Business Cases And Benefits Management
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Business Cases and Benefits Management
Alan McSweeney
Objectives • Why
is Benefits management an important competency for organisations?
• What
is a Business case, how do you write one?
• How
should the Business case and Benefits be measured and managed during the project’s delivery?
• Some
differing perspectives…..
November 26, 2009
2
Scope • Draws
on experience in providing services to Financial services and Corporate clients investing in Information Technology projects.
November 26, 2009
3
Hints and tips on Mountain Climbing, not a guide to Climbing Mountains…
November 26, 2009
4
Project Outcomes • 2004
Standish Group Report http://www.standishgroup.com/ − 29% projects succeeded (delivered on time, on budget, with required features and functions) − 53% are challenged (late, over budget and /or with less than the required features and functions) − 8% have failed (cancelled prior to completion or delivered and never used) − Failures cost an estimated US$145 billion
November 26, 2009
5
Benefits Approach • How
do we pick the winning investments?
• How
do we ensure that we are getting value from these investments and know that we are doing so? − Benefits do not just happen with delivery − Benefits rarely happen according to plan − Benefits realisation is a process that must be managed like any other business process
November 26, 2009
6
Four Questions • 1.
Are we doing the right thing?
− (Re)definition of business, program alignment • 2.
Are we doing them the right way?
− Organisational structure, program integration • 3.
Are we getting them done well?
− Organisational capability, support structure • 4.
Are we getting the benefits?
− Proactive management of benefits realisation process as a whole
November 26, 2009
7
Four Questions
November 26, 2009
Alignment
Benefits
1. Are we doing the right thing?
4. Are we getting the benefits?
2. Are we doing them the right way? Integration
3. Are we getting them done well? Capability/Efficiency 8
Benefits Management •A
process of organising and managing such that potential benefits are actually realised
• Benefits
Management means maximising the benefits from projects, changes and initiatives
November 26, 2009
9
What is a Benefit?
•Improve
•
The value placed by a stakeholder on the performance improvement or new capability resulting from an outcome
•
Benefits are identified by asking stakeholders to articulate how they believe they (or the people they represent) will experience the value of the outcome, i.e. stakeholders answer the question “what’s in it for me?”
•Increase •Reduce •Eliminate •Stop
November 26, 2009
10
Benefits Analysis • What
benefits do we want / could we get?
• Identify
benefits
• Link
to business objectives
• Link
to enablers
• For
each benefit:
− How can you measure it − Can we quantify it − Is there a financial value?
November 26, 2009
11
Benefits Realisation Planning for Programmes •A
set of activities to design and plan an integrated change programme to deliver quality and value benefits to patients, staff and local communities
• Benefit
realisation IS NOT only about whether the project delivered things on time to budget, etc.
• Identifying
benefits will not make them happen
− Preparation − Objectives and Outcomes − Benefits and Measures − Validation and Completion − Support, Manage and Update November 26, 2009
12
Benefits Realisation Management Process
Yes
Develop/update business case; timetime-phased cost, benefit flows;plans
Perform to plans
Benefits being realised? realised?
Yes
Assumptions still valid?
No No
Determine corrective actions
November 26, 2009
13
Benefits Management Challenge •
Technology driven
•
Benefits driven
•
Value for MONEY
•
VALUE for money
•
Expenditure proposal
•
Business case
•
Loose linkage to business need
•
Integration with business drivers
•
IT implementation plan
•
Change management plan
•
Business manager as on-looker
•
•
Large set of unfocussed functionality
Business manager involved and in control
•
Stakeholder “subject to”
•
IT investment sufficient to do the job
•
Trained in technology
•
Stakeholders “involved in”
•
Do a technology project audit
•
Education in exploiting.
