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Project Initiation - Business Case
By Raymond Keckler | December 9, 2007
A project should only be taken on by organizations if they add value. Basically you want to ensure the benefits exceed the cost in doing the project. There is a cost to all projects and that cost is employees. If we decide to do a project that project must have man hours set against it. The project must do some objective analysis to determine if the project is really needed.
The project must increase the value the organization can deliver. Just because a project seems like a good idea does not mean it will enhance the company’s product. A business case should be drawn up to show it will benefit the company. The first question is “Does this project solve a problem, issue or business need?” Goals and benefits should be outlined. The business case allows the business to determine if the potential project is a sound business investment.
So the business case should have the following:
- The issue or problem to be addressed/solved.
- The goals and benefits of doing the project.
- The objectives of the project.
- The needs and wants.
- The potential project scope.
- The risk and impacts associated with the project.
- The cost benefit analysis
- The return on investment.
Clarity around the issue or problem must be drawn out. This will result in all the stakeholders getting involved to see if it really exists or if it is important enough to start a project on it. After clarifying the issue we need to know what the end result should be - the goal. We must know how this will benefit the company. The objectives would identify why we are putting our resources on this effort and how we will know when we are successful. When a project is getting started, the stakeholders meet and each will have needs and wants for this project. Those needs and wants should be listed so an order of magnitude on cost can be drawn out.
When the first four items are discussed a project manager should be included. This way the project manager can take that information and start the preliminary scope statement. The scope addresses all the work that must be done to deliver the final results. The scope will address all the deliverables and if it is not in the scope statement it will not be delivered. Risks and impacts with the project must be investigated. By identifying the risks ahead of time we can prevent delays or catastrophic failures ahead of time.
We came together and developed a needs and wants list. This gave us an order of magnitude of cost. The order of magnitude is not the final cost of the project. It gives us an estimate of -25% to +75% of what the cost will be for the project. The final cost of the project, the budget, will be developed when the work break down structure is built. Now we need to know how much we will benefit from this project. This gives us a cost to benefit analysis and from it, we can generate a return on investment. The business must know when it will be get back the money it invested in the project and what type of continuing profit it will make.
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Topics: Business, Project Management |