Recognizing the importance of a business case

The business case is critical in order to get company buy-in. Without it, your company won’t give you the funding to get the product out the door. To make your business case easy to comprehend, divide it up by the following three components:

• The story: The why of the problem you’re looking to solve. Why is solving it so important for a particular customer set or sets? Tell this part as clearly and as simply as possible. Forget fancy words, and don’t go on and on.
• The numbers: The evidence that supports your story. It’s nice that you want to solve a problem for somebody. In the numbers portion, you bring the proof — for example, you have this many potential customers, and with a certain amount of budget an expected level of profitability. Again, simplify. You may have a huge spreadsheet of numbers as background material, but focus clearly on the ones that are most important to support your story.
• The downside: These are the risks and tradeoffs that the company need to be aware of. Here’s a tip from human psychology: If you admit to the weak parts of your business case, the people who hear you will trust you more. Be realistic; tell your audience about the potential downsides, and you’ll actually be better off.

Outlining your business case

Your business case has many components. Table 9-1 briefly outlines the main headings, and we give a more detailed breakdown of each piece of the business case puzzle throughout in this chapter.

Just because a business case has a lot of pieces doesn’t mean it needs to be long. Focus on what is important. Don’t repeat yourself needlessly. When you’re finished writing, put it away for 24 hours and then reread it from the beginning to find any repetition or extraneous information that you can eliminate. Make your goal to cut 30 percent of the content from your completed draft so that you hone in on only the most critical and necessary parts.

Gathering the necessary information

To gather the necessary information for each of the sections of the business case template you’ll do market and competitive research (in many cases by the time you are writing the business case you have already completed these). See Chapter 6 for details on how to do these. One good way to make sure that your business case has enough detail and information is to ask your manager and others in your company what the executives expect to see in a typical business case that is presented to them. Check this against the sections of the business case template and add anything that is specific to your company and the management’s expectations.

Part I: Executive summary

Though the executive summary is the first section of the business case, you write it last, after you know what information you’re summarizing. The goal is to include the following content: problem statement, vision, project evaluation, risks, return on investment(ROI), and recommendation. The summary should be approximately one page — two pages at most — for a completely new idea. See the sidebar “For Example: Executive Summary” in this chapter for a sample of an executive summary. Here are three reasons for making the executive summary short and to the point:

• Executives won’t read anything that is too lengthy.
• When you present the business case for approval, you should already have pre-sold the idea within the organization.
• The details appear in later sections of the business case if questions come up or anyone wants to drill down on the information.

Part II: Problem and opportunity

The problem and opportunity section of the summary addresses what the customer problem is and how your company would solve it. Table 9-2 breaks down the different sections of Part II of your business case.

Part III: Market landscape

The Part III section contains the following three main components:

• Overview: Provide a general overview of the market. Is it a growth industry, or is it an established market that is growing more slowly? Include a brief analysis of where you believe your product’s technology is in its adoption cycle. List the market size, growth, and future projections. Identify any key data points about the market in general. What is the total size of your market? Provide an estimate of the total available market (TAM) in revenue terms if available (total number of potential customers × total number of units per customer × price).
• Trends: What are the top three to five trends you foresee in the industry, both short term and long term? Identify and describe the market growth, competitive situation, trends in consumer or business preferences, and trends in technology in your targeted (and other related) market segments.
• Barriers to entry: Common barriers to entry are high capital costs, high marketing costs, shipping costs, tariff barriers and quotas, brand recognition, consumer acceptance, network effect, vertical integration, training and skills, unique technology, government regulation and patents, unions, and so on. What barriers to entry do you face entering this market?

In the competitive landscape segment of your business case, you answer the question “What barriers do competitors face that we can put in their way?”

Part IV: Competitive landscape

The competitive landscape section describes who you believe your main competitors will be. It begins by describing what your organization is all about and then provides details about your competitors and their products.

Competing products

Compare the top three to five competing products. To retain the focus on the customer, include the value or benefit to the customer for each feature listed. In Figure 9-2, you can see a simplified feature matrix comparison.

Don’t make the mistake of comparing your future product to current competitive products already being shipped. You need to project where you think your competitor’s future products may be when you ship.

Part V: Financial and resource impact analysis

Part V covers the financial and resource impact that bringing your product to market will have on the company. This includes how much it will cost, what the revenues and projected profits will be, and what resources will be required.

Part VI: Risks

Identify the key barriers that could impede the progress of the project in terms of development and bringing it to market. How could the risks affect the company? For each risk, provide an estimate of whether the risk is low, medium, or high. Also include recommendations for reducing the risk. For example, if developing your product is highly dependent on one of your engineers who has deep expertise in an area that no one else in the world does, you might recommend providing a financial incentive to ensure the engineer stays on until the product ships. Keep your answers brief, but make sure you clearly state the risks.

Parts VII through XI: Other sections

Here are some other sections that you can include in your business case for further explanations. Pick and choose from these as needed based on what your executive management is likely to want included.

• Assumptions: A business case is about predicting the future, so unless you have a time machine, you have to make a number of assumptions while writing it. Record your assumptions in this section and be prepared to defend them.
• Open issues: Track any open issues that have come up so far in the project. When the issues are resolved, document it. Assign any unresolved issues to a responsible party. You’ll likely have a number of open issues, which tend to get resolved as the project proceeds. Identify where in the process these issues need to be resolved.

• Conclusions and recommendations: State your conclusion and justification of the recommendation, including the likely effect of following your proposals. What are the pros and cons? Describe alternative options as well as what may happen if the company pursues this opportunity.

  Also identify what will happen if you don’t go forward with the project. Every good executive will ask the question “What if we don’t do this?” at least once. Be prepared to answer it clearly and coherently.

• Governance: Governance is the process for getting approval and moving forward; it includes who needs to be informed of and approve the decisions. Describe the governance processes and structures within the company. What has happened up to this point, and what are the next steps after a decision is made? Be brief.

  List the roles and names of the contributors and key reviewers of this document. Some companies require many signatures and others very few. Some transfer a document electronically, while some create a stapled document that makes the rounds. Keep track of getting full sign-off from everyone that is required so that the project isn’t delayed.

• Exhibits and appendices: This is the place for additional or more detailed information that details the core of your argument. Other pieces common to this section are a glossary, profit and loss projection (see Figure 9-3), any supporting data, and external references.

Getting buy-in for your business case

When the writing is done and you have polished the writing to clarify each part of your business case story, make sure everyone who had input has reviewed it and provided feedback. Your likely next step is to create a short, focused, and compelling presentation to tell your story to your executives to get the funding. The presentation should include everything in your executive summary of the business case. The executives make many decisions every day, so you don’t want to make it hard for them to figure out what’s going on. The clearer your story is, the more likely your business case is to be approved.