•
Obtain business benefit then review
November 26, 2009
14
A Benefits Driven Approach Will … •…
Allow you to:
− Build the case for your investment − Forecast benefits and business impact − Identify key business changes − Gain buy-in to the project from all participants − Identify early wins and prioritise the application portfolio − Reduce risk by having better understanding of expected outcomes and barriers to success
November 26, 2009
15
Silver Bullets • 60-80%
of projects do not deliver benefits
• Success
is usually measured in terms of delivery time
and cost • Is
the system in use or useful is rarely examined
• Failure
November 26, 2009
= Blame = Bad Press = Punishment
16
• Lots
of projects become disconnected from the business need, processes and people that created them
• Benefits
Management reconnects project to benefits
• Structured
approach that will
− Make the link between the enablers and the organisation’s strategic objectives − Build the case for investment − Gain buy-in to the project from all participants − Maximise the benefit from investment
November 26, 2009
17
The Why: A Benefits Led Approach to Project Selection… • Is
a critical success factor for organisations who are seeking to obtain best in class performance − Assuming that you assess/understand your market position relative to market…
• Aligns
the delivery of change with business objectives and strategy − Assuming there is an agreed strategy to align with…
November 26, 2009
18
The Why: A Benefits Led Approach to Project Selection… • Enables
decisions to be made around portfolio management and prioritisation − Not who shouts loudest…
• Creates
a culture of accountability and measurement in service delivery. − Or gives the Business back control over the portfolio of projects…
November 26, 2009
19
Best in Class Performance: the Evidence…. • High
performing companies are 50% more likely to use analytic information strategically Have significant decisiondecisionsupport/analytical capabilities Value Analytical insights to a very large extent
65% 23%
36% 8%
Have above average analytical capability within industry Use analytics across their entire organization
77% 33%
40% 23%
High Performers Low Performers
Source: Competing on Analytics, Thomas Davenport November 26, 2009
20
Benefits in Projects
• We
invest in projects because of the perceived Benefits they bring
• The
Benefits justify the project
− Linked to Corporate Objectives & Priorities − Can be wide-ranging • Statutory, Social, Economic…
− Often financial (but not exclusively) − Sometimes hard to measure
November 26, 2009
21
Financial Benefits •
Time saved, posts lost, costs avoided, costs reduced… − Calculate a £ figure − Work out timing (investment & saving)
•
Payback (in years) − When Savings equal Investment
•
NPV (Net Present Value) − A common measure of a project’s value − Cash flows adjusted for time they occur − Using a 5% discount rate
November 26, 2009
22
Non-financial Benefits • Is
this a Corporate priority?
• Look
for a performance measure
− BVPI − Other PI • Measure
− Value at start of project − Predicted value at end of project − Actual value at end of project
November 26, 2009
23
Organisation Development • The
four pillars of Change
− Driven by the Customer − Improving our Performance − Learning & Developing − Optimising our Finances • These • Each
describe the type of organisation we want to be
project has to contribute
November 26, 2009
24
Later Benefits • Project
puts a capability in place
− To be exploited by a later project • Must
link these projects
− Is funding in place for later project? − Are we committed to later project? − If not, investment in first project may be wasted
November 26, 2009
25
Later Benefits • Project
delivers as expected
− But Benefits only measurable later • Need
to link to process
− What process? − The owner? − When and how to measure?
November 26, 2009
26
Realising Benefits •
Financial saving − Remove £ from next year’s budget − Saving included in formal budget setting process − Clarity about what was saved where
•
Posts lost − At risk register • Identify the staff affected, communicate
− Process based on existing Council policies • Consultation, redeploy, retrain … redundancy • Minimise redundancy costs
− Affects timing of realisation of Benefits
November 26, 2009
27
Tough Decisions • Cost
constraints
− We must stay within this • Headcount
and Budget
− We need to manage both • May
require restructuring
− New ways of working may mean changes to some organisation structures
November 26, 2009
28
Strategy Alignment to Change Management
Strategy •Business Vision •Strategy •Goals and Objectives in a 3-5 Year Investment Plan •Products and Services •Annual Budget
November 26, 2009
Change •Project and Programme Design •Business Case •Programmes and Portfolio Projects •Benefits Management and Realisation
29
Prioritisation: Follow the Money • All
Project investment decisions should be based on a Financial justification.
November 26, 2009
30
Benefits Realisation Principles • Benefits
realisation is the pre-planning for, and ongoing management of benefits promised to be enabled by the successful implementation of a project
• Sound
project management can only enable a business owner (program) to realize intended benefits
• Accountability
for the realisation of intended benefits must rest with the business function, not with the IT project
November 26, 2009
31
Outcome Management •
What is an outcome? − An outcome (benefit) is the desired result of an initiative undertaken to meet a need or solve a problem − Outcomes are final results supported by intermediate outcomes (benefits milestones)
•
Background − Outcome Management is focused on the outcomes or results side of an initiative or program − Outcome Management methodology is based on internationally recognized project and risk management techniques that has been refined − Outcome Management is an evolving discipline
•
Details − Cost benefit analysis is a subset of Outcome Management − Outcome Management is the potential link to existing tools or other sources of performance indicators
November 26, 2009
32
Portfolio Prioritisation • “One
of the key contributors to poor IT investment performance is an unbalanced approach taken by executives at the project approval stage.
