In this article, we discuss an ROI-based approach to building a robust business case.

Project sponsors are seeking new ways to reduce cost, improve their customers’ experience and deliver growth in these challenging times. There are many demands on their finances and it isn’t always immediately clear which of the projects are really valuable. Therefore, as a project manager, you need to provide them with the ability to evaluate the ROI for your proposed initiatives in order to secure (or sustain) funding―as well as manage the delivery of benefits and show their alignment to the overall strategic goals of the organization.

Developing a business case using ROI-based methods provides sponsors with the chance to truly understand the value any proposed project will deliver. Technology-enabled business change can provide vast opportunities to add value within an organization, however, the articulation and quantification of the monetary ROI is not always easy.

Using an ROI-based method will focus implementation teams on delivering value to the business―not just on delivering technology or data. In our experience, many programs focus on delivering technical milestones, but rarely can they effectively answer the typical executive questions of "So, what does this mean to me? Will it improve my top- or bottom-line? How will this improve the customer experience?"

Following a defined step-by-step approach will allow you to demonstrate the potential ROI of a proposed project and ensure that the activities planned around the program are focused on delivering the intended benefits throughout its lifecycle.

The value of any technology solution will be measured by the business benefits it delivers to the organization, not by the flexibility and functionality of the user interface. Project managers should focus on the value-driving aspects of a technology solution rather than taking the familiar project or technology focused approach. A useful way to stay on course is to compare your approach to these stereotypes:

Developing an ROI-based Business Case

The following steps must be followed to develop a robust strategy and business case.

1. Engage the business to understand the key issues - Look at the goals and objectives of the organization to draw out the key issues and challenges being faced by stakeholders. The IT programs’ objectives can be aligned with these higher level organizational goals and challenges in terms of opportunities for improvement to set the program up for success.

The benefit to this top down approach is that it builds consensus for the program with senior stakeholders while simultaneously addressing gaps between the organization’s current state and desired-future-state. Once the opportunities have been identified, they are prioritized so the focus is on the initiatives that will deliver the most business value and when they can be realistically implemented.

2. Design a high-level program structure and governance - After the desired benefits have been identified and a future state developed that will deliver these, the next step is to construct a program of work to reach this desired state. To do this, build a complete portfolio of projects/workstreams based on the gap between the current and future state, which will deliver the benefits promised by the technology. Then show how each of those projects/ workstreams, either independently or in aggregate are linked to the strategic objectives of your organization.

If the program is of appropriate size and scope (e.g., affects multiple parts of the business), you should adopt an enterprise approach rather than a siloed one to take advantage of economies of scale and combine like projects together. Once the program of work has been developed, we suggest using Capability Maturity Model and service management diagnostic tools to assess the organization’s capability to deliver on the proposed solution and support post implementation. Gaps in the current delivery and post implementation support model are thus exposed and flagged where additional internal or external resources may be needed to achieve success.

3. Calculate the benefits and complete the business case - One of the most powerful and challenging portions of the approach is the construction of the financial business case. This comprises three elements:

• A capex/opex budget to capture costs;
• Modeling benefits to understand the financial benefits of the project; and
• A method to calculate what monetary value the program will deliver over time compared to other investments, typically captured as Net Present Value (NPV).