Jason West and Joe Ales at river bank

Joe Ales & Jason West

Season 1 Episode 11 –  The Business Case for Transformation

Jason West: Welcome to the Underscore Transformation Podcast. My name’s Jason West.

Joe Ales: And I’m Joe Ales.

Jason West: Together, we’re the founders of Underscore. This week, we’re discussing the business case.

Joe Ales: A good business case goes along side your carefully constructed solution design. A robust business case is one of the most important outputs from the scoping phase; it’s one of the primary documents used to assess the viability of the transformation, and it’s typically essential to secure, frankly, large sums of cash. And ultimately getting buy-in from executives running the organisation. So, Jason where do we start?

Jason West: That’s a very good question. I think probably the first place to start is the format. Normally organisations will have pretty well-defined templates for investment appraisal, and business case. So use standard company templates, because that’s what the exec are expecting. What we’ve found, in working with a number of different organisations, is those business case templates can be quite a summary level, and actually to work out the real costs, the real benefits, there’s quite a bit of work you need to do underneath that.

This is where all of your solution design that you’ve done, and any assessment you’ve done really comes to the fore. Your ‘as is’ assessment tells you what your current cost base is, so that’s your current run costs of the function, the your people costs, your facilities costs, your systems, any outsource costs, any external third party suppliers to your function, and also any addressable spend areas. If in procurement or the viewer external third party spend that your procurement function should hopefully be getting better value from it, should probably be part of your business case. Even in HR you’ve got a significant amount of recruitment and training spend, contractors. And there’s that, often thorny, issue of “is this contract to spend sat in procurement? Does it sit in HR? Who’s actually accountable?” For quite a long time no one’s accountable and it kind of falls between the cracks. But there’s massive opportunity there, often millions of pounds worth of upside, by managing your contractor workforce better.

So whatever that [business case] format is, absolutely use it. But actually, you’re probably going to need something underneath that, that really breaks your cost down into a more granular level and work with your financial controller, with a finance business partner, whoever’s been assigned. Firstly, make sure you have someone from finance during your programme. Even if your finance function is going through transformation, you need a named individual who’s going to work with the work programme lead on this, to bring that kind of external challenge, especially around benefits. And you need to ensure that any benefits that you put into your business case have been through a robust level of scrutiny, internally from your finance team, and they have really put you through the wringer on it. Because as you take your business case through for approval, you want them stood next to you, ideally presenting the business case on. Because if the CFO asked the financial controller to sign off on these numbers, and they have not seen them before, no one wants to be in that place. One sure way of having to at least go again or just gives it, in fact a whole load of more credibility, is if you’ve done that due diligence, got people round the table the other area to really look at: is the treatment of the costs, so how much can you actually capitalise versus goes into operational expenses? When cloud projects first came along we used to have quite a lot of trouble; we’re getting auditors and financial controllers to actually agree the implementation costs for actually developing an asset that.  We’ve not really seen that issue in recent years, now that’s kind of gone away, but it is important to pay attention to the areas that you can capitalise because that just makes your return on investment just a little bit easier to manage. If you’re spreading your implementation costs, are in proportion of your implementation costs over five or years, whatever the expected life of the outset is, getting that kind of agreed mapped out, is key. Being clear about where you’ve got systems that you have today, that you’re going to retire, that’s baked into your business case; any changes in headcount, whether operating model costed should say, it might be head count reduction, in one area, increasing another area. You might need to build a new facility site. A challenge that I found with a lot of internal business case templates is they tend to be geared or skewed quite a lot towards capital investment: It’s buildings, it’s IT systems, and that’s fine in and of itself. But what they tend to miss out is a lot of the broader strategic objectives. Not all of them, but it tends to be an area where I think there’s kind of two problems: you can have the business case and it can either be kind of too project focused, rather than transformation focused, or its too asset focused; it’s only considering time, cost benefit sort of arguments and it’s kind of quite transactional. It’s missing that discussion around: “OK is this going to enable me to deliver my business vision for my organisation as a whole?” And sometimes that’s harder to quantify for a business case. It does force you down into number crunching and ultimately it’s a bottom line issue; but things are not easy to quantify, especially for functional transformation, which tends to be more enabling, far more strategic than you know “we’re going to put up this new building so we can put more people in it and have a better use of space, and leather desk costs, and those sorts of things.”