• Too
often, the overriding emphasis is on quick payback or demands for the return on investment (ROI) to be demonstrated in financial terms.” terms.” − Gartner.
November 26, 2009
33
Business Accountability and measurement • The
Business is responsible for ensuring that the Investment made yields the return calculated.
November 26, 2009
34
Recap: Why do we need Business cases •A
Critical Success Factor
• Ensuring
Strategy alignment
• Prioritisation • Accountability
November 26, 2009
and Measurement
35
What is a Business case, how do you write one? •
A Business case should describe the proposition in terms of:− − − − − −
•
Scope and out of scope Objectives Options Schedule Risk Investment and return.
In short, it should describe the reason and justification for initiating a project and explain how the organisation will get there.
November 26, 2009
36
Identifying Benefits •
Deliverables or outcomes
•
Cashable v non cashable
•
Efficiency
November 26, 2009
37
Business Case Features of a good business case − Description of benefits — quantified − Cost benefit analysis − RoI • The
business case is a logical argument to spend money and Benefits Management creates a compelling reason for the Sponsor / Champion to act
Is it worth spending this amount to achieve this result? November 26, 2009
38
Benefits Management • Assigning
benefits
− Benefits manager − Service managers • Metrics
− Financial − Non-financial − Proxies
November 26, 2009
39
PMBOK: Project Initiation
Inputs
1. Product description 2. Strategic Plan 3. Project selection criteria 4. Historical information
November 26, 2009
Tools and Techniques
1. Project Selection Methods 2. Expert Judgement
Outputs
1. Project charter 2. Project Manager identified/assigned 3.Constraints 4. Assumptions
40
Business Case Activities Scope Definition and Agreement The scope and requirements of the engagement are confirmed. The required outputs are agreed. The scheduled is established. Requirements Analysis, Definition and Agreement Business, functional, technical and implementation requirements are identified, analysed and documented. Any existing processes and systems impacted by the proposed investment are analysed.
Solution Implementation Options and Selection The options for implementing the solution – package acquisition and customisation, existing system upgrade, system development – are analysed. Suitable suppliers are identified. An options or options are recommended. Implementation Plan Roadmap A realistic plan to implement the solution is creating, incorporating resource requirements and constraints and includes risk, assumptions and dependencies.
Solution Architecture Specification and Design
Financial Analysis
A logical solution is designed to meet the defined and agreed requirements.
The full costs to implement and operate the solution are quantified. The tangible savings are identified.
November 26, 2009
41
Presenting a Business Case Strategic Fit
Business need and its contribution to the organisation's business strategy Key benefits to be realised Critical success factors and how they will be measured.
Options Procurement and Whole-Life Costs Evaluation and Implementation Identification Cost/benefit Proposed sourcing Statement of analysis of realistic option with reasons available funding options for meeting and details of the business need Key features of projected whole-life proposed cost of project Statement of commercial (acquisition and possible soft arrangements operation), including benefits that cannot all relevant costs be quantified in Procurement financial terms approach/strategy Expected financial with supporting benefits Identify preferred details option and any trade-offs
Plan for Achievement Plan for achieving the desired outcome with key milestones and dependencies Contingency plans Risks identified and mitigation plan External supplier plans Resources, skills and experience required
November 26, 2009
42
Exec Summary Name of project Responsible Board Member Project owner Project manager Objective
Value Drivers Market launch Estimated cumulated investments Present Value
November 26, 2009
43
Market Opportunity
Customers/needs* Targeted customers and their key needs
Region/maturity of market* Targeted region … Description of maturity of market ...
Products/substitutes* Description of products/services
Current market volume (as of …) Future market volume (growth / market potential by ...)
Opportunities
...
Threats
...
...
Competitors* Main competitors (incl. market shares)
Possible substitutes (existing / expected) *) Current status
November 26, 2009
44
Opportunities and Threats
market
Opportunities
Threats
…
...
...
…
November 26, 2009
45
Description and Analysis of Proposed Offering/Sales Sources Our offer
What are our products/ services?
Text
Who are our customers?
Text
What demand is met?
Text
How is the money earned (revenue driver, pricing) ?
Text
November 26, 2009
46
Strengths and Weaknesses of Proposed Offering Key Differentiation Factors Compared to Competitors’ Our offer
Strengths
Weaknesses
…
...
...
