PRINCE2_LESSON_04.pdf

PRINCE2® Foundation Lesson 4—Business Case Theme

Based on AXELOS PRINCE2® material. Material is reproduced under licence from AXELOS Limited. All rights reserved. PRINCE2® is a [registered] trade mark of AXELOS Limited, used under permission of AXELOS Limited. All rights reserved. AXELOS® is a [registered] trade mark of AXELOS Limited, used under permission of AXELOS Limited. All rights reserved.

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The Swirl logo™ is a trade mark of AXELOS Limited, used under the permission of AXELOS Limited. All rights reserved.

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Objectives After completing this lesson, you will be able to:

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●

Define a Business Case theme

●

Explain the PRINCE2® approach to Business Case theme

●

Describe the development of a Business Case

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Purpose of Business Case Theme The purpose of the Business Case theme is to establish mechanisms to judge whether the project is (and remains) desirable, viable and achievable as a means to support decision making in its (continued) investment.[1] After synthesising the need for Business Case theme, the main elements to be understood are: ●

Desirable—means the cost/benefit/risk balance.

●

Viable—implies that project can deliver the product.

●

Achievable—means the products can deliver the benefits.

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For composition of Business Case, please refer PRINCE2® Manual Appendix A. Copyright 2014, Simplilearn, All rights reserved.

Business Case—Introduction The definition of Business Case is as follows:

The Business Case presents the optimum mix of information used to judge whether the project is (and remains) desirable, viable and achievable, and therefore worthwhile investing in.[2]

The salient features of Business Case are:

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●

Business Case is continually updated with costs, timescales, risks and benefits.

●

Outline Business Case is developed during Starting Up a Project process.

●

Detailed Business Case is developed during Initiating a Project process.

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Outputs, Outcomes and Benefits of a Project The outputs, outcomes and the benefits are considered while deciding the desirability of a project. Let us look at these terms individually:

Output

Outcome

Benefit

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A project’s output is any of the project’s specialist products whether tangible or intangible. Example: New Enterprise Resource Planning (ERP) system for the HR department.

An outcome is the result of the change derived using the project’s outputs. Example: Faster application and approval of leaves.

A benefit is the measurable improvement resulting from an outcome that is perceived as an advantage by one or more stakeholders. Example: Employee productivity up by 5%, employee satisfaction levels up by 7.5% and revenue increased by 10% annually. Copyright 2014, Simplilearn, All rights reserved.

Relationship between Outputs, Outcomes and Benefits The figure illustrates the relationship between Outputs, Outcomes and Benefits.

Figure 4.1 Relationship between outputs, outcomes and benefits. Copyright © AXELOS Limited 2013. Material is reproduced under licence from AXELOS. All rights reserved.

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Benefits Review Plan The Senior User specifies the benefits and is accountable for the benefits realisation. The different features of Benefits Review Plan (BRP) are the following: ●

Every Project should have a Benefits Review Plan or BRP.

●

BRP is first created by the Project Manager in the initiation stage and submitted to the Project Board for approval when seeking project authorisation.

●

BRP defines the scope, timing and responsibility of reviews depending on the expected benefits.

●

BRP is updated at the end of each stage by including the actual benefits achieved (if any).

●

BRP is different from project plan and stage plans.

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For composition of BRP, please refer PRINCE2® Manual Appendix A. Copyright 2014, Simplilearn, All rights reserved.

Business Case for Different Types of Projects The nature of the project determines the objectives to verify the desirability of the project. Later, it is confirmed whether the project’s products have met the objectives. ●

The various types of projects are compulsory, not-for-profit, evolving, customer/supplier and multiorganisation project.

●

Some of these projects may be measured principally on Return on Investment, however others like the not-for-profit projects may be measured on other non-financial benefits.

