Business Case: Why Do You Do What You Do
“Talk sense to a fool and he calls you foolish.” ― Euripides
MENTAL MODEL
A business case is the reasoning for initiating a project or task. Many projects are started by using a business case presented in a structured document or presentation. The logic is that whenever resources like money or effort are consumed, they should be in support of a specific business need. This keeps us from making stupid, wasteful decisions. An example is a software upgrade. It might improve system performance. The business case here is a rise in customer satisfaction, reduced system maintenance cost, and less task processing time. See it as the “value proposition for a project that includes financial and nonfinancial benefit.”
Business cases can be comprehensive and highly structured or informal and brief. The more detailed, the better, generally. It includes the background of the project, the expected business benefit, the options and alternatives considered, the expected costs, and the expected risks. Among the options is the choice to do nothing and what the costs and risks of inactivity are. Using this, a business case is formulated, and a project is either justified or let go of. We create them to ensure that: (a) the thing we do will have value and enough to be a relative priority compared to alternative initiatives and (b) the performance indicators and objectives and benefits laid out in the business case are realized.
A good business case should be: adaptable (tailored to the proposal), consistent, business-oriented, understandable (contents are clearly relevant, logical, simple to evaluate), measurable (key aspects can be quantified, their achievement tracked and measured), transparent, and accountable (delivery of benefits and management of costs and who does what is clear). If you can formulate a business case for your choice, it’s probably a good decision. It essentially answers two questions for you: “Why this project?” and “Why now?”
To use business cases effectively, its easiest to see it in the form of questions. What is the opportunity? (e.g. declining market share due to outdated tech) What do you intend to achieve? (e.g. increased efficiency by 20 percent) How will you address the opportunity? (e.g. implementing a new ERP system) What are the benefits? (e.g. cost savings, productivity, and competitive advantage) What are the costs? (e.g. upfront investment and ongoing maintenance) What could go wrong? (e.g. implementation risk and employee backlash) Why now? (e.g. a competitor is set to launch a similar product) What are the alternatives? (e.g. do nothing, in-house development, different tech vendors) How will we do it? (e.g. a phased rollout with success criteria at every stage) What is the payoff? (e.g. a detailed ROI analysis that shows the break-even point and long-term wins)
Real-world examples of business cases:
Technology Upgrade in Manufacturing: the problem is outdated production equipment that’s causing inefficiencies and higher costs. The case: a technology upgrade to modern, automated machinery. Benefits: 25 percent increased efficiency, reduced production cost, and improved product quality. Costs: significant upfront investment offset by long-term savings. Timing: urgent since competition is rising. Outcome: the project is approved, resulting in a surge of productivity and a regain of their competitive edge.
Market Expansion for a Retail Chain: the opportunity is entering a growing urban market with untapped customer potential. The case: opening new stores in high-density areas. Benefits: expected revenue growth, increased brand visibility, and economy of scale. Costs: real estate, staffing, and market expenditure. Risks: a saturated market. Timing: immediate action is needed as competitors are beginning to flood the market. Outcome: strategic expansion that results in a significant boost of market share and profitability.
How you can use the business case as a mental model: (1) clarify the “Why this?” and “Why now?” — before initiating a project, clearly articulate the underlying reason for its necessity; (2) make it mathematical — quantify the benefits, costs, and risks, using data and benchmarks to back your estimates; (3) compare alternatives — see how different approaches work to make sure the chosen solution is the most effective, explaining to yourself or relevant stakeholders why other options were not selected; (4) structure the implementation — devise a roadmap with milestones, timelines, and resource investments to see how the project will be executed over time; (5) formalize it — if its particularly high-stakes, prepare a concise document or presentation that outlines your case, focusing on the proposed value and risks.