…
November 26, 2009
47
Key Success Factors of Product/Service Offering
<Success factor 1>
<Success factor 2>
<Success factor 3>
<Success factor x>
November 26, 2009
Our offer
Text
Text
Text
Text
48
Strategic Fit and Risk Assessment
Strategy/Risk
Corresponding strategic objectives ...
•... •… •...
… are reflected in initiative ... •... •… •...
November 26, 2009
Potential strategic conflicts or risks ...
•... •… •...
… are mitigated by ... •... •… •...
49
Sales drivers project/product/service Sales drivers
2008
2009
2010
2011
2012
(a) Number of Customers*
xxx
xxx
xxx
xxx
xxx
(b) Average quantity per customer*
xxx
xxx
xxx
xxx
xxx
(c) Average price per unit*
xxx
xxx
xxx
xxx
xxx
(d) Sales volume (mn (mn €)) *
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Market share
<Bubble to add important remarks> November 26, 2009
*) Generally: (a)*(b)*(c)=(d); (c) in line with pricing model
50
Cost drivers: Name of project/product/service Cost drivers
Quantities or mn €
2008
2009
2010
2011
2012
FTE
xxx
xxx
xxx
xxx
xxx
...
xxx
xxx
xxx
xxx
xxx
...
xxx
xxx
xxx
xxx
xxx
...
xxx
xxx
xxx
xxx
xxx
Bubble to add important remarks
November 26, 2009
51
Differentiation of project scope and handling of project risks Project
Aspects not in project scope …
Potential project risks and mitigation ... mitigated by … ...
...
mitigated by … ... mitigated by ...
November 26, 2009
52
Project phases, milestones and required budgets/resources
Implementation
•
Project Phase 1
•
Project Phase 2
•
Project Phase 3 ...
Milestone (interim result)
•
Text
•
Text
•
Text
Responsibility
•
Text
•
Text
•
Text
Delivery date
•
Text
•
Text
•
Text
Depedencies
•
Text
•
Text
•
Text
Budget/resources (mn €,, man days)
•
Text
•
Text
•
Text
November 26, 2009
53
Summary of Strategic fit
Comments: Strategic Planning XXX XXX ... ...
November 26, 2009
54
How should the Business case and Benefits be measured and managed during the project’s delivery?
November 26, 2009
55
Project and Benefits Lifecycle
November 26, 2009
56
Change Management Change requests should assess Business case impact. • The approval of scope changes, budget changes, schedule changes should be mapped back to the Business case • For Larger projects and programmes, stage gate Business case reviews as part of key phase end milestone reviews • Consider changes in the wider Business environment (e.g. the current recession), as drivers to re-assess the in flight portfolio • Consider changes in products and solutions as drivers to reassess the in flight portfolio •
− E.g. Vendor consolidation, changes in Vendor product strategy − E.g. New products that might improve solutions/invalidate previous architectures − Changes in Organisation structure or composition (mergers/takeovers/sales/joint ventures) November 26, 2009
57
Benefit Realisation • Most
Business cases have a time horizon which extends over a period from 1 — 5 years.
• So
Benefits are often fully realised only after the project has been closed.
• Who
measures the effectiveness of the investment when the project is gone? − Project Management Office − Business Management − IT Management − Project Manager
November 26, 2009
58
Project Management Office and Benefits Management • PMO’s
are often located in IT, not embedded in the Business
• Terms
of reference for PMO are often quite narrow
− Focus often on methodology, resourcing, governance and reporting − Is there an appetite to extend the PMO into this role…
November 26, 2009
59
Conclusion: Recap of Seminar Objectives • Why
is Benefits management an important competency for organisations?
• What
is a Business case, how do you write one?
• How
should the Business case and Benefits be measured and managed during the project’s delivery?
• Some
differing perspectives…..
November 26, 2009
60
Some Closing Thoughts • What
are the Critical Success Factors for Benefits Management? − If they arent in place what does this mean?
• Should
Benefits management be part of the PM’s remit?
− If not the PM then who? • Should
Benefits realisation be placed in a more general Management framework − Cobit? − PMM Maturity assessment?
November 26, 2009
61
The Success of Benefits Management in Organisation and projects is •
Linked to the ability of the organisation to − Clearly define strategy and business goals − Determine priority of activities − Measure costs and success of implementation
•
So to be truly successful Organisations must − − − − −
Understand their customers needs Understand and quantify revenues by customer and product Understand and quantify their cost base (activity costing/unit costing) Understand their relative competitive position Have processes and policies in place to support a Benefits led culture when introducing change
November 26, 2009
62
Relationship to Other Management Disciplines
PMBOK
……..Is ……..Is Benefits Management a core competence of a Project Manager? ………Should ………Should the PM be involved? General Management Knowledge and Practice
November 26, 2009
Application Area Knowledge and Practice
63
COBIT
November 26, 2009
64
Maturity Models
November 26, 2009
65
More Information Alan McSweeney [email protected]
November 26, 2009
66
Alan McSweeney
Objectives • Why
is Benefits management an important competency for organisations?