So you can really focus too much on those hard cashable, easy to measure, savings that drives you to perhaps have an overly simplistic view of the world. The real risk there, is that it underplays the amount of change management that needs to happen, and potentially you won’t have sufficient budget set aside for programme costs, those change management costs or portfolio management costs. That it’s too simplified and if you don’t have enough budget set aside you can really fail to win hearts and minds with people because you haven’t got adequate resource or budget set aside to really pay attention to it. You might deliver a new system, some new processes on time and on budget; everybody’s happy but actually over time the costs creep back in and it’s because you haven’t really considered the complete view of the solution. And the people element to the change is kind of really key to that, but on the flipside we’ve all seen business cases that are very fluffy, they don’t talk about strategic benefits or are just poorly defined. Poorly defined benefits and a lot of a lot of benefits that are actually being claimed elsewhere in the organisation as well, so you got to be mindful of that; that you’re not claiming to deliver a something tangible that’s actually being claimed in a different programme in the organisation.

If somebody manages to get a business case through an exec approval that is really fluffy claiming benefits that are stored elsewhere, or attributed to a different programme I’d be surprised. But they do happen in operations and then you do a look back six months later to say “did we actually derive any benefit?” Or they look at that business case and there’s no metrics in it, no measures; you’ve got no means of knowing whether you have delivered greater employee engagement, or whatever it may be: a reduction in cost.


Joe Ales: One of the other areas that can trip you up, is your option analysis. If you are going to present a business case, you need to be really clear what options you’ve considered, and if that option selection isn’t robust you will get rightly challenged on it. So the first thing to consider is what is the ‘do nothing’ scenario? And you need to have fully costed that; you need to have written out a business case that says “okay here are the costs and benefits of doing nothing.” And you would anticipate there’s quite a few disbenefits of doing nothing, of keeping the status quo because otherwise why would you want to do anything? But if you haven’t, as you’ve gone through the scoping phase, been really clear with the executive, kind of key gate reviews: “here’s the options that we’ve considered we’re taking these ones out of scope now, for these reasons.” Whether it’s value, whether it’s cost whether it’s strategic direction, whether it’s technical, whatever the reasons are, if you haven’t had that discussion, well you have had the discussion and delays have happened and you’ve not kept a record of it. And the challenge will be: you get your final business case, you think everybody is on board, but actually at the last minute they go “hold on why haven’t done this?” You can hear that actually having stage reviews throughout your scoping phase is really important to established out front, and we got different episodes that talk about that: some of them on reviews episodes, talk about the importance of governance structure, and getting that right up front. This cannot be presented for the first time to a bunch of execs experiencing this at a point where you’re asking them to put their hand in their pocket. So you’ve got to take them on a journey to get to the destination. Upbringing and presenting the business case with this option A, option B, till maybe two options at that point. But remember that we’ve explored option C, D, and F. We’ve excluded those options for these reasons; because they weren’t practical, they want it cannot make 4 or whatever and now we’re presented with these two and we’ve gone into Ennis those two. You put a huge amount of detail into them the fun part is the definitely it’s the art in the science of the transformation, and discuss his all spawn select. This is all sponsored standing up, articulating the vision, and why programme is so important, yet why that investment is so important for the success of ultimately the business. Really don’t do this in isolation. And the sponsor has to be across the absolute detail of the business case. If they’re not prepared as they go into that meeting and have the CFO challenge them on their NPP calculation, or their tax treatment, or the assumptions that are driving this size of organisation, or market entry in this country, or whatever, the peoples, are to the business case you’re in real trouble. It’s one of those wonderful Dragon’s Den or Shark Tank moments where you’ve done your wonderful pitch and then one of the investors ask “so then tell me about your numbers.” It has kind of turned into a sweaty mess; you don’t want to be putting a sponsor in that position, and as a sponsor you don’t want to ever be in that position, you have got to know your numbers. You really have to know your numbers, when you’re asking people making investment decisions absolutely. And the other thing to remember is, as a sponsor, that you’ve got to be 100% confident that this is the best set of numbers that you could possibly be putting forward. If you haven’t got adequate budget to deliver on the solution design that you’re putting forward at the same time as your business case, and benefits that you are personally committing to deliver to this organisation, that could be potentially career limiting in quite a significant way. So it’s really critical to get into the absolute detail of the business case, and we have touched on, in previous episodes, the importance of sponsors getting into the detail in certain areas. This is one of them. And the components of a business case, you talked a lot about the structure of it, but actually we’ve talked in previous episodes about the things that you can do to help you create that robust business case. Doing voice of the customer, understanding what business problems, you’re trying to solve, be very clear on those. Where do you stack up against other organisations? How do you compare against them? So doing benchmarking of processes, benchmark your costs, benchmark your effectiveness, understand what people spend their time doing, really understand where your operating model is today, and where do you have capability gaps, and what are the capabilities that you need to plug into your function to allow the business to be in more successful, and to align your operating model to what the business is trying to achieve.

