He very clearly stated, in front of the entire audience, that if they were still here at the end of the project, I wouldn’t be. It was an important and sobering lesson for me from a CEO who was determined to extract the planned financial benefit from an IT investment. This lesson sits like Jiminy Cricket on my shoulder whenever I have had occasion to create a business case – and it is one that I share now as instructive to CIOs who are being asked to reinvest in growth now the economic challenges of the past two years are receding.
During the global financial crisis, many ANZ CIOs adopted a “wait and see” approach. Many IT projects were put on hold until the impact of the economic situation on our region was known. Although the current recovery varies by country and industry, the common wisdom is that ANZ has dodged a bullet, and CIOs are now grappling with how to respond to the sudden increased demand associated with the business wanting to swiftly return to growth. In some cases this demand also needs to be managed against a backdrop of reduced numbers and skills within an IT organisation that was slimmed down in response to economic uncertainties.
This revised impetus for growth is being experienced across the board in enterprises – not just within IT. In their plans for acquiring funds to respond to increased demand CIOs are vying with BU leaders who are also being incentivised to innovate and grow. Therefore there is considerable competition for available investment funds.
Over the last couple of years, CIOs have been required to be stringent with expenditure. However, although controlling costs remains a major business pressure and the lessons of the past two years are expected to endure, cost cutting alone doesn’t foster growth, energise employees or attract new customers. Investments do - if they’re well considered, well implemented and deliver results.
Many of Gartner’s Executive Programs clients are reporting that they are being asked to continue to maintain a lower cost IT environment, but to invest savings in new and innovative investments that will advantage the front end of the business. Avoiding common pitfalls in business case development can facilitate that by significantly improving the odds of project success. Brilliant business cases generate stakeholder commitment (not just support), they are credible, and they guide the work to ensure that expected benefits are realised. To succeed in this current climate, CIOs should brush up on their financial skills and improve the chances of success of their business cases (and subsequent investment) by watching out for some common pitfalls.
Senior management is often asked to approve large capital investments based on flimsy business cases that:
• Don’t quantify all potential benefits, who will achieve them and how they will be measured;
• Have little or no involvement or ongoing commitment from stakeholders;
• Focus on technology, rather than on the needed changes in business processes and people that will achieve the benefit;
• Aren’t aligned to corporate plans, objectives and strategies;
• Ignore major risks or how they will be mitigated;
• Aren’t documented clearly and credibly;
• Aren’t used to guide the projects from analysis through implementation; and
• Aren’t used to institutionalise new way of working and the resulting benefits.
Business cases need to be more than a document designed to gain funding. Once approved, they need to be integral to achieving the proposed benefit from the investment. Many organisations track project costs against the business case but not the benefits the projects actually achieve. Brilliant business cases need to address these shortcomings.
To avoid the most common shortfalls when developing successful business cases, CIOs must:
• Focus on how the business will achieve changes related to both processes and people;
• Identify all potential benefits and who will achieve them; and
• Involve all stakeholders to ensure approval and ongoing support.
My rule of thumb is to never go into a meeting to approve a business case without having first ensured you have all the stakeholders on board, that they have already verbally agreed with the basics of the business case and that the approval process is assured. I once attended a meeting to approve a business case for a considerable new system investment. There were 16 stakeholders in the room – many of whom had not previously met each other, didn’t understand their respective stakes in the system, and had not yet been provided with sufficient overview of the business case to assure their support. Needless to say the meeting was chaotic and it set the investment decision back at least six months.
Returning to a growth agenda is exciting for all of us, in both the private and public sectors. I believe that if we take time to ensure future investments are underpinned by solid business cases, we have a better chance of sustaining the growth and reaping the rewards.
Linda Price (firstname.lastname@example.org) is group vice-president of executive programmes at Gartner.
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