelligence. The capability to renew skills, in alignment with the business environment that is constantly changing and to offer innovative responses when the time-to-market and the response time are critical in a market that is unpredictable, is the biggest challenge to any manager. The term “skills” highlights the key role of strategic management in the adequate adaptation, integration and reconfiguration of internal and external organizational skills, resources and functional competencies in order to respond and combine with the market requirements and modifications (Teece, Pisano, & Schuen, 1997 ). Then, if a manager mission is to create wealth and to take the necessary measures to enhance its organizational resources, he will require CAPEX in the form of investments and initiatives of high value intended to the continuous innovation and reinvention. Despite the recession, the growing trend of CAPEX has become more evident in the industry-leading companies. Why? Because it is only through the implementation of new initiatives that will be possible to enhance the value of the organization which can become a major player in the market. Hence, a mindset of continuous innovation implies an alignment with the budgeting policy to allow space for its implementation and for continuous stimulus to value creation. If the market rate is higher than the speed of the organization, it can undermine its competitive advantages and put an end to the reason of its own existence.

3.4.

Portfolio Priorization

As explained in the second chapter “What is a Business Case”, the investment is a key means for the sustainability of the business as well as for its growth given that it is through it that it is possible to put in practice the suggested innovative projects with high return for the organization. Therefore, the expected benefits of an investment can be classified into four dimensions: business increase, efficiency increase, cost reduction and legal compliance. In this sense, how should managers prioritize their projects? After conducting the business case of each initiative, from the evaluation of its strategic alignment to the analysis of its return on investment and organizational context, the manager makes a final decision of going forward or not with its implementation (Go/No-Go). In case the organization has initiatives with impact on the different dimensions it is important to understand its main differences at the benefits level both in terms of its type and time horizon. Therefore, an initiative with a positive ROI does not mean that it goes forward per si, given that the company’s budget is limited and in case there is an initiative with a more attractive ROI, it may stay in standby. 38

Figure 19 – Portfolio prioritization layers (Pereira, 2014)

Figure 20 – Portfolio prioritization levels (Pereira, 2014)

1st Priority In this sense and as illustrated in figure 19 and 20, the legal compliance projects should be the first ones to be implemented and to be carried out in budget provisioning. The credibility of the organization and its credibility are usually in first place apart from some rare exceptions. These projects are typically considered to be a priority and their Business Case is left behind, however the underlying ROI calculation is possible by appraising what will be the impact on the organization if the compliance project is not implemented. The benefits of implementing this project are avoiding these impacts (fines, image damage and consequently loss of revenue or right to operate). The ROI of these projects does not compete directly with the ROI of business increase, cost reduction or efficiency projects. 2nd Priority The second priority projects are those related with revenue increase or cost reduction, which compete directly in terms of ROI given that both equally impact the organization’s income statement. Regardless of the fact that the financial impact is the same, the organization’s objective is not to “slim down” but to sustainably survive which makes the quest for a larger market share and context relationship more recommended then cutting internal costs. 3rd Priority The third (and last) priority are the efficiency projects. Nowadays, technological innovation and automation processes are a given and have a presence at all levels of the organization. It is however absolutely essential that these projects are stimulated to boost the revenue or reduce costs given that in most cases the technology is used to cut back-office processes resulting in spare time of employees although this does not reflect on the financial results of the company because it continues to pay the same salary to employees. The “myopia efficiency” phenomenon is a very present reality in the organizations when most of its energy (budget) is dedicated to improve the lives of employees instead of improving those of customers, distracting the organization and its management from what is truly important. The ROI of efficiency projects should not be compared with those of revenue increase or cost reduction given that with the implementation of these types of projects we obtain virtual or real value in the long term. www.businesscaseinstitute.org | ©2015 Business Case Institute | A Guide to the Business Case Body of Knowledge BCBOK® Guide – Draft Version

Direct Impact It should also be noted that it is absolutely critical that the ROI measurement is made in the direct impact and not on the secundary impacts. Lets suppose we implement a project to optimize a sale process in a retail store. With this project, we cut around one hour per day in the labor of the employees associated with each store. The employees are part of the organization therefore there will be no cost reduction effect, the employees will continue to receive the same salary at the end of the month. The manager of each store will decide what each employee will do in its spare hour on a case by case basis considering there are more than 100 stores and a total average of 800 colaborators. Some will be allocated to the register machine, others to the cleaning or article repositionning and others to customer support. Having this said, it is highly recommended that the daily valuation be equivalent to the cost per hour of each colaborator times the total number of colaborators. If we were to measure the secondary impacts we would probably have to do 800 different Business Cases, which would be impracticable.

Figure 21 â&#x20AC;&#x201C; Project vs Benefits Matrix (Pereira, 2014)

Apart from the dimension identification of the benefits to exploit with the investment and according quantification, another aspect should be considered while prioritizing the initiatives to be implemented: figure 21 illustrates the different relationships between the type of investment the project requires (effort vs. financial cost) and the three possible dimensions of the benefits. Strictly speaking, an investment project is no more than the exchange of energies, between the giving and receiving ends. However, this exchange is not always convenient for the organization, in particular when it confuses real money with virtual money. This is, when it implements efficiency projects at the expense of financial investments with suppliers to free up time of the internal collaborators of the organization. If the return is not of a high magnitude, the company loses out, at least in the short-medium term. When the company uses external suppliers to implement cost reduction or revenue increase projects the relationships in terms of investment are more balanced. This way, the nature of the investment and profit is equivalent and therefore rational and more beneficial to the organization. However, it should be noted that the real wealth catalyst occurs whenever the organization values its human resources (properly specialized) and invests its internal teams so that through their effort in the project 40

environment, they can free up time (efficiency) of employees. It is an exchange of effort (invested) with spared effort (gain) of the employees. Another situation with a high value to the organization is when the internal teams of the organization are able to reduce costs or increase revenue. In this case the organization exchanges a guaranteed cost (internal effort) for financial benefits. In these circumstances the organization demonstrates the capability and competency to self-regenerate and therefore of survival and prosperity. It should be noted that during the prioritization, the organization should consider in its decisions what type of energy it is using according to what type of benefits it wants to achieve. 1. Best case scenario: accomplish revenue increase projects through internal effort 2. Worst case scenario: accomplish efficiency projects by contracting suppliers

3.5.

Business Analysis and Project Management

After the Business Case development and having collected all the necessary information for each initiative decision-making, if it brings the right conditions to move forward, it is only necessary to assure its budget provision and consequent priority in the portfolio pipeline. The conversion from paper to product or service is the next step that will be exploited to collect the benefits.

Figure 22 — Three macro phases in the transformation process

The next phase is composed by three complementary activities: Business Analysis, Project Management and Technical Process. Each one have a distinct and complementary mission, although taking place with high parallelism and interaction: 1. Business Analysis. Ensure that the functional and non-functional requirements are properly collected and analyzed, always in accordance with the guidelines on benefits (business requirements) that the project aims to achieve. As a next step, it’s essential to define the functional solution that meets them. 2. Project Management. Ensure that the business plan and its functional solution is met, within budget and defined deadline. It’s crucial to ensure that all project scope changes are framed within the benefits (business requirements) proposed in the Business Case. One of the most effective techniques to protect the non-distortion of the project scope is the "In / Out of Scope", which states that if a component does not belong to the project there’s a direct impact on loss benefits. This technique, is named as “contradictory” technique leaving the onus proof on the project sponsor side. If there is no "cause-effect" in terms of benefits loss previously established in the Business Case, when a component is not included, then it is "out-of-scope". 3. Technical Process. Ensure the design and the technical solution development within the functional and nonfunctional requirements.

Main Adversities 



Scope Changes. In the Business Case transformation process to a final asset to be explored, the main difficulties are typically the distortion caused by multiple interests of stakeholders, and in most cases, when the benefits are not well established and defined. Is not easy to protect the project of a continuous temptation to distort its initial mission, therefore it is essential scope changes are not taken lightly, and need to justify them by the analysis of its impact against the benefits. Change Management. Typically the human being and society in general, only appreciate what they don’t have. It is a normal behavior of people, which is reflected in organizations. So, when the solution is available, it comes the criticism, negative comments, and friction, leading to a less effective usage and to a partial exploitation of the asset created in the organization. It is therefore essential to set up a focus group of end users to accompany the solution from defining requirements until the entry into production so that the obstacles are minimized to the full exploitation of the solution. Thus, when the solution is available, come the criticism, negative comments, attrition, leading usually to a less effective use, causing a partial exploration assets created in the organization. This is why is crucial to create an end users focus group, to follow up the solution from the requirements definition until a production go live phase. This way permits to minimize the obstacles to a total solution exploration.

These two difficulties usually compromise the initial Business Case proposed in three different dimensions: budget deviation, time-to-market benefits exploitation and the benefits plan to be realized. 



Budget Deviation —The project ROI is composed by three main components: the project budget, the new operational cost to support the exploitation and the benefits. When the budget has a deviation we are immediately compromising the Business Case. Schedule Deviation — In business projects (revenue growth) a one month delay may express big loss of benefits, since the time-to-market may condition the competitor to have an offer sooner, or seasonality may inevitably eliminate part of the benefit (school period for the sale of books and computer equipment, summer period for the ice cream and soft drinks sales, etc.). For these cases, the Business Case is getting compromised. Benefits Deviation. Situations with scope changes in the project phase may limit, reduce or restrict the benefits initially defined and estimated for the project. The best product / service configuration is determined by the market, since making changes based on assumptions can make the product / service less attractive and can compromise the benefits during exploitation.

Therefore it is essential to assure that the Business Analyst role and the Project Manager work in perfect harmony and be fully committed to the Business Case while being their operational guardians. It’s important to emphasize that the creation of value and true innovation in the organization does not occur with Business Cases, but with the integration and complementarity of these functional areas, which are playing an increasing role in organizations.

3.6.

Benefits Tracking

With no less importance than the business analysis phase and project management, is the benefits measurement during the exploration stage. During the project phase all the conditions should be created to ensure that the benefits are successful and maximized to their full potential, however it is not always what 42

happens and the organization may turn to be its main enemy. However it’s essential to measure and know which factors and causes of exogenous and endogenous origin are conditioning the benefits plan. Among the different problems, there are the following: 



Operational Cost Deviation. Sometimes it’s necessary to incur on new operational costs to allow an appropriate exploited solution (new opex). A difference between the initial estimation and the real exploration cost can condition the project ROI and consequently increase the Business Case risk. Therefore it is essential to find different scenarios to minimize these deviations. Benefits Plan Deviation. As referred, the context volatility is so accelerated that if the organization strategy is to implement huge projects (more than 6 months) typically incurs on a high risk of obsolescence bringing as a consequence the lost of interest to the full operation and the Business Case will lose value. Thus, for the organizations it’s essential to adopt an agile and quick behavior, and minimize the number of benefits chased in each project. With this strategy will be more efficient to reach those benefits in a faster fast way. Business Cases with too many benefits are converted in long projects with many difficulties to manage.

3.7.

Business Case Office

To ensure there is organizational competence and it is properly done it is crucial to not overload the other organizational areas that already have multiple responsabilities and where typically the new competence is the last operational priority. Thus, to implement Business Cases it is essential to ensure a dedicated and specialized area in the organization that works in a transversal way to reach a high quality standard, ensuring an audit process and also being a facilitator for this critical competence. The Business Case Office will be an independent body in the organization, with the main objective to support top management elements to define the correct and rational investments decisions in the right projects. This requires that the Business Case elements need to work together with other business and technical areas to understand the business problem, need or opportunity, to evaluate which is the most effective solution and what value (impact) that will bring into the organization. The Organizational Structure is composed by four main categories: Methodology, Tools and Specialists in the Business Case process and Subject Matter Experts (SME), from other areas who colaborate with the Business Case Office.

Figure 23 — Business Case Office (Pereira, 2014)

3.8.

Responsibility Matrix

In addition to the knowledge and implementation of the Business Case practices, there is a critical factor to make them highly effective on a daily basis: every stakeholder involved in the process must have a clear understanding of their role and responsibilities throughout the lifecycle and be compromised in the process. So from the request for proposal to the last stage of benefits measurement during the project exploitation, several stakeholders are involved in the process: senior management, customers, business and technical experts (subject matter experts) and others who are responsible for a variety of tasks and responsible for their decisions. Using the correct tools and methodologies together with reliable sources, good communication skills and appropriate mechanisms are critical success factors for a sustainable success.

R – Responsible (performer); A – Accountable (ultimate responsible); C – Consulted; I – Informed; V – Validate; S – Sign-Off (final acceptance) Figure 24 — Responsibilities Matrix (Pereira, 2014)

Scientific Management Principle

The principle of scientific management originated in the early twentieth century with the boost of the Industrial Revolution. The first author and founder of the scientific management theory was Frederick Taylor, a creator and American nationality engineer. This principle came up from the need of improving production processes, seeking to reduce production costs and increase the efficiency of teams in order to optimize the production process and maximize business results. According to Taylor (1998), scientific management involves a mental revolution concerning people’s commitment to the organisation in meeting their duties, their co-workers and their bosses. He also concluded that for a true scientific management, this attitude/mind-set should be applied by the organisation’s managers – either the business owner, the CEO or even the board of directors This theory has been explored and developed by other managers in order to find the best way to maximize companies’ performance. Today, the principle of scientific management has evolved towards that the productivity and success are not only obtained by controlling all factors in the workplace, but also taking into consideration the contribution to the welfare and development of each employee. Currently, not all modern organisations apply the principles of scientific management, however, many previously mentioned factors are already inherent to the current business management, which is why management has taken on a new dimension in the 21st century. Management in many organisations is still supported on assumptions (“pre”-“supposed”, in other words, prior assumption or hypothesis unconfirmed) what leads to difficulties in survival and therefore sustainability in relation to their habitat to not making roper use of the resources available. It is in this sense that business management has suffered greater improvements through the systematic and deliberated approach to management, by questioning what is obvious and what is common sense, testing processes in various contexts and organisations and with validated results, while in constant search of practicing optimal management and becoming a universal management in the matter under consideration.

Figure 25 – Common Sense Management VS Scientific Management (Pereira, 2014)

Basically, the principle underlying the scientific management is that two different entities reach the same conclusion about a particular phenomenon of management. Thus, the scientific management applied to Business Cases aims two different teams to obtain the same conclusions about the ROI of a particular project.

According to the article of Ingrid Jeacle, the advantages of scientific management go beyond top management. In the twentieth century, scientific management comprehended not only the layout and shops design (retail), but also hiring qualified people based on credible information sources and better communication with the consumer through research and advertising techniques, and the application of a good human resources management (Jeacle, 2004) (Tedlow, 1990). It is in this context that over the last century and the current 21st century information-gathering techniques on the market have been explored. If a business lives from its customers, it has to offer value propositions with value for money and still, simultaneously, have the ability to respond to those needs on the right timing, in other words, within timeto-market. The market pace is so fast that the concept of Marketeers of â&#x20AC;&#x153;todayâ&#x20AC;? involves being able to create great experiences to consumers: the right consumer, receives the right message, on the right equipment (device), at the right time, with the right price. So to do this, for a manager to offer a value proposition to the market it is imperative depth knowledge on what are the needs (problems) and its impacts on the lives of potential and/or current customers, understand their preferences and behavior (habits, stimulus to consumptions, etc.). It is in this context of globalisation, crossed by an era of technological innovation and revolutionary communication channels (internet, mobile phones, social networks) that market competitively has been increasingly aggressive and ferocious. As so, in order to translate the felt need and be able to offer the best solution to the market, several efficient techniques were developed and scientifically proven for assessing the contribution that an initiative or project can offer.

Figure 26 â&#x20AC;&#x201D; Scientific Business Case

Since scientific management stands on the existence of a cause-effect relationship, Business Case will also have to follow this principle based on a set of scientific management techniques that allow the validation of this relationship in order to analyse the viability of initiatives and best configuration of the solution.

4.1.

Business Research

Business Research is the application of scientific management in the search and identification of a business phenomenon. This activity includes defining business opportunities and problems, generating and evaluating ideas, monitoring performance and understand the business process. This process involves developing the idea and theory, define the problem, seek and gather information, analyse the information and report the findings and their implication (Zikmund, Babin, Carr & Griffin, 2013). The goal is to facilitate managers’ decision-making through the delivery of the needed and precise information, reducing the risk and uncertainty of business. However, before any decision-making, Business Research is useful in activities of problem-solving, allowing the identification of problems and opportunities, clarifying the situation and discover the situation causes. This means, in case of an existing problem, it is necessary to understand the reasons of its existence; in case of an opportunity, it’s necessary to explore and quantify it. The process of Business Research is a sequential process that involves several steps. Although not mandatory, they serve as an orientation to the development of a project. Figure 10 represents the sequential process of the Business Research.