• What
is a Business case, how do you write one?
• How
should the Business case and Benefits be measured and managed during the project’s delivery?
• Some
differing perspectives…..
November 26, 2009
2
Scope • Draws
on experience in providing services to Financial services and Corporate clients investing in Information Technology projects.
November 26, 2009
3
Hints and tips on Mountain Climbing, not a guide to Climbing Mountains…
November 26, 2009
4
Project Outcomes • 2004
Standish Group Report http://www.standishgroup.com/ − 29% projects succeeded (delivered on time, on budget, with required features and functions) − 53% are challenged (late, over budget and /or with less than the required features and functions) − 8% have failed (cancelled prior to completion or delivered and never used) − Failures cost an estimated US$145 billion
November 26, 2009
5
Benefits Approach • How
do we pick the winning investments?
• How
do we ensure that we are getting value from these investments and know that we are doing so? − Benefits do not just happen with delivery − Benefits rarely happen according to plan − Benefits realisation is a process that must be managed like any other business process
November 26, 2009
6
Four Questions • 1.
Are we doing the right thing?
− (Re)definition of business, program alignment • 2.
Are we doing them the right way?
− Organisational structure, program integration • 3.
Are we getting them done well?
− Organisational capability, support structure • 4.
Are we getting the benefits?
− Proactive management of benefits realisation process as a whole
November 26, 2009
7
Four Questions
November 26, 2009
Alignment
Benefits
1. Are we doing the right thing?
4. Are we getting the benefits?
2. Are we doing them the right way? Integration
3. Are we getting them done well? Capability/Efficiency 8
Benefits Management •A
process of organising and managing such that potential benefits are actually realised
• Benefits
Management means maximising the benefits from projects, changes and initiatives
November 26, 2009
9
What is a Benefit?
•Improve
•
The value placed by a stakeholder on the performance improvement or new capability resulting from an outcome
•
Benefits are identified by asking stakeholders to articulate how they believe they (or the people they represent) will experience the value of the outcome, i.e. stakeholders answer the question “what’s in it for me?”
•Increase •Reduce •Eliminate •Stop
November 26, 2009
10
Benefits Analysis • What
benefits do we want / could we get?
• Identify
benefits
• Link
to business objectives
• Link
to enablers
• For
each benefit:
− How can you measure it − Can we quantify it − Is there a financial value?
November 26, 2009
11
Benefits Realisation Planning for Programmes •A
set of activities to design and plan an integrated change programme to deliver quality and value benefits to patients, staff and local communities
• Benefit
realisation IS NOT only about whether the project delivered things on time to budget, etc.
• Identifying
benefits will not make them happen
− Preparation − Objectives and Outcomes − Benefits and Measures − Validation and Completion − Support, Manage and Update November 26, 2009
12
Benefits Realisation Management Process
Yes
Develop/update business case; timetime-phased cost, benefit flows;plans
Perform to plans
Benefits being realised? realised?
Yes
Assumptions still valid?
No No
Determine corrective actions
November 26, 2009
13
Benefits Management Challenge •
Technology driven
•
Benefits driven
•
Value for MONEY
•
VALUE for money
•
Expenditure proposal
•
Business case
•
Loose linkage to business need
•
Integration with business drivers
•
IT implementation plan
•
Change management plan
•
Business manager as on-looker
•
•
Large set of unfocussed functionality
Business manager involved and in control
•
Stakeholder “subject to”
•
IT investment sufficient to do the job
•
Trained in technology
•
Stakeholders “involved in”
•
Do a technology project audit
•
Education in exploiting.