If people are listening to this episode for the first time, I’d suggest that they listen to all the previous ones because there’s an awful lot of content in previous episodes that lead up to having a robust business case, where all of the inputs there. It’s not rocket science; this is not rocket science, but if you follow a thorough process you’re more likely to get something off the ground, or likely to be ready to present a case for change to a bunch of execs, and be really compelling.

One of the other points that we talked about previously, is redefining what that vision statement, what’s the vision? The strategic objectives to the programme is what this programme is going to deliver for you, step why. And it can be visionary statements within a set of key deliverables, and key objectives, underpinned by a set of data that you have gathered from the various tools that we’ve talked about. And this is where the storytelling part of it comes in; the case for change, that story that you’re telling the exec about: “we were here. It was a bad place ,we actually went out to talk to you, and you told us this works when it was happening and we talked to people in the business, and these other things were happening. And, by the way, some of the stuff that you thought was bad, it’s a lot worse. And you didn’t even know about that thing over there. But actually, we’ve got a solution, we’ve done work with lots of departments, we’ve looked at lots of different options and where we need to be is over here, and we’re going to get there. We’ve planned all this out and we’ve got an absolutely robust plans, and we’ve thought about our risks and we’re doing this in really structured, well-defined way and we’re going to get you to that wonderful promise land you just described in glowing terms. And here’s the numbers that stand behind it.”

Joe Ales: We focus quite look bit, on this stage of this episode, on the detail of the business case. But you’re absolutely right, in the case for change, the story is just as important as the numbers. The numbers make sure that the team believe, that you as an individual sponsor, are going to get this done. They’re not going to sign it off if the don’t believe; well can it might feel like a leap of faith for some of them, saying “I see I can see where you’re trying to take this, and see that the destination is a good destination. I don’t quite know if the benefits really stack up against what you’re describing, because you don’t have the evidence to support it yet.”

I’ve got some commentary around what the ‘as is’ and what pains are but actually I’ve got no evidence either. We often talk about there’s an awful lot of clowns with lots of opinion right, and actually if you’ve got a bunch of a set of data you might get informed individual. And it’s not data paralysis for all day today to say “so what data do I need to help me construct?” And it’s not about getting the business case off the ground, it’s actually for the sponsored to actually assess: “is this a problem worth solving?” It’s not just a case of let’s just do this to get a business case; no, you are doing a scoping phase to really understand: “is that a problem in my organisation that I need to fix?” And if everything comes back to say “no, everything is wonderful, no nothing needs fixing”, you don’t need a business case.

The business cases is the final stage of a series of analysis that you’ve done throughout a period of six to twelve months, or however long it’s taken, to get to a point where you say: “What we do need to make sense to do something different? And these are the reasons why.” Because this is all the analysis you’ve done and this is what the future is going to look like.

This is our final episode of season one. So you get through your business case, it gets approved, you have a huge celebration because it’s the end of the beginning. But you have not even started. You have no idea what’s about to hit you. The real hard work starts now. So have some drinks, if that’s your thing, and have a nice meal to celebrate with a team; it’s really important to celebrate these things. But get ready for the next phase, and we’re going to cover that in season two, covering build.

Checklist two will be coming out soon on build. It’s a bit more involved than the scoping, it’s fair to say.

Before that, we have got a couple of fantastic interviews that are coming up in the next couple of episodes, these conversations with really experienced, really great transformation professionals that we’ve worked with, and know their reputation, and we certainly value their opinion and their thoughts. And I think our listeners will appreciate hearing others behind the people’s opinions other than just our own.

As ever, please stay subscribed hopefully, or subscribe if you like what you hear. Please do comment and rate us on whatever your podcasting app is and tell your friends about our podcast.