During 2019, Claverton undertook research into the most common causes of
transformation failure – watch out for the results being published later in 2020. One of the most notable findings was that people rank the quality of the original business case in the top 5 root causes of failure. In this blog we will explore why this might be the case and understand what we can do to avoid it happening to us.
We discovered that transformation professionals faced with struggling transformation programmes often realise that the programme business case either wasn’t viable in the first place or became severely compromised sometime during the transformation journey.
Any business case should encapsulate the drivers of transformation and the beneficial outcomes – if those are compromised the programme itself needs to be examined. It is the role of the Transformation Sponsor to ensure that it is viable, at the outset and beyond. So, why might a business case be flawed?
Why might a business case be flawed?
We need to get it approved: Business cases are invariably written with the aim of making an initiative happen and inevitably, given the motivations of the sponsor, it paints the initiative in the best possible light to achieve approval. When people know their case doesn’t fit ‘approval criteria’ they might be tempted to squeeze it to fit, so that it gets approved
We only need high-level understanding: strategic projects can offer business cases which emphasise the critical nature of the project and frame out the benefits at a high-level, without demonstrating their achievability
Sales trumps delivery: some people and organisations buy the sales pitch too readily without scrutinising the detail of whether something is credible and achievable. The attraction of the outcomes and benefits outweighs concerns about the costs
Your eyes are bigger than your stomach: complex transformation business cases tempt the reader with a pot of gold at the end of the rainbow, but does your organisation have a great record of delivering transformational change, over long periods? If not, think about whether bite-sized change might be more consumable
Stress testing isn’t carried out: what if you’re project takes another two years? What if your assumptions were flawed? What if your suppliers don’t deliver? What if customer tastes change? What if the market moves? These are some examples of questions that should be asked and answered before the business case is presented in order to validate it; or, at least approve the programme with your eyes open as to the risks
The resulting case will always attempt to convince the reader to say “Yes!” to the proposition and it is important that you do not allow it to omit or obscure uncomfortable questions or facts. It is worth considering that not every idea is a good idea; it is quite possible that if a business case could be written to say that the initiative is not worth doing, then it’s not worth doing.
What are the risks of a marginal business case?
Most transformation programmes run the risk of coming under fire if there are delays, conflicts or cost overruns. With a strong business case, a robust strategic roadmap and strong stakeholder support it is possible to ride such things out. However, with a marginal business case, the impact of underperformance will be felt more acutely:
Political discomfort: a marginal case leaves you little room for political manoeuvre. If costs or risks increase, or timescales begin to lag it invites pressure and stress on the sponsor and the team. Often this develops into credibility problems for those who are leading the programme
Other stakeholder priorities: should the benefits start to decay against a borderline case, such that the payback is threatened, stakeholders may seek to kill the programme to free up resources for other projects
Fail (too) fast: there’s a mantra, ‘if you’re going to fail, fail fast’; but there’s such a thing as failing way too quickly. Should multiple risks crystallise without a budgetary insurance policy (i.e. a chunk of contingency), there is a possibility that you will fail very quickly, damaging the credibility of yourself and the leadership team
Sub-optimal business operations: if a major transformation overruns, overspends or leaks benefits it might be stopped before the objectives are achieved, creating a failed state and leaving the area being transformed in a sub-optimal position. Another costly transformation might be required to repair the damage
No surprises: risks and issues which emerge after programme approval can quickly undermine the entire transformation, particularly if they result in nasty surprises, budget requests or impact the wider organisation
Scope control: marginal cases have precious little room for scope change or increases. More likely, a marginal case will end up de-scoping components, adversely affecting solution quality, the resulting operating model and potentially reducing the benefits you committed to when the business case was signed off
Sponsors can change: a new Sponsor coming in is likely to re-evaluate the case, with one of the outcomes being that they decide it is not strong enough for them to take the programme on. Again, this can kill the programme off before the business outcomes have been achieved and leave the business in need of another initiative if those outcomes remain valuable.
How can I avoid producing a marginal business case and offset its risks?
The following tips should help you to build and maintain a great business case:
Be honest with yourselves: the most important advice we can give you is don’t pull the wool over your own eyes. Not only do you expose your case to those who might challenge it, but you won’t build a robust case if you cannot accept the facts, assumptions and costs associated with getting it done. Tip: always build a set of numbers that factor in everything going wrong and see if your case (and your stakeholders) will still stand up for it
Get some experienced transformation help: from the gestation of the programme, get one or two people on board to help you shape the transformation proposition who can advise you on the core dimensions of transformation, the typical risks you will face. Tip: experiences transformation leaders can help you understand the opportunities and pitfalls that may present themselves, and offer you options to deal with them
Assign benefits owners: ensure that benefits realisation is owned by the key beneficiaries, is baked into profit/cost centre budgets and that the accountability for the realisation of those benefits rests jointly between the programme and the owners. Tip: collective responsibility creates a sense of shared ownership for the outcomes of the programme and helps deliver your business case during difficult times
Socialise the case very clearly: to ensure that the Steering Committee and other executive leader understand any constraints. Documenting key risks, issues and assumptions accepted during the approval phase by a Steering Committee provides a frame of reference to draw upon. Tip: Stakeholder sign-off should require rigorous review and challenge to ensure that the business case is viable
Make assumptions visible: ensure that the assumptions which underpin the case are socialised, thought about and the implications are truly understood of each assumption being broken. Also, look at the cumulative effect of several assumptions breaking and ensure that key stakeholders buy into that risk, and will continue to support the programme should it occur. Many transformation programmes document assumptions (each of which is a form of risk which requires active management) but few acknowledge them effectively at Executive level. Tip: treat every key assumption as a risk and ensure your stakeholders and Steering Committee accepts them as such
Make sure that the business case itself:
Is measurable: with a clear articulation of the financials and how they will be achieved, baking numbers into budgets along with a regular process to track progress and reassess the viability of the project
Tells a story: it is important that the financials tell the transformation story, its journey and its outcomes
Is complete: the case should include both the good and bad news to ensure that all stakeholders have a clear understanding about the commitments they are being asked to make. This will prevent unpleasant surprises later and ensure your credibility is high from the project outset
Contains clear, justified contingency (both funds and time): contingency should be there to allow for the crystallisation of risks, the potential for change / scope creep, and to cope with delays should any occur. The use of all contingency should be assumed as part of stress testing your business case, i.e. its inclusion should not create a negative Net Present Value (NPV) or reduce the Internal Rate of Return (IRR) below acceptable levels
Produce a series of business cases: within the framework of one overall case. This allows for validation against strategic goals whilst maintaining sharp focus on the outcomes and financial imperatives at the end of key milestones or stages. This is particularly helpful for large-scale, complex transformation programmes which span several years. Tip: pre-define and agree key business case checkpoints where updates or re-writes will take place
Conclusion
As you prepare a business case, you should insist that it presents a balanced view: it is tempting to attempt to convince the reader to say “Yes!” to the proposition and omit or obscure uncomfortable questions or facts. Ensure you independently challenge your case to achieve robustness and avoid a marginal case wherever possible. And, most importantly of all, if the case is well prepared and it still suggests that you shouldn’t do it, consider not doing it at all.
Contact Claverton To contact our experienced Transformation leaders please visit our website (www.clavertonconsulting.co.uk) or email info@clavertonconsulting.co.uk.
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