•
Obtain business benefit then review
November 26, 2009
14
A Benefits Driven Approach Will … •…
Allow you to:
− Build the case for your investment − Forecast benefits and business impact − Identify key business changes − Gain buy-in to the project from all participants − Identify early wins and prioritise the application portfolio − Reduce risk by having better understanding of expected outcomes and barriers to success
November 26, 2009
15
Silver Bullets • 60-80%
of projects do not deliver benefits
• Success
is usually measured in terms of delivery time
and cost • Is
the system in use or useful is rarely examined
• Failure
November 26, 2009
= Blame = Bad Press = Punishment
16
• Lots
of projects become disconnected from the business need, processes and people that created them
• Benefits
Management reconnects project to benefits
• Structured
approach that will
− Make the link between the enablers and the organisation’s strategic objectives − Build the case for investment − Gain buy-in to the project from all participants − Maximise the benefit from investment
November 26, 2009
17
The Why: A Benefits Led Approach to Project Selection… • Is
a critical success factor for organisations who are seeking to obtain best in class performance − Assuming that you assess/understand your market position relative to market…
• Aligns
the delivery of change with business objectives and strategy − Assuming there is an agreed strategy to align with…
November 26, 2009
18
The Why: A Benefits Led Approach to Project Selection… • Enables
decisions to be made around portfolio management and prioritisation − Not who shouts loudest…
• Creates
a culture of accountability and measurement in service delivery. − Or gives the Business back control over the portfolio of projects…
November 26, 2009
19
Best in Class Performance: the Evidence…. • High
performing companies are 50% more likely to use analytic information strategically Have significant decisiondecisionsupport/analytical capabilities Value Analytical insights to a very large extent
65% 23%
36% 8%
Have above average analytical capability within industry Use analytics across their entire organization
77% 33%
40% 23%
High Performers Low Performers
Source: Competing on Analytics, Thomas Davenport November 26, 2009
20
Benefits in Projects
• We
invest in projects because of the perceived Benefits they bring
• The
Benefits justify the project
− Linked to Corporate Objectives & Priorities − Can be wide-ranging • Statutory, Social, Economic…
− Often financial (but not exclusively) − Sometimes hard to measure
November 26, 2009
21
Financial Benefits •
Time saved, posts lost, costs avoided, costs reduced… − Calculate a £ figure − Work out timing (investment & saving)
•
Payback (in years) − When Savings equal Investment
•
NPV (Net Present Value) − A common measure of a project’s value − Cash flows adjusted for time they occur − Using a 5% discount rate
November 26, 2009
22
Non-financial Benefits • Is
this a Corporate priority?
• Look
for a performance measure
− BVPI − Other PI • Measure
− Value at start of project − Predicted value at end of project − Actual value at end of project
November 26, 2009
23
Organisation Development • The
four pillars of Change
− Driven by the Customer − Improving our Performance − Learning & Developing − Optimising our Finances • These • Each
describe the type of organisation we want to be
project has to contribute
November 26, 2009
24
Later Benefits • Project
puts a capability in place
− To be exploited by a later project • Must
link these projects
− Is funding in place for later project? − Are we committed to later project? − If not, investment in first project may be wasted
November 26, 2009
25
Later Benefits • Project
delivers as expected
− But Benefits only measurable later • Need
to link to process
− What process? − The owner? − When and how to measure?
November 26, 2009
26
Realising Benefits •
Financial saving − Remove £ from next year’s budget − Saving included in formal budget setting process − Clarity about what was saved where
•
Posts lost − At risk register • Identify the staff affected, communicate
− Process based on existing Council policies • Consultation, redeploy, retrain … redundancy • Minimise redundancy costs
− Affects timing of realisation of Benefits
November 26, 2009
27
Tough Decisions • Cost
constraints
− We must stay within this • Headcount
and Budget
− We need to manage both • May
require restructuring
− New ways of working may mean changes to some organisation structures
November 26, 2009
28
Strategy Alignment to Change Management
Strategy •Business Vision •Strategy •Goals and Objectives in a 3-5 Year Investment Plan •Products and Services •Annual Budget
November 26, 2009
Change •Project and Programme Design •Business Case •Programmes and Portfolio Projects •Benefits Management and Realisation
29
Prioritisation: Follow the Money • All
Project investment decisions should be based on a Financial justification.
November 26, 2009
30
Benefits Realisation Principles • Benefits
realisation is the pre-planning for, and ongoing management of benefits promised to be enabled by the successful implementation of a project
• Sound
project management can only enable a business owner (program) to realize intended benefits
• Accountability
for the realisation of intended benefits must rest with the business function, not with the IT project
November 26, 2009
31
Outcome Management •
What is an outcome? − An outcome (benefit) is the desired result of an initiative undertaken to meet a need or solve a problem − Outcomes are final results supported by intermediate outcomes (benefits milestones)
•
Background − Outcome Management is focused on the outcomes or results side of an initiative or program − Outcome Management methodology is based on internationally recognized project and risk management techniques that has been refined − Outcome Management is an evolving discipline
•
Details − Cost benefit analysis is a subset of Outcome Management − Outcome Management is the potential link to existing tools or other sources of performance indicators
November 26, 2009
32
Portfolio Prioritisation • “One
of the key contributors to poor IT investment performance is an unbalanced approach taken by executives at the project approval stage.