Figure 27 — Research Process (Cooper & Schindler, 2014)

Typically, the trigger of an investigation is and organisational dilemma (Management Dilemma) that requires a decision-making (i.e. increase of the number of clients complains). This dilemma gives origin to the organisational question (Management Question) that is the reformulation of the dilemma in a question (i.e. What can be done to improve the company service?). After, this question should be progressively split into more specific questions and hypothesis (i.e. Should the company increase the number of hours regarding employees training?), translating on the research question (Research Question). After defining and detailing the research question we have a research proposal (Innovation Proposal). However, before proceeding to the collection and analysis of information, a plan should be done (Outline Data Collection) to achieve the goals and answer research questions. In this plan, we define the methods, techniques and proper procedures. It is also critical to define the sample (Sample Definition) which involves the identification of the target population (i.e. people, events or records that contain the desired information). The process of data collection begins, usually, with the pilot test (Pilot Test). This test is conducted in order to detect errors and correct them so the research is more robust. After the pilot test is done we must proceed to data collection phase and its preparation (Data Collection & Preparation). The methods techniques and procedures chosen during the planning phase will now determine the way that information is to be collected. Information can be secondary, if it has already suffered an analysis or interpretation and if it has been previously collected for other purposes, or primary information, if it I original and collected for the purpose of study. Once data collection is done, it is necessary to analyse it (Data Analysis & Interpretation). This analysis allows the transformation of data into useful information that can be interpreted by the manager, in the light of his research question. Once the information is interpreted, it is possible to prepare a study report and make a decision to management.

4.1.1. Business Research Methods

Figure 28 â&#x20AC;&#x201D; Business Research classification methods (Pereira, 2014)

Business Research existing techniques can be classified in several ways. Usually they are classified as qualitative or quantitative. One way to distinguish this terminology is the focus on numerical and nonnumerical data. Quantitative techniques are associated to any data collection technique or data analysis that generates numerical information. Qualitative techniques refers to any technique of data collection or analysis that generated non-numerical information. In Figure 24, Business Research techniques are classified depending on the research approach used: the historical method, experimental method or interrogative method. Each method is not necessarily isolated from the other, as well as the techniques associated to them. Any research can use a mixed approach of methods and techniques in order to increase the degree of validity and reliability of the drawn conclusions. 4.1.1.1.

Historical Method

Under the elaboration of a business case typically the starting point occurs with the survey of historical data in order to obtain a clear and measurable understanding either of a past scenario or of a current scenario. In order to deepen the dilemma that gave rise to the need(s) of the initiative(s) to be analysed in the Business Case and understand to what extent it translates numerically (quantified) as well as its behavior over time it is essential to identify the respective variables or to define them if they are non-existent. This research method is based primarily on historical survey and thus the data collected are typically classified as secondary data (e.g., reports) allowing to avoid unnecessary work and effort duplication when the organization already has relevant informational material to be considered. Historical information is very rich as it will allow one to obtain evidences about "where we are" (AS IS) or "were" so that the Organization can afterwards be able to decide which initiatives to invest in so that it can reach "where we want to be" (TO BE). Sometimes the intended historical information is not registered, therefore it will be necessary to resort to other types of techniques to collect these data (e.g., Expert Judgment), which will be classified as primary data because it will never have been produced previously. Being the measurement of ROI (return on investment) one of the paradigms of the business case methodology, it is required to understand the scenario of "today" and the scenario of the “future” (e.g., via experimental method and questioning) to estimate the added value generated and afterwards its evaluation (measurement of ROI). The historical method allows to portray past scenarios and the current one, gives us trend information and even facilitates the comparison process of the organization/area against other competing entities (national and/or international). Some of the techniques used are: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Document Analysis Trend Analysis Expert Judgment Interviews Benchmarking Gap Analysis Observation Regression Analysis Operational Risk Three Point Estimate

Technique

What?

Where/How?

When to use?

Contracts Market studies

1. Document Analysis

Internal reports Survey of the information available and recorded to Reference literature competitors date.

When it is intended to collect detailed from information about past periods to use as reference in future estimation.

Business Plans Databases (customers / suppliers)

2. Trend Analysis

3. Expert Judgement

4. Interviews

After the collection of historical data that are Bar chart with trend line intended to be analysed Line chart (technique 1), make a trend chart with the desired Area charts variable and the time variable.

Request information and opinions to individuals expert in the subject under review, either by being involved or by having been involved in the past.

In order to â&#x20AC;&#x153;correct" the margin of error, the expert should provide a range of values (worst and best case scenario). If there is more than one knowledgeable expert, it is recommended to ask various elements and to calculate the mean of the values (ensure that the standard deviation of the sample is not high).

Technique that consists in the systematic approach to In person the collection of information from a person or a group of Remote (video call) people in order to question Format: Formal or informal them about a topic and document the answers.

When it is intended to evaluate the behaviour of a variable over time (how much it increased, how much it decreased, how long was it stable). E.g. based on a trend estimate what is the % of reduction or increase that is aimed for by implementing a new solution. Examples of variables: Drop-out rate; Rate of adhesion to a product.

Typically used when there is no prior study or historical record, thus one resorts to consulting professionals who have knowledge on the subject that can give a reference (a value) very close to reality based on their perception and experience.

This technique is often used simultaneously with other techniques (e.g. Expert Judgement).

Technique that consists in comparing the current or 5. planned practices, such as Benchmarking processes and operations of an organization, to other companies.

A very useful technique for estimation, Data collection (variables) typically to collect data that are concerning each of the unknown in our organization, whose companies for analysis "neighbour" competitors or companies of similar profile / business model have Comparative analysis already implemented and which will serve as input for estimating the Conclusions solution to consider in our organization.

It is a useful exercise that involves portraying the current state and the desired Historical data collection to portray the most up to date future state (goal). scenario and the use of Afterwards one proceeds to historical parameters that allow the comparison between the to give a reference and thus set current scenario and the forth / estimate the desired future in order to identify the future scenario. differences and create an action plan.

6. Gap Analysis

7. Observation

8. Regression Analysis

Technique that consists of observing the behaviours of people, processes and systems for the collection of information and respective documentation.

This technique consists in verifying the relationship of two or more variables based on the mathematical model called "regression".

Passive Observation: there is no intervention from the observer until the end of the process Active Observation: there is dialog between the observer and the end user.

One proceeds to collect each of the variables for a given time horizon, in order to obtain the scatter plot and respective linear regression function.

Knowing the current scenario and the future scenario that can be leveraged by a solution, it is possible to collect the value of the metric that is intended to be estimated.

Often used for detecting values/problems that were not collected and documented to date. E.g. to obtain detail on a current process (to portray the current scenario) or when there is the intention to improve or change the current process. Used for predictive purposes. It is evaluated how much the behaviour of a variable (independent variable) changes the behaviour of another (dependent variable) based on historical values of parameters. E.g. Relationship between Advertising (advertising campaigns costs) and Sales.

www.businesscaseinstitute.org | ÂŠ2015 Business Case Institute | A Guide to the Business Case Body of Knowledge BCBOKÂŽ Guide â&#x20AC;&#x201C; Draft Version

9. Operational Risk

Consists in collecting the frequency and impact values that come from incurring losses arising from failure, deficiency or inadequacy of internal processes, people and systems or from external events.

10. Three Point Estimate

Technique that uses a combination of other historical collection techniques (namely Expert Judgment and Observation) to make an estimate based on possible scenarios.

4.1.1.2.

By analysing the internal processes, people and systems or from external events and anomalies or deviations detection regarding the defined standards and collecting losses from poorly formulated procedures, control and systems. To this end, it is required that the company has well-defined processes and a clear model of monitoring their impacts.

Typically used for projects aimed at increasing operational efficiency or cost reductions.

Three scenarios are considered: Optimistic, Pessimistic and Most likely.

During the (historical) data collection process a range of possible values (optimistic, most likely and pessimistic) will be assessed/questioned in order to “minimize the discomfort" of the respondent and to obtain an estimate based on three possible scenarios.

Experimental Method

The experimental studies are particularly useful to complement the historical method or when we don’t have historical records or secondary information. This method includes a group of techniques to obtain a more clear evidence and idea to test the study object, normally with a pilot test or proof of concept. Specifically the objective is to control and systematically change the study variables (independent variable or explanatory) and observe the impacts of those changes to understand the relations between them. Sometimes, this approach is overlooked because uses qualitative data and thus is considered more subjective. However, allows to save time and money because in the investigation it’s possible to identify flaws early, avoiding the advance with other larger spending. As a hypothetical case of a company that wants to increase sales through training its employees on negotiation and communication. Before implement this training action, the company can test this solution by identifying a sample of employees and measuring the sales results of this experimental group, comparing with the others (Control group technique). In this approach, we need to know if it’s possible to control others variables external to the investigation. In this hypothetically case, the company need to guarantee that the final result is not adulterated (e.g., sales incremented by the Christmas season and not by the training sessions of this experimental group). Although this can be an efficient method to speculate future results on a real environment, the experimental techniques can be more expensive than the others. Another handicap is the fact that this can only be effective for studies with impact in the present or immediate future. The experimental method is not viable on past studies or forecasts in a distant future. 52

For this approach we have the below techniques: 1. 2. 3. 4. 5.

Control Group Observation Prototyping “GAP” Analysis Simulation

Technique

1. Control Group

2. Observation

3. Prototype

4. Gap Analysis

What?

Where/How?

When to use?

— Technique used in order to evaluate the impact (behavior) of introducing a new variable, based on an experimental study. The representative value of that variation on the sample will be a reference for the estimate of future value (for the universe)

Requires the collection of a sample and creation of two groups: 1) Experimental Group: It is the group where we will intervene (make the experience). 2) Control Group (represents the current scenario, with no intervention)

— Technique very used for the analysis of initiative with impact in Increase Business (e.g., to verify the adherence to a product or service) and Increase Efficiency (e.g., to evaluate the effect (impact) in productivity/efficiency of a training to collaborators). It is also a recommended technique for benefits measurement at the project implementation. — The control group not only eliminates the effect of external variables that affect the final result but also eliminates the Business Case expert bias effect (influences the results that unconsciously or consciously the manager is subjected.

Two types of variables: a. Independent. Experimental variable is the one that represents the only difference between the two groups. It is a manipulated characteristic (CAUSE). Applied in experimental group b. Dependent. Consequent variable, the one that changes or is affected by the independent variable (EFFECT). Assure from the beginning that it is measurable – collect variable after the independent variable insertion. — Technique that consists in the — Passive Observation: there is no observation of people’s behavior, intervention until the end of the processes or systems to collect process, by the observer information and respective — Active Observation: exists dialogue documentation between observer and the final consumer

— Technique that consists on the — Prototype utilization in the life cycle: construction of a sample/model or — Throw-Away Prototype: highlight creation of a product at an early interface requirements rapidly, using stage to test concept or process simple tools. It’s abandoned when the and obtain knowledge for further final solution is implemented. improvement. The goal is to — Evolutionary Prototype: rigorous discover and view the requirements approach allows the evolution of initial interface before the solution is interface requirements for a functional system, requiring tools and drawn and developed specialized prototyping language. — It is a useful exercise that involves portray the current state and the desired future state (goal). Then, proceed to the comparison of current scenario and future one, in order to identify differences and develop an action plan

— Historical data collection to portray the most actual scenario and the use of historical parameter to give a reference and so design/estimate the desired future scenario

— Most of the time used to detect values/problems that have not been collected and documented until today. For example, to obtain detail on the actual process (to better portray the actual scenario) or when there is an intention of improvement or change of the actual process — Widely used on the design context, electronics and software's programming and for the requirements gathering, cots identification and quantify intangible benefits — Technique used to evaluate the potential benefits that a solution can leverage

— Knowing the current situation and he future scenario that a solution will enable leverage, it is possible to collect the metric value that is intended to estimate

5. Simulation

— Technique that consists in the — Implies the use models to represent imitation of something real or a a real situation. Typically are process. The simulation action mathematic models that calculate the usually implies the representation impact based on uncertain inputs of key characteristics or behaviors — Inputs Model – uncertain variables of a physical or abstract system. (sometimes it is possible to reduce error based on historical) — Definition of intermediate calculation — Outputs Model – results that will depend on inputs (will also involve some uncertainty)

4.1.1.3.

— Used when there are no analytical methods available or adequate — Used for benefits estimation concerning internal projects. E.g., initiatives with impact on operations (projects to increase business and/or reduce costs), such as: Waiting Problems (time of processes), Production Management (defects; production capacity); inventory management.

Interrogative Method

Another possible research approach is the interrogative method. This method intends to question the market regarding the study object or the selected solution to implement. This approach can have two different purposes: validate or exploring. In the first one, the objective is to test and confirm solutions or existing configurations. In the second case, the objective is exploring possible solutions that were not considered yet and include new study variables For example: a company intends to change the price strategy, for a product, with the purpose to increase the sales. If they want to certify if the product price is adjusted to the market interests, it’s possible to prepare a market study, questioning directly if the client considers the value adjusted to his expectation. On the other hand, if the objective has an exploratory purpose, the question can be formulated in order to obtain the optimal price, ie the price that the customer will be willing to pay. For this approach we have the following techniques: 1. 2. 3. 4. 5.

Market Research Hall Test Focus Group Expert Judgment Three-point Estimate

Technique

1. Market Study

2. Hall Tests

3. Focus Groups

4. Expert Judgment

What?

Where/How?

When to use?

Technique that consists in collecting information directly from the market. Is typically composed by two partial studies: Consumers Study and Competition Study. Depending on the topic under review, it should be made a quantitative and/or qualitative analysis.

— Surveys – usually for the massive information collection. — Open answer — Closed answer — Interviews – for exploratory studies and qualitative information, usually for a smaller sample, sometimes serving as a complement to surveys.

— Technique that consist in collecting feedback, ideas and opinions through the invitation and the meeting of a group of persons in an area where it is presented the product/service and where they can experiment it (touch and feel).

— Adequate rooms for this purpose — Information collecting in a controlled environment, ensuring the coherence of research conditions — All interviewed are under the same environment — The research team can play with the research environmental variables (e.g., the smell, decoration, etc.)

— Research technique of qualitative market in order to study and understand a reality through the information collection in the form of a dynamic group (typically specialists on the theme under analysis or consumers).

— Adequate rooms for this purpose — Information collecting in a controlled environment, ensuring the coherence of research conditions — All interviewed are under the same environment

— Request information and opinions to individuals that are experts on the theme under analysis, in order to present an estimate of the future value

— In order to “correct” the error margin, the expert should provide a range of values (worst and best scenario). If it exists more than 1 expert on the theme, it is recommended to ask several elements and calculate a mean of

— Market studies aim to help managers in the identification of needed products or services to put in the market, in price definition and optimal sale conditions, in the identification of distribution circuits that will boost sales; clients satisfaction studies; validate the adherence to a product; explore and identify market needs, study the clients image/perception on the company, and others. — Experiment products, feedback in terms of packaging, advertisement, concepts or brands. — Useful information for the adequate solution definition to the real consumer need and draw conclusion on the potential adherence to a new product/service giving the relevant information for projects with external orientation (market), this means, with impact in increasing business — When we aim to study targetmarkets; make concept tests, advertisement and behaviors; collect perceptions, opinions, beliefs and attitudes on a product/service/concept/idea or packing before its release in the market. Gives valuable information on the potential market acceptance of the product Analysts not only value the transmitted information contents by participants but are also interested in facial expressions, body language and group dynamic (by observation) — Typically used when there is absence of any prior study or historical record, reason why we resort to professional consultation of those who have knowledge on the subject, in order to give us a reference (value) very close from reality, based on his perspective and experience 56

values (assure that the sample standard deviation is not high)

5. Three Point Estimate

— Technique that uses the — Are considered 3 scenarios: combination of other techniques of Optimistic, Pessimistic and the most historical collection (namely Expert likely Judgment, Observation) to elaborate an estimate based on possible scenarios

— During the process of data collections (historical) it will be evaluated/questioned a range of possible values (optimistic, more likely and pessimist) in order to “minimize the discomfort” of the respondent and obtain an estimate based on 3 possible scenarios

Business Case Framework

The Business Case Body of Knowledge is a methodology composed by a set of knowledge, skills, tools and techniques which, when appropriately applied in any given initiative, it enhances the chances of a successful management decision towards a project investment. The methodology is composed by eight main steps and aims to assess the feasibility of an initiative (investment), or in other words, if it creates value to the organization. The Business Case Framework is composed by: 1. 2. 3. 4. 5. 6. 7. 8.