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PRINCE2® Approach to Business Case Continued business justification is ensured by assuring the justification of the project when starting and also re-verifying this at the end of every stage. In PRINCE2®, the Business Case is developed at the beginning of the project and maintained throughout the life of the project, being formally verified by the Project Board at each key decision

point, such as end stage assessments, and confirmed throughout the period that the benefits accrue.[3]

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PRINCE2® Approach to Business Case (contd.) Let us look at the terms develop, verify, maintain and confirm individually. Develop

Business Case should be first developed in the beginning of the project and maintained through the life of the project. Verify The Project Board needs to verify to make sure that project is desirable, viable and achievable as per the Business Case. Maintain The Project Manager needs to update Business Case with actual costs and timescale data of current stage and provide the forecast of the costs and timescales of the upcoming stage. Confirm An assessment to confirm whether the planned benefits have been or will be realised. 10

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Development of Business Case In PRINCE2®, Executive is responsible for the Business Case. Development of the Business Case may be delegated to a Business Analyst or a Project Manager. The other features of Business Case are: ●

The outline Business Case is derived from the project mandate and developed pre-project in the Starting up a Project process.

●

The detailed Business Case is derived from the outline Business Case, the Project Plan, which provides inputs like costs and timescales and the Risk Register.

Figure 4.2 The development path of the Business Case. Copyright © AXELOS Limited 2013. Material is reproduced under licence from AXELOS. All rights reserved.

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Verify and Maintain Business Case It is the responsibility of the Executive to assure the project’s stakeholders that the project remains desirable, viable and achievable at all times. To drive the decision making, the Business Case should

be reviewed by: Corporate or programme management

Approves the Outline Business Case. Reviews the Detailed Business Case as part of Benefits Review.

May review the Outline Business Case during the Starting up a Project process to take a call on whether to initiate the project. Project Board

Refers the Business Case while assessing impact of any change, issue or risks. Project Manager

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Content of Business Case Business Case comprises:

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●

An Executive summary

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Business options—Do nothing should always be the starting option

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Expected benefits—Quantification of benefits is necessary for setting up the benefits tolerances

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Expected dis-benefits—Negative outcome of carrying out a project

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Timeframes—What period the project cost will be incurred and when to expect benefits

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Costs—On-going operations and maintenance costs and their funding arrangements

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Investment appraisal—Includes the development, operations and maintenance costs

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Major risks—Document the major risks foreseen in the project

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Roles and Responsibilities in Business Case Theme The table lists the responsibilities of Corporate or programme management and Executive in Business Case theme.

Role

Responsibilities

Corporate or programme management

● ● ●

Executive

● ●

●

Provide the project mandate and defines any standards to which the Business Case needs to be developed. Hold the Senior User(s) to account for realising the post-project benefits enabled by the project’s products. Responsible for the Benefits Review Plan (post-project). Responsible for the Business Case for the duration of the project. Responsible for the Benefits Review Plan (for the duration of the project) unless being managed by corporate or programme management. Oversee the development of a viable Business Case, ensuring that the project is aligned with corporate strategies, and secure the funding for the project.

Text in box is from Managing Successful Projects with PRINCE2®. Copyright © AXELOS Limited 2013. Material is reproduced under licence from AXELOS. All rights reserved.

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Roles and Responsibilities in Business Case Theme (contd.) The table lists the responsibilities of Senior User(s) and Senior Supplier(s) in Business Case theme.

Role

Responsibilities

Senior User(s)

● ● ● ● ●

Responsible for specifying the benefits upon which the Business Case is approved. Ensure the desired outcome of the project is specified. Ensure that the project's products deliver the desired outcomes. Ensure that the expected benefits (derived from the project’s outcomes) are realized. Provides actual versus forecast benefits statement at the benefits reviews.

Senior Supplier(s)

● ●

Responsible for the supplier Business Case(s) (if they exist). Confirm that the products required can be delivered within the expected costs and are viable.

Text in box is from Managing Successful Projects with PRINCE2®. Copyright © AXELOS Limited 2013. Material is reproduced under licence from AXELOS. All rights reserved.

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Roles and Responsibilities in Business Case Theme (contd.) The table lists the responsibilities of Project Manager in Business Case theme.