• Too
often, the overriding emphasis is on quick payback or demands for the return on investment (ROI) to be demonstrated in financial terms.” terms.” − Gartner.
November 26, 2009
33
Business Accountability and measurement • The
Business is responsible for ensuring that the Investment made yields the return calculated.
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Recap: Why do we need Business cases •A
Critical Success Factor
• Ensuring
Strategy alignment
• Prioritisation • Accountability
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and Measurement
35
What is a Business case, how do you write one? •
A Business case should describe the proposition in terms of:− − − − − −
•
Scope and out of scope Objectives Options Schedule Risk Investment and return.
In short, it should describe the reason and justification for initiating a project and explain how the organisation will get there.
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Identifying Benefits •
Deliverables or outcomes
•
Cashable v non cashable
•
Efficiency
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Business Case Features of a good business case − Description of benefits — quantified − Cost benefit analysis − RoI • The
business case is a logical argument to spend money and Benefits Management creates a compelling reason for the Sponsor / Champion to act
Is it worth spending this amount to achieve this result? November 26, 2009
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Benefits Management • Assigning
benefits
− Benefits manager − Service managers • Metrics
− Financial − Non-financial − Proxies
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PMBOK: Project Initiation
Inputs
1. Product description 2. Strategic Plan 3. Project selection criteria 4. Historical information
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Tools and Techniques
1. Project Selection Methods 2. Expert Judgement
Outputs
1. Project charter 2. Project Manager identified/assigned 3.Constraints 4. Assumptions
40
Business Case Activities Scope Definition and Agreement The scope and requirements of the engagement are confirmed. The required outputs are agreed. The scheduled is established. Requirements Analysis, Definition and Agreement Business, functional, technical and implementation requirements are identified, analysed and documented. Any existing processes and systems impacted by the proposed investment are analysed.
Solution Implementation Options and Selection The options for implementing the solution – package acquisition and customisation, existing system upgrade, system development – are analysed. Suitable suppliers are identified. An options or options are recommended. Implementation Plan Roadmap A realistic plan to implement the solution is creating, incorporating resource requirements and constraints and includes risk, assumptions and dependencies.
Solution Architecture Specification and Design
Financial Analysis
A logical solution is designed to meet the defined and agreed requirements.
The full costs to implement and operate the solution are quantified. The tangible savings are identified.
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Presenting a Business Case Strategic Fit
Business need and its contribution to the organisation's business strategy Key benefits to be realised Critical success factors and how they will be measured.
Options Procurement and Whole-Life Costs Evaluation and Implementation Identification Cost/benefit Proposed sourcing Statement of analysis of realistic option with reasons available funding options for meeting and details of the business need Key features of projected whole-life proposed cost of project Statement of commercial (acquisition and possible soft arrangements operation), including benefits that cannot all relevant costs be quantified in Procurement financial terms approach/strategy Expected financial with supporting benefits Identify preferred details option and any trade-offs
Plan for Achievement Plan for achieving the desired outcome with key milestones and dependencies Contingency plans Risks identified and mitigation plan External supplier plans Resources, skills and experience required
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Exec Summary Name of project Responsible Board Member Project owner Project manager Objective
Value Drivers Market launch Estimated cumulated investments Present Value
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Market Opportunity
Customers/needs* Targeted customers and their key needs
Region/maturity of market* Targeted region … Description of maturity of market ...
Products/substitutes* Description of products/services
Current market volume (as of …) Future market volume (growth / market potential by ...)
Opportunities
...
Threats
...
...
Competitors* Main competitors (incl. market shares)
Possible substitutes (existing / expected) *) Current status
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Opportunities and Threats
market
Opportunities
Threats
…
...
...
…
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Description and Analysis of Proposed Offering/Sales Sources Our offer
What are our products/ services?
Text
Who are our customers?
Text
What demand is met?
Text
How is the money earned (revenue driver, pricing) ?
Text
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Strengths and Weaknesses of Proposed Offering Key Differentiation Factors Compared to Competitors’ Our offer
Strengths
Weaknesses
…
...
...