Project Request Strategic Alignment Benefits Estimation Costs Estimation Economic Evaluation Context Readiness Decision Making Benefits Tracking

Figure 29 — Business Case Framework (Pereira, 2014)

The following table shows the major steps that comprise the business case process and related inputs inputs, tools and techniques recommended, followed by the outputs generated in each step. This steps interaction is sequential which means that in order to move a step forward in the process it is required to have the previous step duly completed.

Business Case Steps

.1 Inputs

.2 Tools & Techniques

.3 Outputs

5.1 Project Request

.1 Strategic Plan .2 Market Demand .3 Legal Requirement .4 Client Request .5 Innovation Initiative .6 Technological Advance .7 Request for Bid .8 Enterprise Reports .9 Enterprise Risk

.1 Problem-Solving .2 Elevator Pitch .3 POLDAT .4 Futures Wheel .5 ZACHMAN .6 Expert Judgment .7 Enterprise Workflow .8 Enterprise Architecture .9 Business Requirement

5.2 Strategic Alignment

.1 Project Request Form .2 Strategic Plan .3 Organization Capacity .4 Exceptional Conditions

.1 Strategic Force Analysis .2 Scoring Model .3 Murder Board .4 SWOT Analysis .5 Peer Review .6 Nominal Group .7 Delphi Technique .8 Paired Comparison Analysis .9 Analytical Hierarchy Process

.1 Strategic Alignment .2 Go/No-Go

5.3 Benefits Estimation

.1 Project Request Form .2 Strategic Alignment .3 Enterprise Environment Factors .4 Outer Context .5 Historical Data .6 Market Reports

.1 Data Collection Plan .2 Pareto Analysis .3 Gap Analysis .4 Data Gathering .5 Parametric Analysis .6 Control/Focus Group .7 Prototyping / Simulation .8 Surveyâ&#x20AC;&#x2122;s .9 Sensitive Analysis .10 Three Point Estimate

.1 Benefits Plan .2 Benefits Estimation .3 Sensitive Data

5.4 Cost Estimation

.1 Project Request Form .2 Benefits Estimation .3 Enterprise Environment Factors .4 Outer Context .5 Historical Data .6 Market Reports

.1 Product Breakdown Structure .2 Parametric Analysis .3 Analogous Estimation .4 Bottom-Up Estimation .5 Cost Breakdown Structure .6 Expert Judgment .7 Risk Register .8 Sensitive Analysis .9 Three Point Estimate

.1 Benefits Estimation .2 Cost Estimation .3 Sensitive Data

.1 Economic-Financial Analysis (NPV, BCR, ERR, ROI, PAYBACK) .2 Interest Rate .3 ROI Sensitive Analysis .4 Profit & Lost Planning

.1 Economic-Financial Indicators .2 ROI Sensitive Data .3 Benefits & Cost Plan .4 Go/No-Go

5.6 Context Readiness

.1 Project Request Form .2 Enterprise Architecture .3 Strategic Alignment .4 ROI Sensitive Data .5 Enterprise Environment Factors

.1 Stakeholder Matrix .2 Force Field Analysis .3 Expert Judgment .4 Climate Analysis

.1 Context Analysis .2 Stakeholders Analysis

5.7 Decision Making

.1 Project Request Form .2 Enterprise Architecture .3 Strategic Alignment .4 Benefits Estimation .5 Cost Estimation .6 ROI Sensitive Data .7Context Analysis .8 Enterprise Environment Factors

.1 SWOT Analysis .2 Business Case Canvas .3 Nominal Group .4 Multi-Criteria Cenarios .5 Expert Judgment .6 Delphi Technique

.1 Benefits Plan .2 Business Case Report

.1 Corporate Reports .2 Trend Analysis .3 Balanced Scorecard .4 Control Group

5.5 Economic Evaluation

5.8 Benefits Tracking

.1 Project Request Form

.1 Cost Estimation .2 Sensitive Data

.1 Business Case Report .2 Go/No-Go

.1 Benefits Tracking Report .2 New Opportunities

5.1.

Project Request

The project request process aims to formalize the initiative request in a standard fashion way. It is essential that it clearly establishes the current problem vision, highlight the negative impacts caused to the organization, as well as what is aimed to obtain in the future while never forgetting to mention the impact of not doing it and identify what are the benefits leveraged by the solution proposed. It shall also formulate a high-level impact analysis in the company arquitecture: functional areas, processes and systems. The project must be standardized, and the application itself must be oriented to uncover, first, the value for money (what is created with the money invested). The project must be standardized and the initiative application should be, by default, able to enhance the the value for money proposed (what is created with the money invested).

.1 Inputs

.2 Tools & Techniques

.1 Strategic Plan .2 Market Demand .3 Legal Requirement .4 Client Request .5 Innovative Initiative .6 Technological Advance .7 Request for Bid .8 Enterprise Reports .9 Enterprise Risk

.1 Problem-Solving .2 Elevator Pitch .3 POLDAT .4 Futures Wheel .5 ZACHMAN .6 Expert Judgment .7 Enterprise Workflow .8 Enterprise Architecture .9 Business Requirement

.3 Outputs .1 Project Request Form

5.1.1. Project Request: Inputs The responsible in charge for the document fulfillement should be well informed about the current context and consider the following inputs (when applicable): 5.1.1.1.

Strategic Plan

Strategic Plan is the company's plan which states its mission, vision and values and the goals outlined. That requires a clear understanding of the organization’s mission and its strategic objectives in order to verify and justify whether the project contributes to the company's goals. The strategy formulation involves scanning the internal and external environment in order to allow the development of a set of strategic goals, objectives and tactics to be followed by the organization (Thune, 1970) (Rhyne, 1986).

Figure 30 â&#x20AC;&#x201D; Strategic Plan Pyramid Guideline

5.1.1.2.

Market Demand

Market Demand means understanding market trends and customer needs. It is essential to adopt an active listening attitude and be able to anticipate the customersâ&#x20AC;&#x2122; needs especially when facing a competitive market economy and globalization. 5.1.1.3.

Legal Requirement

The Legal Requirements are all the legislative aspects which you should be aware of, since they can affect the initiative development. 5.1.1.4.

Client Request

The Client Request is the order triggered by the client where he/she details their need and requirements. It is necessary to understand how to make the difference in the market by listening and understanding the customer needs. 5.1.1.5.

Innovative Initiative

As an input to the Project Request step, the Innovative Initiative requires on adopting a continuous innovation mentality and proactive learning, always with market trends up-to date and with a responsive strategy to respond the identified needs. 5.1.1.6.

Technological Advance

Nowadays, running a company and a business require a good technology basis. Technology can be a major asset for a business differentiation and consequently key to achieve success. In the worst case, and considering the current market competition, companies must ensure the knowledge and continuously update in regards to technologies, systems and tools.

5.1.1.7.

Request for Bid

The Request for Bid is a verbal or written request to potential suppliers, when submitting a proposal for a specific project. This is a request that suppliers present the proposal which will then be reviewed and selected by the customer. In response to the Request for Bid, the goal relies on presenting a high "value for money" fulfilling potential clients’ specific request towards the clients satisfaction. 5.1.1.8.

Enterprise Reports

The internal documentation (Enterprise Reports) is useful to capture the current company situation, detect any gaps and therefore a good source of information for analysis and for leveraging the company value. 5.1.1.9.

Enterprise Risk

As a starting point, it is important to be aware of the main risks the entity may face (both internal and external sources).

5.1.2. Project Request: Tools & Techniques 5.1.2.1.

Problem-Solving

“Problems are only opportunities in work clothes”– by Henry Kaiser (American industrialist) This step aims to perform the initiative formulation, based on a formal and standardized internal process. Therefore, it is critical the client submiting the initiative owns a deep need’s understanding in order to get a document which accurately translated what need / problem / opportunity is identified. Having this goal and aiming to prepare the document which reflects the correct translation of the problem and related solution (initiative) proposal, it is essential that the individual carry out a problem-solving analysis. This is a qualitative analysis where the main need / problem / opportunity is described followed by the identification of its main business impacts and their behavior over a certain period of time (trend analysis).

Figure 31 - Problem-solving diagram (Pereira, 2014)

Once the solution can be able to respond to the problem causes, it is of high importance to identify 20% of the causes (identification of three main causes is recommended) which led to the initiative (investment) origin, since those are accountable for 80% of the problem impacts, according to the Pareto Law. In order to conduct this problem-solving approach, there are two techniques commonly used: the 5 Whys technique in order to get to the root of the problem by following a drill-down process (Taiichi, 1988) and the Fishbone Diagram (or Ishikawa diagram) to analyze any cause-effects allowing to carry the breakdown of the identified causes (Ishikawa, 1990). Both techniques aim to identify the main causes of the problem and the relationships between them.

Figure 32 — Fishbone Diagram Example

Since a business case professional essence relies on following a process with quality, this should include relevant and accurate information. 5.1.2.2.

Elevator Pitch

Having the problem’s causes identified, the Elevator Pitch technique assists on structuring the Project Request. This technique was created by Ilene Rosenzweig and Michael Caruso, originally for sales purposes, in order to sell an investment idea to the administrator or a potential investor, within a 30 seconds timeframe (average time in an elevator) where the key points are summarized and presented. The goal is to capture a person's attention and catch their interest about the project, so that the “small talk” stretches out until the buy-in is achieved. On a business case perpective, it should be structured by the following:     5.1.2.3.

Problem Presentation Problem Impacts Solution proposed Solution Benefits POLDAT

The document stating the project request should also consider the main impacts expected in the enterprise architecture: people (stakeholders), processes and systems. The POLDAT technique (business processes, organization, location, data, technology, applications) assists on making this impact analysis, while requiring a clear understanding of the current situation (as is) and the future scenario (to be).

Figure 33 – POLDAT (Pereira, 2014)

In addition to the previous techniques, additional techniques to assist on the business analysis and its understanding are detailed below. 5.1.2.4.

Futures Wheel

The Futures Wheel technique was created by Jerome Glenn in 1972, who became well-known as an expert and speaker on the "Future Studies" topic. This technique was originally designed to identify potential impacts of a decision, event or trend that can be applied for a decision-making as well as for the change management process while identifying potential change consequences (Glenn, 1972), between other options available.

Figure 34 - Futures Wheel Example (Pereira, 2014)

5.1.2.5.

ZACHMAN

Unlike the more traditional methods organized around the system’s development life-cycle, ZACHMAN technique relies on a different approach. The Zachman matrix includes for each phase data, role, location, people, time and motivation. The lines represent the players’ point of views during the system development process (Executive Perspective, Business Management, Architect, Engineer, Technician Enterprise) while

the columns represent the various aspects of the process (What, How, Where, Who, When and Why) (Zachman J. A., 1987). The Zachman Framework is not a methodology but instead a structure. A structure establishes a definition while a process promotes transformation.

Figure 35 – Adapted from Zachman Framework (1987)

5.1.2.6.

Expert Judgment

The Expert Judgment technique relies on asking individuals’ information and opinions with expertise in the subject under analysis. This technique provides an assessment about a state or degree of knowledge regarding a specific aspect (product / technology / market) or context, in a fast pace. Expert Judgment relies on the Wisdom Crowd principle, based on the fact that "a crowd owns more wisdom than one single part" where the decision error level will be much lower than if a decision taken just by a single person. However, it is not a very accurate technique and does not allow to associate a confidence level. The Expert Judgment methodology is also subject to the same scientific principles as other techniques used to collect data. The Expert Judgment is governed by the main following principles (Cooke, 1991):    



Reproducibility – it should be possible for the peers to review and reproduce the calculations based on expert judgement; Accountability – the expert judgment source should be identifiable; Empirical control – the experts performance e.g., the probability of their good will can be evaluated empirically; Neutrality — the method for the opinion collection, should encourage experts to express their true opinion; Fairness — all experts are treated equally a priori. 66

5.1.2.7.

Enterprise Workflow

With the business growth, the company's workflow definition has turned essential for good management practices. This Enterprise Workflow consists on an organization workflow and a set of organizational rules to implement its activity. In another words, it is a set of business activities which through a set of resources and processes, allow materials transformation, supply of services and processing information. 5.1.2.8.

Enterprise Architecture

An enterprise arquitecture is a holistic and integrated view of a company key system composed by its elements (people, processes, applications, etc) and its relationships / interactions between each other, the environment and the principals which guide their design and evolution (IEEE 1471-2000, Recommended Practice for Architectural Description of Software-Intensive Systems). The Enterprise architecture emerged in 1980 and was later on incorporated into the John Zachman’s framework (Shah & Mohamed, 2007). 5.1.2.9.

Business Requirement

The main starting point of a business case, especially in the problem definition and benefits quantification phasis, has to do with the understanding of the business requirement which is composed by the business need plus the effect leveraged in the business. Business Requirement = Business Need + Business Impact 4

Figure 36 — Business Requirement Definition (Pereira, 2014)

Therefore, when proposing a solution to the identified need, this must generate a positive impact that will become measurable in financial terms. The document with the project request should also present the impacts in case the project does not go forward.

The business impact concepts follows the principle of the economic value of capital (section 1.2), which is essential for a proper quantification of the estimated benefits. The investment value or the initiative is not worth by the idea of itself, but instead by the value it generates, i.e. by the impact. 4

5.1.3. Project Request: Outputs 5.1.3.1.

Project Request Form

After considering the inputs and applying the analytical techniques, the document with the project request should:          

The current problem; The problem’s impacts and its trend over the time; The problem’s causes; The future scenario with the solution proposal (product/service); Identify whether there are any external dependencies; Mention the impact of the project not being done and whether it exits temporary alternatives; Solution’s Impacts analysis in the company’s arquitecture, in particular, the functional areas, processes and application systems; Description of the key benefits; Useful attachments for analysis (e.g., reports, etc); Department area submitting the request, Request name and the interlocutor name

After the project application, the initiative has to be evaluated whether it responds to the company strategic objectives in order to ensure the organization invests its resources together with a vision and strategy alignment.

5.2.

Strategic Alignment

The Strategic Alignment process aims to qualitatively assess whether a particular initiative has the minimum conditions to move forward in evaluation process. The goal is to understand how much the initiative is strategic to be considered as a potential investment. The model should consider the possibility of exceptions and allow an effective reading in top management language of the organization.

.1 Inputs .1 Project Request Form .2 Strategic Plan .3 Organization Capacity .4 Exceptional Conditions

.2 Tools & Techniques .1 Strategic Force Analysis .2 Scoring Model .3 Murder Board .4 SWOT Analysis .5 Peer Review .6 Nominal Group .7 Delphi Technique .8 Paired Comparison Analysis .9 Analytical Hierarchy Process

.3 Outputs .1 Strategic Alignment .2 Go/No-Go

5.2.1. Strategic Alignment: Inputs Having the project request approved by the top management, the strategic alignment is crucial to consider whether or not, to pursue with the benefits quantification. It is therefore necessary to consider the following inputs: 5.2.1.1.

Project Request Form

The Project Request Form Request a result of the project request, described in the 5.1.3.1. Project Request Form. In order to carry out the initiative evaluation on a strategic level, it is required the document with the project request (Project Request Form) where the request is formalized in a standard fashion way, establishing the vision of the current problem, listing the organization’s issues, as well as what is aimed to obtain in the future while never forgetting to mention the impact of not doing it and identify what are the benefits leveraged by the solution proposed. The document shall also formulate a high-level impact analysis in the company architecture: functional areas, processes and systems. 5.2.1.2.

Strategic Plan

In order to verify whether the initiative is aligned with the strategic plan, it is necessary to know what the organization's strategic plan is (described in input 5.1.1.1). The strategy formulation requires the construction of the company's mission, the scanning of the internal and external environment, in order to allow the development of a set of strategic goals, objectives and tactics to be followed by the organization (Thune, 1970) (Rhyne, 1986). 5.2.1.3.

