• twitter
  • facebook
  • youtube
  • linkedin

ARTICLES, TIPS, AND ADVICE ABOUT PRODUCT MANAGEMENT, PRODUCT MARKETING, AND PRODUCT STRATEGY

How to Improve Business Case Accuracy (With Tools That Work)

steven haines speaking at product management course

Steven Haines

March 8, 2018

It goes without saying that a product business case is one of the most important documents produced and managed by product managers.  

As you know, the product business case is a standard method used to justify investments in new products, enhancements, technologies, etc.   Within the context of the business case, product managers take on an investment management role. Therefore, they must protect the invested capital of the company and must accordingly manage its exposure to risk.

Business cases are generally designed to answer the question, “If there is a business or market need, and if I could meet that need by making an investment, what are the business and economic impacts if I choose X or do Y?”

In order to accomplish this goal, a good product business case shows expected financial and business consequences of the decision over time, and it includes the rationale for quantifying benefits and justifying capital and operating expenditures. It also describes the overall impact of the investment opportunity in terms that every financially astute manager or executive seeks: net cash flow, discounted cash flow, payback period, and internal rate of return.

With all this said, it is my experience that business cases are not reviewed or audited with any degree of regularity and frequency. Moreover, there’s no established routine to rate and compare (read: benchmark) business case accuracy. This requires a unified methodology used to audit business cases and evaluate their overall success.

I’d like to offer you a simple way to evaluate the success rates of your business case by providing you with a simple scorecard.  The main idea is to isolate various attributes of the case, and then assess the degree to which it contributed, or did not contribute to the desired outcome.  This outcome is described as the product that meets a market and customer need, is competitively positioned, and fulfills its forecast assumptions – among others.

Another benefit of using this method is to allow you to create a unique score for any business case, and to be able to compare scores.  With this, you can influence the creation of best business practices for the cultivation of each attribute. Moreover, you can fine-tune your approach to each aspect of future cases.  However, the ultimate goal is to improve the accuracy of your product business cases so that you can more effectively achieve goals and contribute results with greater predictability and reduced risk.

To begin, here’s a quick overview of the elements of a basic business case:

  1. Framing (or situational summary) – setting the context and background
  2. Business need or strategic fit – describing how the firm will benefit from this product investment in line with the strategic goals of the firm, and the associated product strategy.
  3. Market assessment – explaining the characteristics of the market, desired segments, targeted customers, and industry trends.
  4. Product description and definition – conveying the functionality, features, attributes, designs, and desired customer experience.
  5. Project plan – laying out the parameters of people, resources, scope, and time.
  6. Forecasts, financials, and assumptions – depicting future volumes, pricing, revenue, costs, gross-margins, expenses, and profits.
  7. Operations and implementation plans – describing how the business will adapt and incorporate the product’s business (or incremental aspects) into the current business model. It also covers the product launch or go-to-market program.
  8. Risks and contingency plans – ensuring that the company’s investment is shielded from unwarranted problems.
  9. Recommendation – portraying the team’s decision.

While this standard business case framework as the starting point, the business case audit or review requires a little more detail.  One way to look at this is through the lenses of the homework done or source documentation.

Here’s how it works:

One of the sections of the business case talks to the market assessment.  With this, you would want to have detailed information about the targeted market segment, characteristics of that segment, trends, and the specifics behind the customer’s needs or motivations.  This is important because it directly influences the forecast (both for quantities and timing), and other factors.

To set up an audit pattern, the table below portrays how to examine some of the supportive elements of the market assessment portion of the business case.   Notice there’s a cell for the accuracy score, shown on a scale of 0 to 100. Accuracy is associated with the degree to which the section of the case contributed to the outcome.   

Your job would be to take each business case element, provide a score, and understand why the score was given, how it affected the outcome of the business case, and what should be done to remedy the situation if the outcome was unsatisfactory. product management business case accuracyproduct management business case table

As you use a format as shown here, you’ll want to ensure that you look at as many elements that have dependencies on the outcome.  You have to connect the dots – from market assessment to the forecast, and to financial success. This allows you to figure out areas where data may have been missing or complete, or where a price may have not been associated with a value proposition, or any other association.

Also, this is not a once and done exercise.  Your team will greatly benefit if you are able to create and continuously develop the list of elements that will enable you to really get to the root cause, and provide the necessary corrective action.

For reference, take a look at Chapter 14 of The Product Manager’s Desk Reference (2e) entitled “Justifying Product Investments: The Business Case.”

About The Author

steven haines speaking at product management course

Steven Haines

Get Actionable Tips from Industry Experts Delivered Weekly!

Sequent Learning Networks

More than 300 product managers have already subscribed!

loading form...

You May Also Like

Sign In
0
Your shopping cart is empty