Phase 5 Guide: Business Case
This short guide provides some advice on implementing the Innovation Process. It specifically focuses on the ‘Business Case’ phase. It is part of a broader toolkit, which provides advice, with tools and worked examples, on a full process that has been developed, tested and refined in partnership with a number of local authorities and is firmly rooted in innovation practice as well as theory.
The key aims and objectives of this phase are to select a small number of projects, from the 5–10 project definitions emerging from the previous phase, to take forward and develop business cases. Activities in this phase will typically involve determining what level of business case is necessary and sufficient to support the decision to take a project forward, and then developing a case for each project. Business case development is best undertaken through collaboration with the key stakeholders who will help to deliver a project or be impacted by it in any way.
At the start of this phase you will have: |
At the end of this phase you will have: |
- 5-10 favoured solutions to key problems, with an audit trail of how these solutions were filtered | - 2-3 business cases for projects: |
- Feedback on these solutions from; users, event participants and other key stakeholders |
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- 5-10 well defined projects based on these solutions; explaining how they could be practically implemented |
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- Potential implementation partners identified and engaged |
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Key activities are outlined in below, with additional detail later in this guide:
Project Selection |
The amount of time and effort in this phase will depend what level of detail is required by the senior stakeholder to approve a project, and also what is required by the funder and finance team to support due diligence.
A number of supporting tools and guides are available to help with this phase:
Overview |
Guides |
Tools |
Examples |
The process has been following a typical innovation funnel as illustrated in Figure 1. During the innovation event many ideas emerged to key problems identified against the main issue or challenge. These were consolidated and reduced to a smaller number of better-defined solutions. During the next phase solutions were shortlisted against robust and transparent criteria and then further researched to begin to answer questions about how they might be practically delivered. At this stage solutions were turned into better-defined projects. At each stage of the innovation funnel the quantity of ideas, solutions and projects has been reduced, but their maturity has increased. The business case stage is no different. A short-listing meeting is held, preferably with the senior stakeholder to make recommendations on the few projects for which to go ahead and develop business cases. The bulk of this stage is spent developing these business cases in preparation for a final milestone meeting at which a decision on which project(s) to take forward will be made.
Figure 1 Innovation Funnel Mapped Against Process |
At the end of the last phase the final project definitions were assessed against the idea filtering criteria, which enabled a clear recommendation to be made on the few projects to take forward to the business case stage. This is a good point at which to meet again with the senior stakeholder to feedback the results of the innovation process to date, to present the breadth of projects that have emerged, and then to offer recommendations on which projects to take forward. The results of the user/ stakeholder testing will also be important to convey at this project selection meeting. Once again a small list of recommendations on how to handle the projects that are not selected would be helpful. The outcome of this meeting should be clear agreement on which projects to proceed with and some direction on what level of detail in the business case is required for a final action decision.
Collaborative Business Case Development
It is important to strike the right balance between the level of effort to produce a business case and the level of investment required to implement the project being assessed. There may be local rules, standards and guidance to support developing a proportionate assessment and these should be well understood before proceeding with this stage of the innovation process. If it is the intention of the project team to submit a bid for a grant to take forward the best solutions from the innovation process, then this is also a good time to look at the business case and template requirements made by the grant body.
There is plenty of national guidance on business case development:
Even for small projects emerging from the innovation process it is worth developing a short, succinct business case. This is because business cases answer some key questions at the start of the project, which if left unanswered, could derail a project much later on when resources have been expended. They are also important for benefits realisation, and keeping the project team focused on delivering the impact envisaged when the idea was originally conceived.
Some particular issues with business cases for projects with social outcomes, and potential ways of dealing with them, follow.
Business Cases are often dominated by one organisation’s perspective (possibly because the wide economic case gets muddled up with the financial case that solely looks at the affordability to the funder); this means that costs and benefits that fall elsewhere other than the lead organisation are not typically as well understood and this can cause problems later with implementation. This issue particularly impacts social and digital inclusion projects where partnership working is often a route to more effective and efficient delivery for the hardest to reach. Ways of the dealing with this issue include:
[1] A burden might be a direct cost borne by a stakeholder, indirect cost related to time and effort, or a potential negative outcome which might make the stakeholder less supportive of the project during delivery.
Social projects often deliver softer, less monetary benefits, which are difficult to compare against seemingly more tangible costs in a business case, but HM Treasury is clear that they are a necessary part of the economic case. Ways of the dealing with this issue include:
Project costs are often underestimated, incomplete or inaccurate, which can cause significant problems during implementation if additional funding is required. Ways of the dealing with this issue include:
In addition to the guidance and prompts that have already been provided there are a number of more holistic toolkits that are available for developing business cases:
Draft and Validate Business Cases
As has been highlighted already, it’s important that the key stakeholders who are impacted by the business case, and/or are vital to project delivery, are sighted on drafts, are able to comment, can agree the final business case and are able to validate the costs and benefits associated with them. Ideally all the delivery partners in particular have their names and logos on the business case, then at the milestone decision meeting in Phase 6 the senior stakeholder can have confidence that the business case provides an accurate assessment and is deliverable.
Finally, it should be recognised that the business case process is often iterative. It is a live document to be revisited during project delivery. So the output of this phase should be considered a starting point.
Do develop a proportionate business case which balances time and effort against the scale of investment envisaged. |
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Do involve stakeholders in cost and benefit identification and analysis – particularly those who are vital to delivering the project. |
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Do make use of the guides and toolkits that are available to help produce business cases. |
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Don’t be tempted to skip the business case phase because the project is too small. The business case stages answers some key questions at the start of the project, which if left unanswered, could derail a project later on. |
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Don’t just focus on the benefits and costs to the lead delivery organisations – identify costs and benefits to all stakeholders. |
© City of London 2010