Organization Capacity

The analysis of the organizational capacity consists in the process of analysing the development, the work environment, the staff skills and operations of a certain business. By performing a regular and detailed organizational analysis is useful for management purposes, since it allows us to identify possible problems www.businesscaseinstitute.org | ©2015 Business Case Institute | A Guide to the Business Case Body of Knowledge BCBOK® Guide – Draft Version

or weaknesses that have arisen but not yer addressed, and therefore develop strategies for their resolution. This analysis focuses on the organization’s structure and its design and on the clear understanding about how the systems, capacity and features influence the results. Considering internal and external factors are also taken into account to assess how to improve efficiency. The analysis of organizational capacity is useful to assess the level of the organization "well-being" and the organization's capacity as well as on deciding about which actions need to be taken to improve an organization’s long-term sustainability. Restructuring an organization may become necessary when either external or internal create a problem or generate an opportunity for improvement in terms of efficiency and effectiveness. 5.2.1.4.

Exceptional Conditions

Exceptional Conditions are informations that prevent the continuation of the initiative and influence the Scoring Model technique (check technique 5.2.2.2). There may be factors that force us to move forward with a specific initiative (Force In) such as initiative with legal / compliance character. Likewise, there may be factors that may prevent a particular initiative not to proceed regardless of their score (Force Out). Therefore it is important to know the exceptional conditions for the initiative appraisal.

5.2.2. Strategic Alignment: Tools & Techniques 5.2.2.1.

Strategic Force Analysis

One of the most recommended techniques for its clarity and effectiveness is the Strategic Force Analysis (analysis of the strategic forces). The Strategic Force Analysis aims to qualitatively evaluate whether the proposed initiative has the minimum conditions to take the next step in the business case process. This exercise intends to identify the solution contribution towards the strategic objective (s), describing how much it will contribute and how it will be achieved. This requires the organization to clearly define the strategic objectives (ideally under a SMART * format) in order to analyze how the proposed solution fits the company's strategy. * SMART goals — stands for: S — Specific M — Measureable A — Achievable R — Relevant T — Time-Bounded 5.2.2.2.

Scoring Model

This technique complements the Strategic Force Analysis and aims to analyze the contribution of each benefit to each strategic goal. The Scoring Model technique includes a list of a decision criteria for the initiatives selection. These initiatives are classified according to each criteria, which is typically represented on a numerical scale. Afterwards, this score is multiplied by weights and summed up to obtain the final classification (score). Initiatives with the highest rating will have greater priority for the organization (Milosevic, 2003).

This simple exercise ensures that the organization maintains its energy and efforts focused in its vision, avoiding the risk of falling into whims or personal wishes. Since organizations have several initiatives (project proposals) to consider, the Scoring Model technique supports on their priorization through a rational approach based on a strategic alignment perspective. The Scoring Model requires rationality, commitment and Top-Down pragmatism (from top management, typically the decision-makers) especially at the ranking stage of each strategic objective in terms of its relevance.

Figure 37 — Scoring Model Example (Pereira, 2014)

5.2.2.3.

Murder Board

The project must be aligned with the company’s operating axes. This means, it must be converted into tangible indicators. One of the techniques used for qualitative evaluation of projects is called Murder Board, which is a meeting with the board of directors, where each sponsor will have five minutes to share it, while administrators assess whether these are aligned with the company's goals. The Murder Board technique took origin in the United States military services where a jury committee would critically analyze a proposal or assist any member to make a decision. Nowadays, this technique is widely used for academic, government and business management purposes. Finally, when it is concluded that an idea is in line with the company's strategic plan, the process can move to the next step. 5.2.2.4.

SWOT Analysis

The SWOT analysis, originally developed by Albert Humphrey during the 1960s and 1970s, is a tool that enables the management team to analyze and position the company in the current context. The SWOT Analysis presents the company strengths and weaknesses as well as the opportunities and threats of market conditions, making it particularly useful for identifying key elements, establish performance priorities and prepare strategic options. By applying this tool, you can understand if the initiative under study fits the key company priorities.

SWOT TEMPLATE Strenghts

Weaknesses

Positive internal factors under the Negative internal factors under organization organization's control that may be control which may be mitigated leveraged Opportunities

Threats

Positive external factors beyond the Negative external factors beyond the organization's control that may be organization's control that must be mitigated leveraged

5.2.2.5.

Peer Review

Regarding the peer review technique, it aims to ensure the quality standards, improve performance and provide credibility by evaluating the work of one or more persons owing similar skills to who performed the task (peers). The peer review technique is well known, especially in the academic world, by the university professors. All of the research presented in scientific journals is peer reviewed. The goal is to help authors to produce a better search through the experts review in the field (Rieber, 2006). 5.2.2.6.

Nominal Group

The Nominal Group technique is a process that involves the identification of a problem, followed by a solution proposal and reach a final decision. This technique is especially used when the groups aim to arrive at a consensus and make a quick decision, for example via voting, but which wants to consider the opinions of the other parties. This technique can be considered as a refinement of the brainstorming activity, especially in the initial phase which requires a creative task in an individual and quietly manner in order to generate more ideas. Therefore, participants are normally in group but working individually on each phase, and a group as a whole, that is why is called NGT. Researchers of brainstorming techniques found that sometimes these techniques may prove to inhibit creative thinking compared to other techniques using quiet activities such as NGT (Taylor, Berry, & Block, 1958).

Figure 38 â&#x20AC;&#x201C; Nominal Group Technique Workflow (Pereira, 2014)

Having this said, the Nominal Group may also be used to prioritize strategic goals by the executive committee. The NGT participants are requested to write their ideas without making any comment to the other colleagues. Usually it is done in post-its, with an idea written on each one, allowing to exchange ideas, for example through Positioning maps. These ideas are then presented by the group members or by the moderator, and openly discussed, usually in a board or in large papers, so that all group members can read it as a whole. After the reading completed, the ideas are discussed by the entire group, followed by their ranking, where for each one, it is assigned a numerical value according to their popularity, based on the number of votes. This can be done by providing a limited number of stickers to use as a vote and paste them in the selected idea. The most popular ideas will be further developed by the group (Clive, 2012). In this sense, the Nominal Group technique may also be used by the executive committee in prioritizing company strategic objectives. 5.2.2.7.

Delphi Technique

The Delphi Technique is a systematic method that seeks to reach a consensus and credible information through a panel of experts, facilitating the decision making (Dalkey & Helmer, 1962). The goal is to use the group expertise to reach a conclusion, similarly to brainstorming techniques and round-tables. However, this methodology is characterized by eliminating biased responses due to psychological influence (e.g., when there is a dominant element in the group or there is social pressure to respond in a particular way) (Brown, 1968). According to the same article from Brown (1968), in this method, each expert individually responds to a questionnaire, without confronting the opinions of others. After completion, answers are gathered and shared with the expert’s panel for further development and comments. After the feedback, the experts can reshape their opinion, taking into account other factors that initially may not have been considered. The consensus is usually reached after several rounds. This technique follows a principle called Wisdom Crowd, based on the fact that "people have more wisdom than a single person" and where the degree of a decision error will be much lower than if taken based on the judgment of a single person. 5.2.2.8.

Paired Comparison Analysis

The Paired Comparison Analysis is a technique that allows on assigning a degree of importance between two options (Lavrakas P. J., 2008). This technique is used upon situations where it is required to set priorities either because there are conflicts in resources usage or where options are totally different or subjective. This analysis provides a framework that facilitates the exercise of comparison between an option and the remaining and assists on demonstrating the importance of difference between several factors. 5.2.2.9.

Analytical Hierarchy Process

The Analytical Hierarchy Process is an alternative technique to decompose the problem into "subproblems" in a hierarchy struture, so that each one is analyzed independently. In a Business Case perspective, it is presented as a way to break down the company strategic objectives in order to analyze their relative importance.

Problems

Sub-Problems

Figure 39 - Example Analytical Hierarchy Process

Once the strategic objectives get deconstructed, decision makers will systematically assess the several objectives by comparing each one, in pairs, as to its importance to the organization. To this end, a preference matrix should be prepared, such as the figure illustrated below:

Figure 40 â&#x20AC;&#x201C; Matrix of preferences

After completing the elementsâ&#x20AC;&#x2122; comparisons and judgments based on its relevance level, these assessments are converted into numerical values which can be processed and compared throughout the scope of the problem. This facilitates the comparison between different elements in a rational and coherent manner. The result of this technique may be useful in ordering the strategic objectives by their importance level when using the Scoring Model technique, explained previously.

5.2.3. Strategic Alignment: Outputs 5.2.3.1.

Strategic Alignment

The output of this process is to determine the initiative alignment towards strategic goals. This process is particularly important because it not only indicates which initiatives are aligned with the organization's strategy, as it also allows to prioritize initiatives according to their strategic importance.

5.2.3.2.

Go/No-Go

After evaluating the initiative’s strategic alignment, it should be decided whether the business case moves on to the next step (Benefits Estimation). In case the initiative is not aligned to the organization's strategy, this should follow the "No-Go", or in another words, it should not move forward. When the initiative does not contribute to the strategic goals achievement that means it does not create value to the organization and therefore it should be automatically rejected by top management. On the other hand, if is aligned to the organization's strategy, it should move to the next business case step, the Benefit Estimation.

5.3.

Benefits Estimation

Having the initiative meeting the strategic requirements, it is able to take the next step in the business case process. The process of Benefit Estimation aims to assess the impact of project benefits quantitatively in the business and in the company. Benefits are measurable and perceived value improvements by one or more stakeholders (Sanchez & Robert, 2010). It is intended that the benefits are calculated through a robust process so they are presented in a rigorous, accurate and conservative manner.

.1 Inputs

.2 Tools & Techniques

.1 Project Request Form .2 Strategic Alignment .3 Enterprise Environment Factors .4 Outer Context .5 Historical Data .6 Market Reports

.3 Outputs .1 Benefits Plan .2 Benefits Estimation .3 Sensitive Data

Since budgets are suffering huge reductions, there are several investment obstacles faced in current organizations, hence the strong need on changing the current mindset towards a budget definition based on the estimated benefits leveraged by the solution (investment) rather on the estimated costs. Therefore, the amont of benefits should determine the budget restrictions.

Figure 41 â&#x20AC;&#x201C; Benefits Planning (Pereira, 2014)

In order to get the benefits estimation, there are several techniques to collect the current situation and assess the future scenario. The ability to identify the correct information sources and assessment techniques will determine the accuracy and the quality of the business case information. Thus, this step is critical to ensure that the estimate will be close to reality and consequently with a reduced expected deviation.

5.3.1. Benefits Estimation: Inputs 5.3.1.1.

Project Request Form

The Project Request Form is a result from the Project Request process, described in output 5.1.3.1. In order to make the benefits estimation, the Project Request Form is required, where the benefits to be achieved and the future situation are formalized, among other information. 5.3.1.2.

Strategic Alignment

As described in output 5.2.3.1, the initiative strategic alignment is a relevant information that tells us how the initiative under study is aligned with the organization's goals. This input comes from the Strategic Alignment process in which the initiative benefits are assessed against the organization strategic goals. 5.3.1.3.

Enterprise Environmental Factors

Enterprise Environmental Factors refers to the conditions typically out of control of the initiative under consideration and which may affect directly or indirectly the initiative development. These factors are considered as Inputs in several processes, since they can either impact the project positively or be an obstacle to achieve success. The enterprise environmental factors can have a different nature and include, among others, the following options:         5.3.1.4.

Organizational culture, the company's organizational structure and processes; Geographical distribution of resources and facilities; Government laws and industry standards; Market conditions; Human resources available (e.g., skills, knowledge); Tolerance to risk by stakeholders; Products and services available in the market; Company communication channels. Outer Context

The Outer Context includes the structural and cultural factors external to the organization that may affect the initiative under study, either positively or negatively. These includes, among others:   

Social and political context (laws and regulations); External incentives; Public opinion and media.

5.3.1.5.

Historical Data

Historical information about the company (such as information on previous projects in terms of costs and benefits, data about customers and sales, etc.) may be useful to predict future trends that may affect the initiative uner study or assist on quantifying benefits and costs. 5.3.1.6.

Market Reports

Market reports bring relevant information on the market characterization, their behavior and trends, assisting on putting the initiative into context in the sector / industry to which it belongs to. These reports are a good input to detect opportunities or threats.

5.3.2. Benefits Estimation: Tools & Techniques 5.3.2.1.

Data Collection Plan

As a starting point, it is essential to create a plan stating the main benefits to be quantified, the required metrics for its measurement, the collection techniques and the source of information. As the return on investment principle relies on the difference between the future scenario and the current scenario, the exercise of Data Collection Plan is mandatory to collect the information and data that will describe the current state of the problem and related variables which will allow the estimation of future behavior.

Figure 42 â&#x20AC;&#x201D; Data Collection Plan Example (Pereira, 2014)

5.3.2.2.

Pareto Analysis

The Italian economist and sociologist Vilfredo Pareto (1848-1923), showed that 80% of a nation's wealth was distributed to 20% of the population (the "vital few"). The remaining 20% of the wealth was distributed among the other 80% of the population (the "trivial many") (La Rooy, 1999). The Paretoâ&#x20AC;&#x2122;s mathematical and economic model became known as the 80/20 rule which states that 20% of known variables account for 80% of the results (Basile, 1996).This connection was the result of observations from Joseph M. Juran, a "pioneer in the development of principles and methods of quality control management programs" (Juran J. , 2001). Juran assigned the name "Pareto" to this principle of "the vital few and trivial many". It is an abbreviation for the phenomenon that for any population that contributes to a common effect, just a few contributors will represent most of the effect (J. Juran, 2001).

The heuristic of the Pareto principle, which emphasizes the focus on the "vital few" rather than on "trivial many", simplifies the decision-making process and is a generally accepted principle of management that can be recommended as a model with little opposition (Craft & Leake, 2002). According to this rule, the benefits estimation will focus on the major 20% of the benefits (ideally up to 3), since these will represent 80% of the value generated. The remaining benefits identified should be listed as intangible due to the residual contribution that they would deliver.

Figure 43 – Pareto histograma exemple Gap Analysis

5.3.2.3.

Gap Analysis

In order to facilitate the planning of data to be collected either on the current scenario and in the future scenario, the Gap Analysis technique is a useful exercise for comparing the current state and the future desired in order to identify the differences that need to be addressed. This technique appeared among the management of quality services developed by Parasuraman et al. (1985), based on the approach about understanding and getting the gap between client’s expectation against the service delivered and the perception of what was received. However, for the Business Case development, the technique goal is to identify the tasks required to bridge the gap between the current situation and the project goals. Having all the data planned required for benefits quantification, the next step will be to define the parametric equations before the amounts allocation. After that, it will be the data collection phase, which should follow the guide plan previously prepared. For the benefits collection (5.3.2.4 Data Gathering) there is a variety of techniques such as: 5.3.2.5.

Parametric Analysis

The parametric model is one of the most accurate and reliable methods based on historical data and parameters from previous projects of the same type, trough a mathematical model with statistic and capabilities analysis of any existing cause-effect relationship between variables, turning it on a valuable contribution to the initiative under analysis. 5.3.2.6.

Control/Focus Group

Control Groups consists on conducting a study based on two groups, where one group is subject to an experience and the other does not, in order to assess the impact of the variable under study (Lavrakas P. J., 2008).

Figure 44 â&#x20AC;&#x201D; Control Group Example (Pereira, 2014)

Focus Group consists on extracting ideas and attitudes, such as impressions, preferences and needs about a product / service / specific opportunity in an interactive group environment, from a group of people with expertise in the area or with a specific need (Kettinger, Teng, & Guha, 1997).

Figure 45 â&#x20AC;&#x201D; Focus Group (Pereira, 2014)

5.3.2.7.

Prototyping/Simulation

The Prototyping technique is a technique that requires developing an experimental and simplified version of a product or service to take feedback and readjust requirements before the solution is designed and developed (Kettinger, Teng, & Guha, 1997).

The Simulations technique consists in the imitation of something real or a process, which action usually implies the representation of key characteristics or behaviors of a physical or abstract system to obtain an estimated outcome of real effects. 5.3.2.8.