Role

Responsibilities

Project Manager

● ● ● ●

Prepare the Business Case on behalf of the Executive. Conduct impact analysis of any new or revised issues or risks that affect the project’s desirability, viability or achievability against the original basis for approving the project. Assess and update the Business Case at the end of each management stage. Assess and report on project performance at project closure.

Text in box is from Managing Successful Projects with PRINCE2®. Copyright © AXELOS Limited 2013. Material is reproduced under licence from AXELOS. All rights reserved.

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Roles and Responsibilities in Business Case Theme (contd.) The table lists the responsibilities of Project Assurance in Business Case theme. Role

Responsibilities

Project Assurance (business assurance responsibilities)

● ● ● ● ● ● ● ●

Project Support

●

Assist in the development of the Business Case. Verify and monitor the Business Case against external events and project progress. Ensure the project fits the overall programme or corporate strategy. Monitor project finance on behalf of the customer. Ensure the value-for-money solution is constantly reassessed. Monitor changes to the Project Plan to identify any impact on the needs of the business or the Business Case. Review the impact assessment of potential changes on the Business Case and Project Plan. Verify and monitor the Benefits Review Plan for alignment to corporate or programme management.

The Business Case should have a baseline and therefore be under configuration management. Project Support should advise the Project Manager of any proposed or actual changes to products that affect the Business Case.

Text in box is from Managing Successful Projects with PRINCE2®. Copyright © AXELOS Limited 2013. Material is reproduced under licence from AXELOS. All rights reserved.

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Quiz

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QUIZ

How does the Business Case theme support the continued business justification

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principle? Allows projects not delivering direct benefits to proceed without a Business Case b. Removes the need for a separate Business Case where a project is part of a programme c. Mandates that even the simplest of projects should have a Business Case d. Ensures a new Business Case is created at the end of each stage to confirm the viability of the next stage

a.

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QUIZ

How does the Business Case theme support the continued business justification

1

principle?

a.

Allows projects not delivering direct benefits to proceed without a Business Case

b. Removes the need for a separate Business Case where a project is part of a programme c.

Mandates that even the simplest of projects should have a Business Case

d.

Ensures a new Business Case is created at the end of each stage to confirm the viability of the next stage

Answer: c. Explanation: The Business Case theme supports the continued business justification principle by a mandate that even the simplest of projects should have a Business Case. 20

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QUIZ

In PRINCE2®, the desirability of the project is determined by analysing which of the

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following?

a.

Business Case

b. Project Plan

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c.

Checkpoint Reports

d.

Stage Plan

Copyright 2014, Simplilearn, All rights reserved.

QUIZ

In PRINCE2®, the desirability of the project is determined by analysing which of the

2

following?

a.

Business Case

b. Project Plan c.

Checkpoint Reports

d.

Stage Plan

Answer: a. Explanation: In PRINCE2®, the desirability of the project is determined by analysing the Business Case. 22

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QUIZ

To whom among the following can the Project Board assign the work of assisting the

3

development of Business Case?

a.

Senior User

b. Senior Supplier

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c.

Project Assurance

d.

Project Support

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QUIZ

To whom among the following can the Project Board assign the work of assisting the

3

development of Business Case?

a.

Senior User

b. Senior Supplier c.

Project Assurance

d.

Project Support

Answer: c. Explanation: The Project Board can consider using Project Assurance to assist the development of the Business Case. 24

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QUIZ

Which of the following is not a business option in PRINCE2®?

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a.

Do nothing

b. Do something

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c.

Do the minimum

d.

Do everything

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QUIZ

Which of the following is not a business option in PRINCE2®?

4

a.

Do nothing

b. Do something c.

Do the minimum

d.

Do everything

Answer: d. Explanation: Do everything is not a business option in PRINCE2®. The business options as per PRINCE2® are: do nothing: always the starting option, do the minimum, and do something. 26

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QUIZ

Who among the following can the Executive use to verify the viability of the Business

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Case?

a.

Project Support

b. Project Assurance

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c.

Senior Supplier

d.

Team Manager

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QUIZ

Who among the following can the Executive use to verify the viability of the Business

5

Case?

a.