…
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Key Success Factors of Product/Service Offering
<Success factor 1>
<Success factor 2>
<Success factor 3>
<Success factor x>
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Our offer
Text
Text
Text
Text
48
Strategic Fit and Risk Assessment
Strategy/Risk
Corresponding strategic objectives ...
•... •… •...
… are reflected in initiative ... •... •… •...
November 26, 2009
Potential strategic conflicts or risks ...
•... •… •...
… are mitigated by ... •... •… •...
49
Sales drivers project/product/service Sales drivers
2008
2009
2010
2011
2012
(a) Number of Customers*
xxx
xxx
xxx
xxx
xxx
(b) Average quantity per customer*
xxx
xxx
xxx
xxx
xxx
(c) Average price per unit*
xxx
xxx
xxx
xxx
xxx
(d) Sales volume (mn (mn €)) *
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Market share
<Bubble to add important remarks> November 26, 2009
*) Generally: (a)*(b)*(c)=(d); (c) in line with pricing model
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Cost drivers: Name of project/product/service Cost drivers
Quantities or mn €
2008
2009
2010
2011
2012
FTE
xxx
xxx
xxx
xxx
xxx
...
xxx
xxx
xxx
xxx
xxx
...
xxx
xxx
xxx
xxx
xxx
...
xxx
xxx
xxx
xxx
xxx
Bubble to add important remarks
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Differentiation of project scope and handling of project risks Project
Aspects not in project scope …
Potential project risks and mitigation
...
mitigated by …
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Project phases, milestones and required budgets/resources
Implementation
•
Project Phase 1
•
Project Phase 2
•
Project Phase 3 ...
Milestone (interim result)
•
Text
•
Text
•
Text
Responsibility
•
Text
•
Text
•
Text
Delivery date
•
Text
•
Text
•
Text
Depedencies
•
Text
•
Text
•
Text
Budget/resources (mn €,, man days)
•
Text
•
Text
•
Text
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Summary of Strategic fit
Comments: Strategic Planning XXX XXX ... ...
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How should the Business case and Benefits be measured and managed during the project’s delivery?
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Project and Benefits Lifecycle
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Change Management Change requests should assess Business case impact. • The approval of scope changes, budget changes, schedule changes should be mapped back to the Business case • For Larger projects and programmes, stage gate Business case reviews as part of key phase end milestone reviews • Consider changes in the wider Business environment (e.g. the current recession), as drivers to re-assess the in flight portfolio • Consider changes in products and solutions as drivers to reassess the in flight portfolio •
− E.g. Vendor consolidation, changes in Vendor product strategy − E.g. New products that might improve solutions/invalidate previous architectures − Changes in Organisation structure or composition (mergers/takeovers/sales/joint ventures) November 26, 2009
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Benefit Realisation • Most
Business cases have a time horizon which extends over a period from 1 — 5 years.
• So
Benefits are often fully realised only after the project has been closed.
• Who
measures the effectiveness of the investment when the project is gone? − Project Management Office − Business Management − IT Management − Project Manager
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Project Management Office and Benefits Management • PMO’s
are often located in IT, not embedded in the Business
• Terms
of reference for PMO are often quite narrow
− Focus often on methodology, resourcing, governance and reporting − Is there an appetite to extend the PMO into this role…
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Conclusion: Recap of Seminar Objectives • Why
is Benefits management an important competency for organisations?
• What
is a Business case, how do you write one?
• How
should the Business case and Benefits be measured and managed during the project’s delivery?
• Some
differing perspectives…..
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Some Closing Thoughts • What
are the Critical Success Factors for Benefits Management? − If they arent in place what does this mean?
• Should
Benefits management be part of the PM’s remit?
− If not the PM then who? • Should
Benefits realisation be placed in a more general Management framework − Cobit? − PMM Maturity assessment?
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The Success of Benefits Management in Organisation and projects is •
Linked to the ability of the organisation to − Clearly define strategy and business goals − Determine priority of activities − Measure costs and success of implementation
•
So to be truly successful Organisations must − − − − −
Understand their customers needs Understand and quantify revenues by customer and product Understand and quantify their cost base (activity costing/unit costing) Understand their relative competitive position Have processes and policies in place to support a Benefits led culture when introducing change
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Relationship to Other Management Disciplines
PMBOK
……..Is ……..Is Benefits Management a core competence of a Project Manager? ………Should ………Should the PM be involved? General Management Knowledge and Practice
November 26, 2009
Application Area Knowledge and Practice
63
COBIT
November 26, 2009
64
Maturity Models
November 26, 2009
65
More Information Alan McSweeney [email protected]
November 26, 2009
66
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