Surveys

Surveys are a technique for collecting responses from a set of standardized questions for a large group in a short period of time. This instrument should be constructed to obtain unbiased answers (Kettinger, Teng, & Guha, 1997). The table below presents some advantages and disadvantages from a questionnaire composed just by open or closed type of questions:

Figure 46 – Advantages and disadvantages of each questionnaire

5.3.2.9.

Sensitive Analysis

After gathering all the information required to supply as an input for the parametric equations, the results should undergo a sensitivity analysis in order to determine how different values of an independent variable under a certain set of assumptions, will impact a dependent variable. Sensitivity analysis can be used to answer the "what-if" ("what if?") kind of questions, which normally uses values considering various scenarios (Kelliher & Mahoney, 2000) (see 5.3.2.10 Three Point Estimate technique). There are several software programs that allow you to perform multiple sensitivity analysis, or in another words allows the display of a range of expected values (with more or less risk) based on the variation of all the assumptions (explained in technique 5.5.2.3) and not just based on the change of an assumption individually (simple sensitivity analysis). As a result, it is obtained a range of values (more or less risky) according to a confidence level (%). 5.3.2.10.

Three Point Estimate

Throughout the data collection and because reality is not static, the BCBOK methodology recommends considering different scenarios during the estimation process, such as, the most optimistic, most likely and

the most pessimistic, based on the technique Three Point Estimate, useful for an business case with business benefits. The final decision should always be based on the conservative scenario in order to create more awareness and avoid unexpected discrepancies, such as a negative return on investment.

Figure 47 — Three Point Estimate (Pereira, 2014)

The estimation is done by the following calculation: E = (a + 4m + b) / 6, where:   

a = most optimistic scenario m = most likely scenario b = worst case scenario

5.3.3. Benefits Estimation: Outputs 5.3.3.1.

Benefits Plan

The Benefit Estimation process will get the Benefits Plan as an output. This one details the initiative benefits in quantitative terms, how these will be achieved after the implementation and during the exploitation period of the project and which metrics, sources and techniques are required for future measurement. Besides specifying how the measurement of benefits will be made, it also indicates when and how often this measurement should occur. 5.3.3.2.

Benefits Estimation

Benefits Estimation is the numerical value resulting from this process, which indicates how much value will be generated by the initiative under consideration. 5.3.3.3.

Sensitive Data

After collecting the Estimation of Benefits (5.3.3.2.) and perform the related sensitivity analysis (5.3.2.9) it is possible to get the benefits’ value (€) to be considered for further economical and financial analysis. For the sensitity analyses, we should work up with the scenarios to which results are more conservative and present the final amount with a 95% confidence level (lowest risk).

5.4.

Costs Estimation

The Cost Estimation process aims to get a cost estimate for the project. This estimate should include not only the cost of the project, as well as the new operational costs. The product components should be addressed as well as the uncertainty of the project for which the estimate is conservative to ensure that the budget available is sufficient. In extreme situations cost options might also be considered, to evaluate alternative scenarios.

.1 Inputs

.2 Tools & Techniques

.1 Project Request Form .2 Benefits Estimation .3 Enterprise Environment Factors .4 Outer Context .5 Historical Data .6 Market Reports

.3 Outputs .1 Cost Estimation .2 Sensitive Data

After estimating the initiative benefits it is also necessary to estimate the costs involved. Costs include: investment costs before the exploitation period and the new operating costs (OPEX). During this process, the components of services / products and tasks must be considered as well as the uncertainty of the project in order to obtain a conservative estimate and ensure that the budget is sufficient.

5.4.1. Costs Estimation: Inputs 5.4.1.1.

Project Request Form

The Project Request Form results from the Project Request process, described in output 5.1.3.1. In order to proceed to the Costs Estimation, the Project Request Form is required, where the future situation aimed to achieve is formalized among other information. 5.4.1.2.

Benefits Estimation

As described in output 5.3.3.2., Benefits Estimation is the numerical value resulting from the Benefit Estimation process, which indicates how much value will be generated by the initiative under consideration. 5.4.1.3.

Enterprise Environmental Factors

As described in input 5.3.1.3., Enterprise Environmental Factors refers to the conditions typically out of control of the initiative under consideration and which may affect directly or indirectly the initiative development. These factors are considered as Inputs in several processes, since they can either impact the project positively or be an obstacle to achieve success.

5.4.1.4.

Outer Context

As described in input 5.3.1.4., the Outer Context includes the structural and cultural factors external to the organization that may affect the initiative under study, either positively or negatively. 5.4.1.5.

Historical Data

As described in input 5.3.1.5., the historical information about the company (such as information on previous projects in terms of costs and benefits, data about customers and sales, etc.) may be useful to predict future trends that may affect the initiative under study or assist on quantifying benefits and costs. 5.4.1.6.

Market Reports

As described in input 5.3.1.6., Market reports bring relevant information on the market characterization, their behavior and trends, assisting on putting the initiative into context in the sector / industry to which it belongs to. These reports are a good input to detect opportunities or threats. .

5.4.2. Costs Estimation: Tools & Techniques 5.4.2.1.

Product Breakdown Structure

The Product Breakdown Structure is the hierarchical structure of the product / service to be delivered, divided by its main components (DupĂŠ, Briand, & Fischer, 2009), particularly useful in the field of engineering. This is the first step to easily detail the components costs of the solution to be presented by the Cost Breakdown Structure technique.

Figure 48 â&#x20AC;&#x201D; Product Breakdown Structure

5.5.

Parametric Analysis

Analogous Estimation

In case the organization does not have enough detailed information about similar projects in the past, the estimation through analogy is another alternative, based on historical information from similar projects, where similarities are determined by the comparison of attributes and of key project characteristics (Auer, Trendowicz, Graser, Haunschmid, & Biffl, 2006). However, this is not as precise as the previous technique (parametric model) and does not allow the analysis of different scenarios. 5.5.1.2.

Bottom-up Estimation

If there are no records from similar projects or if it is a new type of portfolio project, there is the bottom-up technique, where all the costs associated to each "task” required to achieve the deliverable are collected and by summing-up all the costs it will be determined the total costs estimated for the project. However this technique is time consuming (long term effort). 5.5.1.3.

Cost Breakdown Structure

After identifying the main results and the necessary functions for the project implementation, the Cost Breakdown Structure is a practical technique to present the estimates (€) of each component (deliverable) and related tasks. This technique is commonly used when making costs estimation through a bottom-up approach. 5.5.1.4.

Expert Judgment

As a last resource it is possible to use the Expert Judgment (5.1.2.6) which relies on asking individuals’ information and opinions with expertise in that type of projects to provide an estimate about the costs of each project component identified. However, it is important to note it is not a very accurate technique and does not allow associating a confidence level. 5.5.1.5.

Risk Register

Regarding the Risk Register tool, this is usually used for risk assessment and its organization during project management tasks. This model consists of a repository where the main risks identified are classified according to their probability of occurrence, the description of the impact in case it occurs resulting in a risk score (probability x impact), followed by a mitigation and response action plan in case risk will occur. This tool is useful for generating awareness of the potential risks and stimulates cross-functional cooperation and debate, however could lead to a ritual illusory control. 5.5.1.6.

Sensitive Analysis

If a business case estimates future results, then, these involve uncertainty. For this reason, it is recommended that a sensitivity analysis for both the benefits and for cost estimation, in order to examine the sensitivity (behavior) of the results (expected value) when changing assumptions and still measure www.businesscaseinstitute.org | ©2015 Business Case Institute | A Guide to the Business Case Body of Knowledge BCBOK® Guide – Draft Version

uncertainty. By having a clear definition of the assumptions, it will be possible to propose the best solution configuration where the results are maximized.

5.5.1.7.

Three Point Estimate

As described in technique 5.3.2.10., the BCBOK methodology recommends considering different scenarios during the estimation process, such as, the most optimistic, most likely and the most pessimistic, based on the technique Three Point Estimate. The final decision should always be based on conservative scenario in order to create more awareness and avoid unexpected discrepancies, such as a negative return on investment.

Figure 49 – Costs Estimate and Sensitivity Analysis (Pereira, 2014)

5.5.2. Costs Estimation: Outputs 5.5.2.1.

Cost Estimation

The Cost Estimation is the numerical value resulting from Cost Estimation process, which indicates the value of the initiative’s investment, including the cost of the investment before the exploitation period and the new operational costs (OPEX). 5.5.2.2.

Sensitive Data

After collecting cost estimation (5.4.3.1.) and perform the sensitivity analysis (5.4.2.8 Sensitive Analysis) it is possible to get the costs’ value (€) to be considered for further economical and financial analysis. For the sensitive analysis, we should work up with the scenarios to which results are more conservative and present the final amount with a 95% confidence level (lowest risk).

5.6.

Economic Evaluation

The economic assessment process aims to calculate whether the initiative is economically interesting for the organization. The underlying principle is that in the worst case, the initiative should be profitable and pursue the goal of a minimum 50% ROI (Return on Investment). The decision about a project moving forward (or not), should always consider a minimum confidence level from 80% to 95% in the combined cost and benefit cash flows.

.1 Inputs

.2 Tools & Techniques

.1 Benefits Estimation .2 Cost Estimation .3 Sensitive Data

.1 Economic-Financial Analysis (NPV, BCR, ERR, ROI, PAYBACK) .2 Interest Rate .3 ROI Sensitive Analysis .4 Profit & Loss Planning

.3 Outputs .1 Economic-Financial Indicators .2 ROI Sensitive Data .3 Benefits & Cost Plan .4 Go/No-Go

5.6.1. Economic Evaluation: Inputs 5.6.1.1.

Benefits Estimation

Cost Estimation

As descried in output 5.4.3.1, the Cost Estimation is the numerical value resulting from Cost Estimation process, which indicates the value of the initiative’s investment, including the cost of the investment before the exploitation period and the new operational costs (OPEX). 5.6.1.3.

Sensitive Data

As described in Outputs 5.3.3.3 and 5.4.3.2, after collecting the benefits and costs estimation and perform the related sensitivity analysis (5.3.2.9 and 5.4.2.8), the value of benefits and costs (€) is obtained which will be considered for economical and financial analysis. For the sensitive analysis, we should work up with the scenarios to which results are more conservative and present the final amount with a 95% confidence level (lowest risk).

5.6.2. Economic Evaluation: Tools & Techniques 5.6.2.1.

Economic-Financial Analysis

The main performance measure used in the economic evaluation of an initiative is the Return on Investment (ROI), which expresses the proportion of wealth generated by the initiative, quantifying evidence of the added value. According to the ROI methodology, the goal is to get a positive ROI; therefore, within a portfolio of initiatives these should be prioritized based on their estimated return. When the estimated ROI is higher than 50%, the methodology recommends that the project should proceed. Besides this indicator of strong contribution, there are other metrics that should be also considered, such as:

  

5.6.2.2.

The payback period is the time required to pay the investment; The External Rate of Return is the rate of return of the project, without assuming that income received earn interest at unrealistically high rates; The NPV stands for Net Present Value, which is the sum of future cash flows discounted to the date of analysis (present). Interest Rate

Besides the benefits and costs previously calculated there is another variable that will impact the final results of performance: the interest rate. This rate will be used to update future cash flows to the decision making date (present). This rate is composed by the investor’s opportunity cost of capital and by the annual inflation rate. 5.6.2.3.

ROI Sensitive Analysis

In order to calculate the initiative Return on Investment (ROI) linked to a probabilistic result (rather than deterministic) the sensitivity and risk analysis is required, delivering a range of output values according to a confidence level. One of the most popular systems known by its reliable nature is named the Monte Carlo simulation, which through a simulation software, completes a process of assumptions’ change while recording the output value thousands of times until a picture emerges showing the full range of possible results and their related probabilities along with the input / weight of each assumption for the output obtained.

Percentage

The sensitivity and risk analysis provided by these systems is extremely helpful in providing information for management teams towards results maximization, costs reduction and uncertainty mitigation in the business case, assisting on providing the best recommendation.

Net Present Value (NPV) Figure 50 — Monte Carlo Simulation Example

5.6.2.4.

Profit & Loss Planning

Regarding the Profit & Loss Planning, this summarizes the income and expenses of a business activity where it presents the profit obtained in a given period of time, becoming a good tool for the identification of items with high costs or expenses that do not contribute to profit generation.

5.6.3. Economic Evaluation: Outputs 5.6.3.1.

Economic-Financial Indicators

After completing the Economic-financial analysis in 5.5.2.1., it will deliver the related values to each indicator. 5.6.3.2.

ROI Sensitive Data

After collecting the ROI estimate and its sensitivity analysis (5.5.2.3.) it will be obtained, an estimation of the Return on Investment value (€). For the ROI sensitivity analysis, we should work up with the scenarios to which results are more conservative and present the final amount with a 95% confidence level (lowest risk). 5.6.3.3.

Benefits & Cost Plan

The Benefits and Cost Plan is the Economic Evaluation output which details quantitatively benefits and costs of the initiative, how these will be achieved and invested during the project implementation and exploitation and which metrics are required for their future measurement. This plan will then be used to make the project’s benefits tracking. 5.6.3.4.

Go/No-Go

After collecting the economic and financial data and its analysis, it is decided whether the business case should take the next step (Context Readiness). In case the conclusion is that it will not create value to the organization, it should be a "No-Go" decision, or it should not move forward in the business case process.

5.7.

Context Readiness

The Context Readiness process aims to evaluate whether the company and the market are prepared to accommodate the project. This analysis aims to capture the internal and external environment as well as the supporters and opponents of the initiative before making a final decision. Many organizations evaluate projects that economically are of high value, but find that they are not prepared to welcome them, because culture, maturity or vested interests are not a suitable habitat. After the financial metrics analysis, it is important to have a vision, a general market perception as well as an organizational preparation to embrace a new project. As specified in section 5.1 (Project Request) based on POLDAT technique, there must be an assessment of the state of maturity of the stakeholders who will suffer an impact.

.1 Inputs

.1 Project Request Form .2 Enterprise Architecture .3 Strategic Alignment .4 ROI Sensitive Data .5 Enterprise Environment Factors

.2 Tools & Techniques

.1 Stakeholder Matrix .2 Force Field Analysis .3 Expert Judgment .4 Climate Analysis

.3 Outputs

.1 Context Analysis .2 Stakeholders Analysis

5.7.1. Context Readiness: Inputs 5.7.1.1.

Project Request Form

The Project Request Form results from the described in output 5.1.3.1. In order to make the context preparation, it is crucial to consider the internal document with the initiative request (Project Request Form) where is formalized, among others, the future situation to be achieved, the impacts of not implementing the initiative, the external dependencies, the causes of the current problem and the impact of the solution in enterprise architecture (functional areas, processes and systems). 5.7.1.2.

Enterprise Architecture

The Enterprise Architecture is a conceptual model that defines an organizationâ&#x20AC;&#x2122;s structure and operations. It describes its business units, the interactions between them, the customers, the suppliers and their responsibilities to the organization. 5.7.1.3.

Strategic Alignment

As described in output 5.2.3.1, the initiative strategic alignment is relevant information that tells us how the initiative under study is aligned with the organization's goals. This input comes from the Strategic Alignment process in which the initiative benefits are assessed against the organization strategic goals.

5.7.1.4.

ROI Sensitive Data

As described in output 5.5.3.2., the ROI Sensitive Data is the Return on Investment estimation amount (€), which get several values according to the confidence level intended to be used. For the ROI sensitivity analysis, we should work up with the scenarios to which results are more conservative and present the final amount with a 95% confidence level (lowest risk). 5.7.1.5.

Enterprise Environmental Factors

As described in input 5.3.1.3., Enterprise Environmental Factors refer to internal or external conditions that are out of control and may affect directly or indirectly the initiative development. These factors are considered as Inputs in several processes, since they can either impact the project positively or be an obstacle to achieve success.

5.7.2. Context Readiness: Tools & Techniques 5.7.2.1.

Stakeholder Matrix

The Stakeholder Matrix is a tool that allows you to classify each profile (stakeholder) in terms of the initiative decision-making power and the initiative’s impact in that profile’s reality, in order to prepare a communication plan for a smooth transition and a project implementation with a natural path. Polonsky (1996) mentions in his article the importance of classifying stakeholders as a way to address specific strategies to get them to buy-in the initiative under consideration.