Project Support

b. Project Assurance c.

Senior Supplier

d.

Team Manager

Answer: b. Explanation: The Project Board can consider using Project Assurance to assist with the development of the Business Case. So an Executive can also use Project Assurance to verify the viability of the Business Case. 28

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QUIZ Who is responsible for ensuring that benefits reviews are planned and executed?

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a.

Team Manager

b. Executive

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c.

Senior Supplier

d.

Project Manager

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QUIZ Who is responsible for ensuring that benefits reviews are planned and executed?

6

a.

Team Manager

b. Executive c.

Senior Supplier

d.

Project Manager

Answer: b. Explanation: By default, the Executive is responsible for ensuring that benefits reviews are planned and executed. 30

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QUIZ

According to PRINCE2®, which is the starting business option that provides basis for

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quantifying other options?

a.

Do nothing

b. Do something

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c.

Do the minimum

d.

Do everything

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QUIZ

According to PRINCE2®, which is the starting business option that provides basis for

7

quantifying other options?

a.

Do nothing

b. Do something c.

Do the minimum

d.

Do everything

Answer: a. Explanation: Do nothing should always be the starting option to act as the basis for quantifying the other options. 32

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QUIZ

Which of the following would provide information that can be documented under the

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reasons section of the Business Case?

a.

End Stage Report

b. Project Brief

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c.

Project mandate

d.

Project Plan

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QUIZ

Which of the following would provide information that can be documented under the

8

reasons section of the Business Case?

a.

End Stage Report

b. Project Brief c.

Project mandate

d.

Project Plan

Answer: c. Explanation: Project mandate covers the required reasons for the project.

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QUIZ

Who approves or disapproves the outline Business Case that is developed in the

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starting phase a project process?

a.

Project Board

b. Executive

35

c.

Project Manager

d.

Senior User

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QUIZ

Who approves or disapproves the outline Business Case that is developed in the

9

starting phase a project process?

a.

Project Board

b. Executive c.

Project Manager

d.

Senior User

Answer: a. Explanation: Project Board approves or disapproves the outline Business Case. Based on the approval, Initiating a Project process gets kicked off. 36

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QUIZ

Who is responsible for reporting the benefits that are measurable during the lifecycle

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of a project?

a.

Project Manager

b. Senior User

37

c.

Senior Supplier

d.

Team Manager

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QUIZ

Who is responsible for reporting the benefits that are measurable during the lifecycle

10

of a project?

a.

Project Manager

b. Senior User c.

Senior Supplier

d.

Team Manager

Answer: a. Explanation: The benefits that can be measured during the life of a project should be reported by the Project Manager in the end stage report. 38

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Summary Here is a quick recap of what we have learnt in this lesson:

●

The Business Case presents the optimum mix of information used to judge whether the project is (and remains) desirable, viable and achievable and therefore worthwhile investing in

●

The Senior User specifies the benefits and is accountable for the benefits realisation

●

Development of the Business Case may be delegated to a Business Analyst or a Project Manager

●

It is the responsibility of the Executive to assure the project’s stakeholders that the project remains desirable, viable and achievable at all times

39

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Thank You

Based on AXELOS PRINCE2® material. Material is reproduced under licence from AXELOS Limited. All rights reserved. PRINCE2® is a [registered] trade mark of AXELOS Limited, used under permission of AXELOS Limited. All rights reserved. AXELOS® is a [registered] trade mark of AXELOS Limited, used under permission of AXELOS Limited. All rights reserved. The Swirl logo™ is a trade mark of AXELOS Limited, used under the permission of AXELOS Limited. All rights reserved.

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Copyright2014, 2014, Simplilearn, All rights reserved. Copyright Simplilearn, All rights reserved.

References [1] Based on Managing Successful Projects with PRINCE2®, by AXELOS. Business Case, Purpose. [2] Based on Managing Successful Projects with PRINCE2®, by AXELOS. Business Case, Business Case defined. [3] Based on Managing Successful Projects with PRINCE2®, by AXELOS. Business Case, The PRINCE2

approach to the Business Case.

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