Figure 51 – Stakeholder Matrix Example

Besides the power of decision and the project’s impact, there is a third element that must be considered: the stakeholders’ behavior. There are four main types of behaviors of stakeholders (Pereira, 2014):

1. Opponents: entities that regardless of their impact or power, will proactively speak negatively about the project. 2. Positives: Entities that have a positive proactive behavior, or in other words, they will proactively act towards the project realization. 3. Neutral: entities which do not get involved with the project appraisal or its execution 4. Facilitators: entities which will not create barriers to the project appraisal or its execution In terms of stakeholder areas it is required to identify which ones will be involved in the project development as well as the future impacted areas during the exploitation period.

Figure 52 â&#x20AC;&#x201C; Context Analysis (Pereira, 2014)

5.7.2.2.

Force Field Analysis

The Force Field Analysis is a technique created by Kurt Lewin during the 1940s, currently used in business management to assist in the decision making process. Although not of a scientific character, the technique is used to classify different behaviors by capturing and registering positive and negative forces by probing each stakeholderâ&#x20AC;&#x2122;s area and register their opinion. After listing the behaviors both in favor and against the initiative, these are scored according to their influence. This analysis allows the definition of strategies in order to manage the negative forces and strategies to leverage the positive forces. It is important to consider that, the greater a project failure is, more concern will rely on the stakeholders with high power and high impact.

Figure 53 — Force Field Analysis Technique

5.7.2.3.

Expert Judgment

The Expert Judgment technique (see technique 5.1.2.6.) can also be used to collect information about the context, asking for information and individuals’ opinions with particular expertise in the subject under analysis. 5.7.2.4.

Climate Analysis

The Climate Analysis technique is the evaluation process of an organizational culture. The goal is to understand the set of factors inherent to the organization's work environment, which may be an obstacle to the initiative. These cultural factors influence employees’ actions in organizations which consequently impact their performance. Making the organizational culture collection (for example, through a questionnaire) allows for the identification of oppositions to the initiative as well as aspects that promote their implementation. So, you can work on mitigating these barriers and promote favorable aspects.

5.7.3. Context Readiness: Outputs 5.7.3.1.

Context Analysis

This process results from the Context Analysis in which the company operates. The goal is to understand whether the internal and external environment surrounding the organization is prepared to welcome the initiative from which results this output. 5.7.3.2.

Stakeholders Analysis

From the Context Readiness step, arises the Stakeholder Analysis. This analysis identifies all individuals or groups providing influence or getting influenced by the initiative. It also includes an assessment based on the decision power, the impact and the expected behavior of each stakeholder, together with the definition of an action plan. The goal is to understand the receptiveness level of stakeholders and where it is expected to find difficulties or positive synergies. Very often organizations submit business cases which are economically interesting, but the organization’s culture, maturity or interests are not aligned which consequently may jeopardize a project success by failing to deliver the benefits initially estimated.

5.8.

Final Decision

The Decision Making Process aims to gather all the information and help top management making the decision. There are four mandatory elements to consider in the decision matrix: the initiative strategic alignment, the benefits, the investment and the internal and external climate in relation to the project. Both benefits and the investment should consider the uncertainty involved and therefore the decision should be made within a conservative scenario.

.1 Inputs

.2 Tools & Techniques

.3 Outputs

.1 Project Request Form .2 Enterprise Architecture .3 Strategic Alignment .4 Benefits Estimation .5 Cost Estimation .6 ROI Sensitive Data .7 Context Analysis .8 Enterprise Environment Factors

.1 SWOT Analysis .2 Business Case Canvas .3 Nominal Group .4 Multi-Criteria Scenarios .5 Expert Judgment .6 Delphi Technique

.1 Business Case Report .2 Go/No-Go

5.8.1. Final Decision: Inputs 5.8.1.1.

Project Request Form

The Project Request Form results from the Project Request process, described in output 5.1.3.1. In order to make the Final Decision, it is important to consider the initial Project Request Form. 5.8.1.2.

Enterprise Architecture

As described in input 5.6.1.2., The Enterprise Architecture is a conceptual model that defines an organizationâ&#x20AC;&#x2122;s structure and operations. It describes its business units, the interactions between them, the customers, the suppliers and their responsibilities to the organization. 5.8.1.3.

Strategic Alignment

As described in output 5.2.3.1, the initiative strategic alignment is data that is relevant to inform us how the initiative under study is aligned with the organization's goals. This input comes from the Strategic Alignment process in which the initiative benefits are assessed against the organization strategic goals. 5.8.1.4.

Benefits Estimation

As described in output 5.3.3.2., Benefits Estimation is the numeric value resulting from the Benefits Estimation process which indicates the amount generated by the initiative being studied. Such input is necessary so that the final decision is reached bearing in mind the prospect of the generated value. 5.8.1.5.

Cost Estimation

As described in output 5.4.3.1., Cost Estimation is the numerical value resulting from Cost Estimation process, which indicates the value of the initiativeâ&#x20AC;&#x2122;s investment, including the cost of the investment before 94

the exploitation period and the new operational costs (OPEX). This input is needed so the decision maker is aware about the investment required upon the decision-making process. 5.8.1.6.

ROI Sensitive Data

Context Analysis

As described in output 5.6.3.1., this process results from the Context Analysis in which the company operates. The goal is to understand whether the internal and external environment surrounding the organization is prepared to welcome the initiative from which results this output. 5.8.1.8.

Enterprise Environmental Factors

5.8.2. Final Decision: Tools & Techniques In order to assist top management on making a decision (GO or NO GO) all the information on the previous steps should be collected, analyzed and presented in a decision matrix format. This matrix can be presented by one of the following instruments: a SWOT matrix or the Business Case Canvas. 5.8.2.1.

SWOT Analysis

The SWOT analysis is an extremely useful technique to present the necessary information for the final decision: it should indicate the strategic alignment, the benefits, the investment costs and the organizational environment. Regarding financial results, these shall be presented under the most conservative scenario (80% - 95% confidence level) 5.8.2.2.

Business Case Canvas

The Business Case Canvas is another alternative tool, presenting the results of the business case in a logical and structured way. In addition to the data cited in the SWOT analysis, the Business Case Canvas also includes key stakeholders and the description of the potential risks (qualitatively).

Figure 54 â&#x20AC;&#x201D; Business Case Canvas

5.8.2.3.

Nominal Group

In addition to the previous collection techniques listed in the previous steps, the Nominal Group technique (see 5.2.2.6.) has a more structured format and seeks inputs from several people about a particular problem or issue. This avoids the control of a discussion by one single person, encouraging all group members to participate, resulting in a set of solutions and prioritized recommendations. 5.8.2.4.

Multi-criteria scenarios

Regarding the Multi-criteria scenarios technique, this highlights the importance of identifying several possible scenarios based on a set of appropriate evaluation criteria. Sometimes there are more complex problems, involving various questions and parameters which therefore require a more flexible approach in terms of the evaluation criteria (a combination of criteria) used as long as there is a well defined and clear decision-making process and a plan of the problem to be followed. 5.8.2.5.

Expert Judgment

As a last resource it is possible to use the Expert Judgment (5.1.2.6) which relies on asking individualsâ&#x20AC;&#x2122; information and opinions with expertise in the subject under analysis, contributing towards the final decision making. 5.8.2.6.

Delphi Technique

As described in technique 5.2.2.7, the Delphi Technique is a methodology which combines the opinion of several experts to reach a conclusion, without having a social influence upon their responses. The goal is to use the group expertise to reach a consensus and credible information through a panel of experts, facilitating the decision making (Dalkey & Helmer, 1962).

5.8.3. Final Decision: Outputs 5.8.3.1.

Business Case Report

After the final decision is taken, it should be ensured that the business case report is created with all the studies and conclusions made both for consultation in the benefits measurement phase as well as for historical records purposes. The Business Case Report should include the following business case steps: 1. 2. 3. 4. 5. 6. 7. 5.8.3.2.

Project Request Strategic Alignment Benefits Estimation Cost Estimation Economic-Financial Analysis Context Readiness Decision Making Go/No-Go

The result of the Final Decision process relies on deciding whether to implement the initiative, after the analysis pursued in the previous steps, namely the economic and financial analysis and context analysis. Following the previous seven steps based on reliable sources and accurate data, along with the financial models that allow the sensitivity analysis and interaction scenarios, the board of directors (decision-makers) is able to make a more confident decision based on evidences about the investment feasibility.

www.businesscaseinstitute.org | ÂŠ2015 Business Case Institute | A Guide to the Business Case Body of Knowledge BCBOKÂŽ Guide â&#x20AC;&#x201C; Draft Version

5.9.

Benefits Measurement

The Benefits Tracking step is as important as the others above. However, this step tends to be underestimated and ignored in organizations. The process of Benefits Tracking aims to measure the Business Case during the product, service or process exploitation period. This step is of high value as it allows the organization to not only measure the quality of the investment decision making process, as well as identify new investment opportunities to add continuously value to the organization.

.1 Inputs

.1 Benefits Plan .2 Business Case Report

.2 Tools & Techniques

.1 Corporate Reports .2 Trend Analysis .3 Balanced Scorecard .4 Control Group

.3 Outputs

.1 Benefits Tracking Report .2 New Opportunities

5.9.1. Benefits Measurement: Inputs 5.9.1.1.

Benefits Plan

As described in output 5.3.3.1, this one detail the initiative benefits in quantitative terms, how these will be achieved after the implementation and during the exploitation period of the project and which metrics, sources and techniques are required for future measurement. Besides specifying how the measurement of benefits will be made, it also indicates when and how often this measurement should occur. This entry is absolutely important that benefits get measured after the project implementation according to the planning previously established. 5.9.1.2.

Business Case Report

As described in output 5.7.3.1., The Business Case Report is a compilation of the business case steps and its analysis, being decisive for the benefits measurement phase throughout the project's exploitation period.

5.9.2. Benefits Measurement: Tools & Techniques 5.9.2.1.

Corporate Reports

The corporate reports are a good source of information in order to track the benefits collected over the exploitation period, contributing to the trend analysis and identification of relevant results to the management team. 5.9.2.2.

Trend Analysis

The Trend Analysis technique is a useful tool that allows for the assessment of the behavior of one or more variables over time, providing alerts and giving evidences regarding project contribution to the business and problem mitigation. This technique is especially useful when the project contributes directly to the increase 98

in business (such as business increase via: increase client’s retention period, increase sales through crossselling and up-selling, increase in the customer’s base). This is a statistical procedure to assess the relationship between two quantitative variables, usually with data collected over time, intended to evaluate the effect of the independent variable on the dependent variable (Lavrakas P. J., 2008).

Figure 55 — Trend Analysis Examples (Pereira, 2014)

5.9.2.3.

Balanced Scorecard

The Balanced Scorecard, developed in early 1990s by Robert Kaplan from Harvard Business School and David Norton founder of an IT consultant, is a performance management tool aiming to assist managers to control their team and company activities, based on several KPIs (key performance indicators) definition either financial or non-financial aligned with the company’s strategic objectives. According to the economist Peter Drucker, it is not possible to control or manage without measuring results. Therefore the Balanced Scorecard technique allows to measure towards a performance boost: "What you measure is what you get" (Kaplan & Norton, 1992).

Figure 56 – Four dimensions of the Balanced Scorecard

5.9.2.4.

Control Group

As described in the technique 5.3.2.6., the control groups technique aims to perform a study in two groups, where one of the groups is subject to an experiment (the other group is not), in order to evaluate the differences caused by the variable under analysis. In this case, applied to the measurement of project www.businesscaseinstitute.org | ©2015 Business Case Institute | A Guide to the Business Case Body of Knowledge BCBOK® Guide – Draft Version

results, the objective is to verify the differences between the situation before the project and post-project situation, evaluating the gain or loss generated while ensuring the cause of the indicators obtained result exclusively from the implemented project

5.9.3. Benefits Measurement: Outputs 5.9.3.1.

Benefits Tracking Report

The Benefits Tracking Report, or in other words, the report of benefits monitoring is the report of the benefits measurement during the project exploitation period which contains the previous metrics established and the according results realized. 5.9.3.2.

New Opportunities

During the project exploitation, this measurement process benefits measurement process enables to identify new opportunities for future initiatives, or even factors that will require one to change the project already in progress. Besides the adoption of a continuous improvement mindset, the best practices recommend the discussion and recording the knowledge acquired throughout the process (lessons learned) in order to have them as a reference and input for future projects. Having stakeholders involved in an open and objective communication is essential allied with discipline of compiling and documenting information about the successes, failures and recommendations to improve the performance of future projects or project phases.

100

Benefits Measurement: further considerations

The expert’s job in Business Case does not end upon the final decision about moving forward (or not) with the initiative. It is required to monitor the project during its exploitation period in order to validate whether the estimated benefits are getting realized. This is a fundamental step for the organization, not only as a way to prove the accuracy of the Business Case team and their initial assessment, it is also a tool to identify deviations from the plan and understand the causes of deviations. This feedback will be a fundamental source of information for future projects (lessons learned) in order to improve the methodology and / or the techniques used in building the Business Case Report. It is, also, an important stage for identifying new opportunities or needs to the project if the reality / context demands so. The benefits measurement depends on the type of benefit — increasing business growth, increase efficiency or cost reduction — since they are expressed differently over time. Below, it is presented a recommendation for measuring each benefit type, however it is important to safeguard that each project may have some differences and therefore the need to adapt according to the moment when the benefit is completely realized. 

Efficiency Increase

Typically, a benefit of efficiency increase has an effect in the medium / long term, since once it gets into the operation period; the impact in the organization takes some time to stabilize. Since most of the projects involve people and require their commitment to achieve success, it is important to consider their learning curve and their expectations / perceptions. In general, people move from a state of pessimistic-optimistic-realistic or, reversely, optimistic-pessimistic-realistic. At the time it is reported, the introduction of the new project and consequently organizational change, people’s reaction can take one of two forms: refusal or acceptance; pessimism over the project contribution or optimistic over the expected results foreseen. However, often over time, the behavior change to the opposite, changing to a state of amazement or disappointment, accordingly. Only about three months after, the behavior becomes "realistic"; meaning the perception of people matches the project reality.

Therefore it is suggested that the benefits measurement occurs at least after three months. It may be done a single measurement, because after stabilizing it is unlikely that the benefits change, however, a new measurement can be made, in order to confirm and review the baseline.

101



Costs Reduction

For a costs reduction benefit, it is essential to start from identifying what cost items will be affected with the project implementation and when this is expected. Projects aiming for cost reduction might result in an immediate reduction — for example, changing the organization's premises to a location with a lower rent; or a gradual reduction — for example, the gradual renewal of the car fleet to more fuel efficient vehicles. Thus, depending on when the benefit gets realized, the time frame to measure the benefits must be adapted accordingly. This evaluation, similarly to the d efficiency increase type of benefit, may be pursued once or twice, while the second evaluation is considered as a control check. 

Business Growth

For projects with business growth type of benefits, the assessment should be made throughout the project operations life cycle. The frequency of measurement will depend on the volatility degree of the benefit, as well as their importance for the organization, which may be done on an annual basis, biannually, quarterly or monthly. For example, the creation of a smartphone application to provide a new customer service can not have a high degree of adherence at the time it is launched and become increasingly used by consumers until it is a market success. This happens, because not all consumers like to join the new trends and many are reluctant to try something innovative. On the other hand, if a project is implemented to optimize the online buying process on the current organization website, this benefit will be felt instantly increasing the visitors-buyers conversion rate.

6.1.

Statistics Independency in the Analysis of “Cross-Effects”

The statistical independence between two variables or phenomena means a variable behavior does not permit to infer any conclusion from another variable behavior, or in other words, there is no correlation between the variables. On the other hand, when the events are dependent that means that a correlation exists between the variables, which may represent a positive or negative correlation. For example, by providing training on negotiation to our sales team, it is expected that it will increase their effectiveness when attracting new customers. In this case, we are assuming that there is a statistical dependence between the "the sales team training" and "new customers joining fee." A positive correlation indicates that both variables move together: when one increases the other increases as well, as in the example: more training to the sales team leads to an increase new customer’s attraction rate. The negative correlation indicates that the two variables move in opposite directions: when one increases, the other decreases. An example of a negative correlation is when the increasing customer waiting time, causes a decrease in the number of satisfied clients. To find out if there is any cause-effect relationship between two phenomena and how they relate to each other, the Control Group technique is recommended.

102

6.2.

Control Group

Once the projects are easily influenced by many external variables, it is challenging to measure and analyze the cause and effect of a given action. In other words, it is challenging to measure the contribution of the project for the benefits achievement, since the project is not the only factor influencing the benefits. Therefore, it is necessary to know and effectively measure the effects generated by the project, without the influence of other factors, meaning to prevent the occurrence of measuring benefits in the existence of crosseffects. To measure the project’s real benefits it is necessary to isolate the independent variable intended for analysis. How can I determine if it was the new store layout that caused the increase in sales or whether it was the promotional campaign held during the same period? An independent variable is the one intended to be carefully studied and the one assumed that will likely produce a given observable effect on the dependent variable. The dependent variable is the one that will be affected by the independent variable. For example, to change the store layout (independent variable) affects the volume of sales (the dependent variable). The goal is to see if the effects leveraged by an independent variable are the expected results. In this case, validate if the layout store change will increase the sales volume (hypothesis). The external variables are other variables that can influence the results obtained, but are difficult to identify and / or difficult to control. In the layout example, there may be other variables to affect the volume of sales, such as promotional campaigns which may be running simultaneously.

In order to understand the effects produced by the project, one of the techniques that can be used is the Control Group technique. This technique is an essential research tool that allows to isolate the variables under study (independent and dependent), minimizing the effect of external variables. The Control Group allows a more thoroughly analysis of the effect of the project/initiative under consideration, as it contrasts different scenarios while isolating the independent variable. It not only eliminates the effect of external variables that affect the final result as the expert eliminates the bias effect on business case (bias is the act of results manipulation in a consciously or unconsciously manner). In this technique there are two groups: 1. Experimental Group — a set of individuals in which the independent variable is tested; 2. Control group – a set of individual that do not suffer any change. Thus, the independent variable effects are isolated in the experimental group.

103

The groups should be representative of the population so it becomes possible to generalize findings (universe). The population should be homogeneous, randomly created and under the same conditions (external variables) so it will allow to compare the effects of the experience. After the experimentation, both groups are compared and checked whether there are other effects produced exclusively from the drug. When comparing both groups, it is possible to confirm whether there is a causeeffect relation (hypothesis validation). This technique is often used in the medicine field for testing drugs effects, by a clinical trial in the same patient groups. The experimental group will get the drug, whereas the control group receives a placebo (neutral substance). After the trials, the two groups are compared to conclude whether the alleged effects are produced uniquely by taking the real drug. Neither the patients nor the doctors know which group receives the actual product (independent variable), to avoid that the results are biased while assuring the fairness of the study. The limitations of this technique are linked to the complexity of the subject under analysis â&#x20AC;&#x201D; the human behavior. Therefore, for greater statistical strength, ideally, the groups should not be aware of the group they belong to, so that it will not influence their behavior (Hawthorne Effect). The complexity of the context and its external variables are also a barrier to the experiment. In order to eliminate any kind of influence on the results conclusion by the presence of external variables at the exact moment of the analysis, the benefits measurement should be made multiple times as the solution / project is implemented in various units. So, it is recommended to use the Control Group technique under the process of progressive rollout. For example, in the case of store layout, the project can be implemented first in a shop or a small set of shops, depending on the investment required. After implementation and its operation for a few months, the results should be measured and compared with the stores that have not â&#x20AC;&#x153;sufferedâ&#x20AC;? any change (stores without the project). After a while, another layout is implemented in other set of stores followed by a new results measurement. This process continues, in order to isolate the external variables over time, making the experiment conclusion more robust which will represent the estimated benefits leveraged by the project.

104

Skills

The core skills describe a set of behaviors, characteristics, knowledge and personal qualities which are essential to support the implementation of the Business Case practices. All skills that will be presented are also applicable to managers who work in other areas and thus are not exclusive to the Business Case professionals, but still are essential for a good performance. The skills can be organized in three main components:

Problem Solving

Techniques

Soft Skills

Figure 57 – Core Skills

7.1.

Problem-Solving Skills

Context The foundation of running a business case is based on a feasibility study of a proposed solution in order to respond to a need, problem or opportunity identified in an organization. Therefore, having the ability to know how to define the problem's root is crucial for a successful Business Case process implementation. The Problem Solving diagram presented, presents the process to be considered when conducting and presenting a Project Request. The rational behind is that an initiative should be able to respond to an organization need and as such this will have to be examined carefully to ensure that the proposed solution will maximize the value generated. Firstly, the problem should be identified, followed by the cause’s collection (causes which originated the problem). In order to make a root-cause analysis, it is essential to be knowledgeable about the different set of techniques available in order to collect the real problem causes and which generate negative impacts in the business activity (both internally and externally). Therefore, the proposed solution must address the causes of the problem identified, in order that the solution impacts (benefits) will result in a reduction or even complete elimination of the problem negative impacts.

105

Figure 58 â&#x20AC;&#x201D; Problem Solving Diagram (Pereira, 2014)

Value Analysis According to the author (Miles, 1961) the value analysis is a philosophy implemented through the use of a specific set of techniques, body of knowledge and a group of skills learned. It is a creative approach made in an organized manner, with the purpose of the identification of unnecessary costs in an efficient manner, or in other words, the costs that do not have contribution to quality, utility or resources to clients â&#x20AC;&#x201D; costs that do not add value to the business. According to (Williams, Lacy, Smith, & William, 1992) other recent researchers have identified the following phases as the main aspects of an integrated effort when making a value analysis: 1. Information: data collection, role and cost definition; 2. Speculation: it is identified other options or additional alternatives. Creative techniques are particularly useful at the moment of ideas creation. 3. Analysis: Specific activities to determine costs and suitable alternatives as well as evaluation criteria to facilitate the process comparison. 4. Decision and Action: The most satisfactory option is chosen and is prepared an implementation plan. 5. Assessment: The effectiveness assessment and measurement of the selected alternative is carried out at this stage. These steps all together show a sequential and logical way on how to verify, understand and plan the value analysis program.

106

The conceptual model of the diagnosis process According to De Mast, the process of discovering the cause of a problem is called of “diagnosis” and it is an essential component in a problem solving realization. The process of resolving diagnostic problems is conceptualized as a search through a field of explanations of possible causes until an explanation is found that is accepted as true and specific enough. These explanations which are potential causes for the identified problem are hypothesis in the mind of the diagnostician. The organization by hypothesis, allows the professional involved in the analysis, to be more focused on the issues and on the data collection required. Throughout the research, the diagnostician creates, rejects, and accepts assumptions based on the knowledge (domain knowledge) available and collected through the observations. The domain knowledge consists on the knowledge about a product or process being under analysis: for example how it works, what components compose it, how it is used, how it usually behaves, and so on. It is the hypotheses testing that drive the body of knowledge and additional observations over the course of the hypothesis under study. At any given time, you will get-a set of assumptions in the study that were rejected and other accepted. These assumptions and their status (accepted, rejected or under consideration) defines the state of the hypothesis in the research process (de Mast, 2013). The research state progresses as the diagnostician performs three types of actions: hypothesis creation, testing and evaluation. De Mast proposes the following conceptual model for the diagnostics process:

Figure 59 — Conceptual model of the diagnostic process (adapted from De Mast 2013)

1. Hypothesis Formulation: Based on the knowledge domain and observations, the diagnostician “applies” for a new explanation and adds it to the collection of hypotheses considered. The generated hypothesis may vary in a range of either broader causal lines (for example, "The problem is caused in the welding process") or to very specific and detailed causal explanations ("The problem is a short circuit, created by contamination with salts deposited by a newly introduced welding flux "). Additional hypothesis may also be generated. 2. Hypothesis Test: Once the hypotheses are defined, the diagnostician identifies which observations or expertises are required to evaluate each one. When necessary, the diagnostician makes new observations or tests and adds the results and observations to the according domain body of knowledge. 3. Hypothesis assessment: Given the chance to study and take into account the knowledge domain available and collected observations, the diagnostician changes the status of a hypothesis under study to “accepted” or “rejected”. Both hypothesis types, either accepted or rejected, are added to the knowledge domain as new discoveries. www.businesscaseinstitute.org | ©2015 Business Case Institute | A Guide to the Business Case Body of Knowledge BCBOK® Guide – Draft Version

107

The research does not necessarily end when a particular hypothesis is accepted as true, as this hypothesis may be very general and have the need for further development. Instead, the goal of research-diagnosis is achieved by accepting a hypothesis which offers an explanation specific enough of the source problem to allow the right solution design (that better fits the solution). So, after accepting a broad hypothesis ("The cause of the problem is in the welding process"), the diagnostician can continue the research through the creation, testing and more specific elaboration of the initial assessment explanation ("The cause is in the soldering flowâ&#x20AC;?, "The alloy temperature is too low", and so forth). Typically the knowledge domain and observations required for the diagnosis, are not provided a priori in a complete and consistent manner, but are collected during the interaction with the creation and hypothesis evaluation. However, most diagnosis-researches initiate with a first round of knowledge domain collection and observations. This initial round is sometimes called acquisition-suggestion or study of symptoms (Juran J. , 1988).

Techniques The root-cause analysis is a structured and organized problem analysis and origin identification as well as of the according effect caused. During this process it is essential to combine various skills that assist the expert in delivering this analysis, data collection and the appropriate information. There are two main techniques: The Fishbone Diagram and the 5 Whys techniques. The Fishbone Diagram (Fishbone Diagram or Ishikawa diagram) allows the analysis of the cause and effect by presenting the breakdown of the identified causes (Ishikawa, 1990). This diagram allows the emphasis and focus on the potential problem causes (hypothesis creation) and the organization of ideas for further analysis (testing and further evaluation).

Figure 60 â&#x20AC;&#x201D; Fishbone Diagram Example

Main Steps: 1. identify the problem and write it at the top of the diagram; 2. create a horizontal line and according diagonal lines to represent the possible categories of the potential causes. Categories can include people, processes, tools or policies; 3. use data collection techniques such as brainstorming, interviews, observation among others, and capture the potential causes organized by category; 4. after the collection of potential causes, pursue a deeper analysis and check which causes have more direct contribution to the problem; 108

5. after completing the diagram, resort to brainstorming to propose potential solutions. The 5 Whys technique aims to get to the root-cause problem through a process of repeated questions in order to reach the original cause: a. write the problem in a short sentence; b. question why this problem occurs and understand the idea supporting it; c. then ask again, why this happens; d. this process is repeated as often as necessary until we get the cause which triggers the final problem . As the name says, we can reach to the heart of the problem by questioning “why” up to five times throughout each idea that is identified during the process. The 5 Whys technique can be used independently or as a support for the Fishbone Diagram, drill down process of potential causes. Following the process typically followed in a problem-solving approach, below are presented the required competencies to support a successful problem solving analysis:

7.1.1. Ability to Question and to Be Curious During the problem solving process and in order to maximize the techniques support it is essential that a business case specialist has the ability to ask the right questions at the right time in order to obtain an understanding of the problem and its causes. Adopting a curiosity attitude and exploiting the problem, investigate hypothesis and proactively look for solution options are an essential contribution in identifying the solution that best meets the business need and consequently maximizes the benefits generated.

7.1.2. Analytical Thinking Before any decision is taken, the specialist must have an analytical domain on the information collected, and even, during the gathering process. The analytical thinking consists on explaining or exposing a particular material or content in the simplest form, which requires the analyst to have the capacity on decomposing the problem into pieces that can be analyzed. The analytical thinking requires knowledge on the subject under analysis, which requires a careful reasoning, either through a deductive way of mathematical and logical use or by a set of actions that follow an inductive and experimental process based on research and statistic analysis techniques scientifically proven and appropriate for the purpose. In summary, analytical thinking requires interpretation, organization, analysis and processing of information in a more effective and simply way, making it easy to obtain more solid conclusions, identifying solutions and taking future decisions with less effort. Main steps of analytical thinking: 1. Collect data and information (questions, observations, documentation, etc.); 2. Filter the information accurately, interpret and align it to the goal under analysis and validate; 3. Organize the information into categories; 4. Compare information to see similarities, differences and congruencies; 5. Evaluate the information and draw conclusions; www.businesscaseinstitute.org | ©2015 Business Case Institute | A Guide to the Business Case Body of Knowledge BCBOK® Guide – Draft Version

109

6. Design the conclusions for the future;

7.1.3. Decision-Making Ability Experts in business cases should be able to make effective decisions, by deeply knowing the required criteria for the decision-making process and give the necessary support to stakeholders to make better decisions. Typically, the decision-making arises from the need to choose between other alternative or even between others. As such, the specialist must have the ability to perform trade-offs, or in other words, analyze the trade-offs of each option in order to make the decision that delivers more value by following an impartial, objective and rational process. This process also requires the ability on collecting relevant information, related treatment (information breakdown, make comparisons and impact analysis) and be able to make recommendations that add value.

7.1.4. Continuous Learning Since a business success follows a continuous improvement cycle based on the various factors that influence it, the business case specialist will have to have the ability and continuous interest on learning about the business activity in which it operates and the ability to make that relevant and valuable information as an added value, or in other words, through practices and solutions that benefit the organization. In the mid-twentieth century, 1940, a theory named "Four Stages of Learning" was developed by Abraham Maslow, which consists on the following stages:

Figure 61 – The Four Learning Stages

Stage 1: Unconscious Incompetence – the individual doesn’t know what he/she doesn’t know. The individual neither understand nor knows how to do something, nor recognizes the deficit or desire to address it. Stage 2: Conscious Incompetence – the individual is now aware about its incompetence about a specific subject. The individual recognizes the deficit, however without addressing it yet. Stage 3: Conscious Competence – the individual take actions to develop skills and recognizes this learning experience However, the demonstration of a skill or knowledge requires a great deal of consciousness or concentration. 110

Stage 4: Unconscious Competence – the knowledge is acquired by the individual and it comes naturally (unconsciously). After Stage 4 the cycle continues, as in the meantime there are new knowledge needs that will arise and consequently lead again to Stage 1 "Unconscious Incompetence"

7.1.5. Negotiation and Persuasion During the business case development, the expert is faced with several tasks involving interactions between different stakeholders, so the expert also adopts a facilitator role in resolving conflicts or disagreements that may arise along with the business and organization priorities. Therefore, the expert should have the ability to negotiate solutions among stakeholders and lead them to the consensus that benefits the organization to its utmost. The negotiation and persuasion ability requires the domain of other soft skills, such as communication and leadership skills.

7.1.6. Fairness and Integrity In addition to the decision-making ability, the specialist should be able to translate and understand the impact of decisions on stakeholders correctly and ensure a fair treatment, in line with the interests to the organization, hence avoid any decision-makings based on stakeholder wishes or desires. So, the expert should adopt a fair approach together with the sense of responsibility and principle of honesty.

7.2.

Soft Skills

In addition to the Problem Solving skills, in order that the business case process is conducted in a productive and effective way, there are other skills — the soft skills — which are equally important for a successful business case.

7.2.1. Communication Clarity in communication, both oral and written, allows experts to express their ideas appropriately to their target audience, to whom they aim to convey the message. Communication is an efficient channel for passing messages and exchanging of information between two or more parties, so to carry out the business case activities, it is essential to have the ability both to be understood by the audience as well as the ability to understand it. Therefore, to be an "active listener" is critical, or in other words, be proactive in listening to and ensure understanding of the message while promoting interaction between stakeholders, not only in a optical of the information flow, but also to establish relationships. For effective written communication that allows the appropriate information to the context and particular audience, this requires the professional to have a rich and strong vocabulary and grammar understanding with a view to document all relevant information for historical purposes and ease of reference.

7.2.2. Organization For a good management, the personal organization component is essential for effective tasks management, activities and information at the right time. Besides the responsibility on ensuring the process quality and

111

use of appropriate techniques to survey information concerning the business case study, the professional should know also manage his/her time, which requires goals and expectations clarification, knowing how to prioritize and avoid any relevant tasks postponement.

7.2.3. Leadership The ability to learn how to lead a group of people requires good communication skills, in order to create empathy and "rapport", or in other words, have the necessary skills towards an easy collaboration. The ability to create rapport is essential to a competent communicator and its domain becomes an ally to any business leader. Leadership is based on the ability to generate enthusiasm, inspiration and positive energy to group members, or in other words, have the ability to conduct a work team, motivate it and influence it, ethically and positively, with the ultimate goal of achieving the established goals and a common future vision.

7.2.4. Initiative and Persistence The business case expert must adopt a proactive behavior towards problems and accountability for his/her actions, based on an active search for change and opportunities together with the ability to handle problems and overcome obstacles.

7.3.

Technical Skills 7.3.1. Domain in Financial Area

Since the business case process involves projects evaluation, the expert should master the finance, such as analysis techniques and investments evaluation (e.g., ROI, NPV, and Payback). In addition, the expert should be able to collect, interpret and evaluate different financial data to quantify the projectâ&#x20AC;&#x2122;s benefits and costs, regardless their complexity.

7.3.2. Ability to Manage Information Throughout the business case process, the specialist will have to deal with various data and information, therefore the need arises of knowing how to collect, manage and document it. It is especially important that the business case specialist knows how to gather the information needed: What information is needed? How is it going to be gathered? Through which source? The expert must have control over the planning, organization, process, evaluation and distribution of any information, to obtain the most reliable result, precisely and accurately. There are various difficulties that may be encountered during this process, such as lack of information with quality, dispersion of sources, outdated data, and redundancies, among others.

7.3.3. Ability to Assess Risks Given the need to deeply analyze the business problem and the solution to be implemented, the business case specialist should have a holistic and independent view of the whole process, being able to identify various risks inherent in the project. This information is crucial to a project success and, therefore, all identified risks should be documented and taken into account, whether from external or internal character. An early identification allows these 112

risks to be avoided or minimized in case they are negative or on other hand, get them operated and exploited in case those are positive benefits. The identification of potential risks happens during the various business case stages, including the identification of stakeholders, to identify the necessary resources and sources in the context preparation for the estimated benefits, among others. Any identified risks will be an important input for the project manager that can later implement the initiative.

7.3.4. Ability to Manage Value The use of value management techniques in order to increase the ROI of the project is considered an important skill. Despite the business case focus being its economic evaluation, any specialist should be able to critically analyze the solution and understand how it solves the business problem. Thus, throughout the process, the expert may identify ways of maximizing initiative's value to the organization, finding more economic alternatives or more adjusted to the purpose. Understanding business requirements is the first step in understanding the problem and the opportunity and ensuring that the solution accounts for all the needs. At this stage, the expert can intervene, suggesting additions to the solution that maximize its value. The PBS (product breakdown structure) process is another specific example in which the specialist can apply value management techniques (Value Improving Practices, Value Engineering, Value Analysis), since it can measure the value of each solution component and propose alternatives to optimize costeffectiveness.

www.businesscaseinstitute.org | ÂŠ2015 Business Case Institute | A Guide to the Business Case Body of Knowledge BCBOKÂŽ Guide â&#x20AC;&#x201C; Draft Version

113

114

Glossary

Assumption: Presupposition, in other words, represents the prior supposition or hypothesis which is not confirmed. APV (Adjusted Present Value): Current net income of the project less the financing costs. Sensitivity Analysis: Modeling technique and quantitative risk analysis used in order to determine the risks with the greatest potential impact on the project. This technique assesses the uncertainty degree of each element of the project and how it affects the primary goal in question, when all the other factors remain constant. The typical presentation of the results takes the form of a “tornado” diagram. Balanced Scorecard: Performance measurement and strategic management system based on indicators of financial, customer, internal processes and learning/growth. Benchmarking: Technique that consists in comparing the current or planned practices, such as processes and operations, of an organization to other companies in order to identify the practices, opportunities, create improvement ideas and provide a basis for measuring performance. Benefits Tracking: Benefits measurement process during or after a project in order to make an objective judgment about the success of a project. Benefits: Represents the generated value by the project, expressed in monetary terms. Net Benefits: Represents operating income, in other way, is the total sales minus operating costs. Bottom-up Estimating: Represents the method used to estimate the duration or cost of a project, adding the estimates of lower levels of the Work Breakdown Structure. Business drivers: It is a resource, process or condition that is vital to the success and continued growth of a company. Brainstorming: Information gathering technique that can be used to identify risks, ideas or solutions to problems or issues, using a group of expert persons in the matter. Breakeven: Number of required units to sell in order to pay the value of the investment. Product life cycle: It is a business analysis that aims to identify the most common states of the product’s life, such as the development, introduction, growth, maturity and decline. Cost-Benefit Analysis: Financial analysis tool used to determine the benefits versus the costs, provided by a project. Cross Selling: Sales technique with an oriented view to induce the customer to buy additional new products and/or services to your initial purchase. CAPEX Expenditure: Invested capital in permanent assets or to add value to an existing one, and thus leverage future benefits for the company. Control Group: It is a technique that consists of creating two groups, the control group and the experimental group. The results are then compared to determine the changes that may occur due the experimental test. Pareto Diagram: Ordered histogram by occurrence frequency of, showing the results for each cause identified.

115

Deliverable: A project component to deliver. Typically all the deliverables will be translated in the final product/service to deliver by the project. Expert Judgment: Judgment made, based on the knowledge and expertise of a particular area of knowledge, discipline, industry, etc…, suitable for the ongoing activity. This judgment may be given by any group or person with education, knowledge, skills, experience or specialized training. Parametric Estimation: Estimation technique by which an algorithm is used in order to calculate the cost, duration or other variable based on the historical data and design parameters. Force Field Analysis: Technique which assists the decision-making by analyzing forces “for and against” of a change, facilitating the reasoning transmission behind a decision. Force In: In the Soring Model process, there is an exception criteria to force accept an initiative. The Force In allow the acceptance of an initiative score against one or more strategic objectives, even if they are being ranked "below" the scale (Cut Score) previously defined Force Out: In the Scoring Model process, there is an exception criterion to force the rejection of an initiative. The Force Out allows the rejection of an initiative score against one or more strategic objectives, even if they are within the “acceptance” range previously defined Lessons Learned: It consists in the knowledge gained during a project, based on how activities were managed or at the conclusion of how they should be conducted in the future in order to improve future performance Impact Method of the absence: Method used in order to assess what benefits or costs come from the nonrealization of a project and/or investment Pricing Method: Method used to define the optimal price of a product or service by evaluating how much a potential customer is willing to pay, how much is the product on the market and how much it costs to have it / maintain it. Methodology: System of practices, techniques, procedures, and rules used by performers in a given discipline Milestone: A significant point or event in the project, program, or portfolio NPV (Net Present Value): Updated net income of an investment, in other words, the total of the updated benefits less the value of the investment Nominal Group Technique: Technique similar to brainstorming, with the advantage of creating greater incentive to creativity of each participant, in order to obtain final consensus. Typically for this it is used the voting procedure for ranking of ideas/solutions OPEX Expenditures: Capital dedicated to the daily activities of the company to ensure its proper functioning (e.g., in sales, administrative costs…) Goal/Objective: Goal to which the work will be directed in order to be achieved: a strategic position to be reached, a result to be obtained, a product to be produced or a service to be performed Observation: Technique that allows, in a direct way, to see individuals in their environment and carrying out their jobs or tasks and executing processes Payback: Period of time needed for the investment to be paid 116

Requirement: It is a physical and/or functional need indispensable for the performance of a product, process or design ROI (Return on Investment): Consists in the return value of an investment, this means, how much the project values each invested euro Sponsor: A person or group that offers resources and support to a project, program or portfolio, being one of the responsible of achieving success Stakeholder: An individual, group or organization that can affect, be affected or assume itself affected by a decision, activity or result of a project Survey: Quantitative method of gathering information about a particular topic in a population sample Score: Score referring to the resulting weighted average rating of the project alignment with the strategic objectives of the organization Scoring Model: Model used in order to ensure the alignment of an initiative with the strategic objectives of the organization, rationally prioritize and define the best possible configuration Monte Carlo simulation: A process that generates thousands of possible outcomes based on the probability distribution associated with a determined a certain degree of risk Interest Rate: Rate that represents the minimum interest on the investment, composed by the inflation rate, opportunity cost and the business risk Trend Analysis: Analytic technique that uses mathematical models to facilitate the prediction of future results, based on historical data. It is a method that is based on looking for the trends and patterns through the screening of the variances on cost, budget and implementation schedule Three-Point Estimate: Technique used in the estimation process (e.g., cost, time or other variable) through the consideration of three scenarios (the optimistic, pessimistic and the most likely), being used towards the individual estimated uncertainty Upselling: Sales technique used to induce the consumers to buy more expensive products, upgrades or complements, in an attempt of the seller to make a more profitable sale Work Breakdown Structure (WBS): It is a hierarchical decomposition of the scope of the project (tasks) to be taken by the team in order to define and achieve the objectives and deliverables of the project

www.businesscaseinstitute.org | ÂŠ2015 Business Case Institute | A Guide to the Business Case Body of Knowledge BCBOKÂŽ Guide â&#x20AC;&#x201C; Draft Version

117

References

Auer, M., Trendowicz, A., Graser, B., Haunschmid, E., & Biffl, S. (2006, Fev). IEEE Transactions on Software Engineering Vol. 32 Issue 2, pp. 83-92. Barney, J. B. (1995). Looking inside for competitive advantage . The Academy of Management Executive (p.49). Basile, F. (1996). Great management ideas can work for you. Indianapolis Business Journal Vol.16, 53-54. Birkinshaw, J., Hamel, G., & Mol, M. J. (2008). Management Innovation. Academy of Management Review 33:4, 825-845. Borges, A., & Rodrigues , A. (2008). Contabilidade e Finanças para a Gestão. Lisboa: Áreas Editora. Brown, B. B. (1968). Delphi Process: A Methodology Used for the Eliciation of Opinions of Experts. The RAND Corporation. Clive, B. (2012). The Nominal Group Technique: an aid to Brainstorming ideas in research. Qualitative Market Research 15.1, 6-18. Cooke, R. (1991). Experts in Uncertainty. Oxford: Oxford University Press. Cooper, D. R., & Schindler, P. S. (2014). Business Research Methods, 12th edition. New York: The McGrawHill/Irwin. Craft, R. C., & Leake, C. (2002). The Pareto principle in organizational decision making. Management Decision Vol.40, Issue: 7/8, pp. 729-733. Dalkey, N., & Helmer, O. (1962). An experimental application of the delphi method to the use of experts. The RAND Corporation. de Mast, J. (2013). Diagnostic Quality Problem Solving: A Conceptual Framework and Six Strategies. The Quality Management Journal, 20(4), 21-36. Dupé, V., Briand, R., & Fischer, X. (2009). Component Based Modeling for Structuring Measurement. IEEE. Earley, M. E. (2013). Revolutionize your business. American Journal of Business Vol. 28 Issue 1. Freeman, E. R. (2004). A Stakeholder Theory of Modern Corporations. Ethical Theory and Business. Glenn, J. C. (1972). Futurizing Teaching vs Futures Course. Social Science Record, Syracuse University, Volume IX, No. 3 Spring. Grantt, R. M. (1991). The resource-based theory of competitive advantage: Implications for Strategy Formulation . California Management Review . Hamel, G. (1998). The Challenge Today: Changing the Rules of the Game. Business Strategy Review, Vol.9 Issue 2, 19-26. Hamel, G. (2000). Leading the Revolution. Boston: Harvard Business School Press. Hashim, M. (2013). Change Management. International Journal of Academic Research in Business and Social Sciences, 685-694. 118

Ishikawa, K. (1990). Introduction to Quality Control. Tokyo: 3A Corporation. Jackson, P. (2012). Value for Money and international development. Jeacle, I. (2004). Emporium of glamour and sancturn of scientific management. Management Decision 42.9, 1162-1177. Juran, J. (1988). Quality Improvement. In Quality Handbook (pp. 1-74). NY McGraw-Hill. Juran, J. (2001). The non-Pareto principle; mea culpa. Retrieved from The Juran Institute: www.juran.com/research/articles/ sp7515.html Kaplan, R. S., & Norton, D. (1992). The Balanced Scorecard: Measures that Drive Performance. Harvard Business Review 70, no. 1, 71-79. Kelliher, C., & Mahoney, L. (2000, Janeiro). The Appraisal Journal , pp. 44-56. Kettinger, W. J., Teng, J. T., & Guha, S. (1997, Março). Business Process Change: A Study of Methodologies, Techniques and Tools. MIS Quarterly, pp. 55-80. Kumar, S., Teichman, S., & Timpernagel, T. (2012). A green supply chain is a requirement for profitability. International journal of production research, 50:5, 1278-1296. La Rooy, G. (1999). Know what counts. NZ Business, Vol. 13, 28-31. Lavrakas, P. J. (2008). Encyclopedia of Survey Research Methods. SAGE Publications. Lavrakas, P. J. (2008). Encyclopedia of Survey Research Methods. SAGE Publications. Luh, Y.-P., Pan, C.-C., & Su, J.-W. (2007). A Study on Modular Design Representation. IEEE, 1327-1331. Miles, L. (1961). Tecniques of Value Analysis and Engineering . New York : McGraw-Hill. Milosevic, D. Z. (2003). Project Management ToolBox: Tools and Techniques for the Practicing Project Manager. New Jersey: JohnWiley & Sons, Inc. Morató, E. A. (2012). Growing the enterprise. eBookIt.com. Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1985). A conceptual model of service quality and its implications for furute research. Journal of Marketing 49, 41-50. Pascale, R., Millemann, M., & Gioja, L. (1997). The way we change. Harvard Business Review, 127-139. Pereira, L. (2014). Como Criar Riqueza. A competência do gestor na economia real. Portugal: Bnomics. Pereira, L. (2014). Como criar riqueza: a competência do gestor na economia real. Portugal: Bnomics. Piercy, N., & Cravens, D. (2010). The imperatives of value-driven strategy. Journal of Change Management, 22-40. PMI. (2013). PMBOK. http://www.pmi.org/About-Us/About-Us-What-is-Project-Management.aspx. Polonsky, M. J. (1996). Stakeholder Management and the Stakeholder Matrix: Potential Strategic Marketing Tools. Journal of Market Focused Management 1, 209-229. Rhyne, L. C. (1986). The relationship of strategic planning to financial performance. Strategic Management Journal, Vol. 7, 423-436.

119

Rieber, L. J. (2006). Using Peer Review to Improve Student Writing in Business Courses. Journal of Education for Business Vol.81 Issue 6, 322-326. Sanchez, H., & Robert, B. (2010). Measuring Portfolio Strategic Performance Using Key Performance Indicators. Project Management Journal Vol. 41 No. 5, 64-73. Shah, H., & Mohamed, E. (2007, Set/Out). IT Professional Magazine Vol.9 Issue 5, pp. 36-41. Taiichi, O. (1988). Toyota Production System: Beyond Large-Scale Production. New York: Productivity Press. Taylor, D. W., Berry, P. C., & Block, C. H. (1958). Does group participation when using Brainstorming facilitate or inhibit creative thinking? Administrative Science Quarterly, Vol. 3 No. 1, 23-47. Taylor, F. (1998). The Principles of Scientific Management. Dover Publications. Tedlow, R. (1990). New and Improved: The Story of Mass Marketing in America. Oxford: Heinemann Professional. Teece, D., Pisano, G., & Schuen. (1997 ). A Dynamic capabilities and strategic management . Strategic Management Journal , V. 18, p.509-533. Thune, S. S. (1970, August). Where long-range planning pays off. 13(4), pp. 81-87. Tyson, K. (2002). The complete guide to competitive intelligence . Chicago: Leading Edge Publications . Vaccaro, I. G., Jansen, J. J., Van Den Bosch, F. A., & Volberda, H. W. (2012). Management Innovation and Leadership: The Moderating Role of Organizational Size. Journal of Management Studies 49:1, 28-51. Wetherbe, J. C. (1976). A general purpose strategic planning methodology for the computing effort in higher education: development, implementation and evaluation. Unpublished Ph.Dissertation Texas Tech. University. Wetherbe, J., & Montanari, J. (1981). Zero Based Budgeting in the planning process. Strategic Management Journal , Vol. 2. 1-14. Williams, A., Lacy, Smith, S., & William, C. (1992). Purchasing's Role in Value Analysis: Lessons from Creative Problem Solving. International Journal of Purchasing and Materials Management. Zachman, J. A. (1987). A Framework for Information Systems Architecture. IBM Systems J., vol. 26, no. 3, 276-292. Zachman, J. A. (2008). Zachman International: Enterprise www.zachman.com/about-the-zachman-framework

Architecture.

Retrieved

from

Zikmund, W. G., Babin, B. J., Carr, J. C., & Griffin, M. (2013). Business Research Methods, 9th edition. USA: Cengage Learning.

120

121