Business justification

Business justification
See also
Structure of enterprise planning system Preparation of project Logic matrix Critical chain method Stakeholder management plan Project initiation Tax strategy Benefits of planning Project cycle management

Business justification (also: business case, business rationale) prepared for the project is one of the foundations for its implementation. It allows to assess the desirability, reasonableness and purposefulness of future activities and to assess the probability of success of implementation in the short and long-term perspective. The business case of the project is also a document allowing the entities and institutions supervising the project (stakeholders) to take and justify decisions having an impact on the course of the project. This is one of the essential parts of the basic document initiating the project: Project Charter. To a minimum extent, business justification defines the expected results of the project and gives direction to the project team

The role of business justification

The role of a business justification in a project is to provide a comprehensive and persuasive argument for why the project should be undertaken and to demonstrate that it is a worthwhile investment for the organization. It helps to ensure that the project is aligned with the organization's overall goals and objectives, and that the proposed solution is the most efficient and effective way to address the problem or opportunity.

A business justification serves as a guide for the project team, outlining the scope, objectives, deliverables, and key stakeholders for the project. It also helps to identify potential risks and contingencies, and outlines a plan for mitigating them.

It also helps to secure the necessary resources, including funding and personnel, for the project. By providing a clear and compelling argument for the project, stakeholders such as upper management and investors are more likely to approve and allocate resources for the project.

In addition, a business justification helps to ensure that the project is well-planned and executed, by providing a clear and measurable set of objectives and benefits, as well as a detailed plan for implementation and governance.

The business justification serves as a roadmap for the project, outlining the steps necessary to achieve success and demonstrating the potential benefits to the organization.

Example structure of business justification

A business justification typically includes the following sections:

• Executive Summary: A brief overview of the key points of the business case, including the problem or opportunity, proposed solution, projected costs and benefits, and recommended course of action.
• Problem or Opportunity: A detailed description of the problem or opportunity that the project is meant to address, including the impact it has on the organization and the reasons why a solution is needed.
• Proposed Solution: A description of the proposed solution, including the project scope, objectives, and deliverables.
• Project Costs: A detailed breakdown of the projected costs of the project, including expenses for materials, labor, and any other necessary resources.
• Project Benefits: A detailed analysis of the projected benefits of the project, including financial and operational benefits, and how they align with the organization's overall goals and objectives.
• Risk and Contingency: A description of the potential risks and contingencies associated with the project and the plan for mitigating them
• Implementation and Governance: A description of the plan for implementing the project, including timelines, milestones, and key stakeholders.
• Conclusion: A summary of the key points of the business case, including the problem or opportunity, proposed solution, projected costs and benefits, and recommended course of action.
• Appendices: Additional information and supporting documents, such as financial projections, market research, and regulatory analysis.

It should be noted that the structure of the business justification can vary depending on the organization, project, and audience, but the above-mentioned sections are the common elements that most business justification should have.

Example business justification for a project

Here's an example of a business justification for a project to implement a new customer relationship management (CRM) system:

1. Executive Summary: The current customer relationship management system is outdated and not able to keep up with the demands of the business. A new CRM system is needed to improve customer satisfaction, increase sales, and streamline internal processes. The proposed solution is to implement a new CRM system at a cost of $500,000, with projected benefits of $1 million in increased sales and cost savings of $250,000 per year. The recommended course of action is to proceed with the implementation of the new CRM system.
2. Problem or Opportunity: The current CRM system is outdated and has limited capabilities, resulting in poor customer satisfaction and lost sales opportunities. In order to stay competitive and meet the demands of the business, a new CRM system is needed.
3. Proposed Solution: The proposed solution is to implement a new CRM system that includes features such as automation of sales and marketing processes, improved data analysis and reporting, and enhanced customer tracking and communication capabilities. The project scope includes the purchase and implementation of the new CRM system, as well as training for all employees on its use.
4. Project Costs: The projected costs for the project include the purchase of the new CRM system at $400,000, implementation and customization costs at $50,000, and employee training at $50,000. The total projected cost of the project is $500,000.
5. Project Benefits: The new CRM system is expected to generate $1 million in increased sales through improved lead generation and tracking capabilities. Additionally, the automation of internal processes is expected to result in cost savings of $250,000 per year.
6. Risk and Contingency: There is a risk that the new CRM system may not be fully adopted by employees, resulting in limited benefits. To mitigate this risk, a plan for training and support will be put in place. Additionally, the project will include a pilot phase to test the system before fully implementing it.
7. Implementation and Governance: The project will be overseen by a steering committee, including representatives from sales, marketing, and IT departments. The project will be broken down into phases, including requirements gathering, selection of vendor, customization and testing, deployment, and post-implementation support and monitoring.
8. Conclusion: A new CRM system is needed to improve customer satisfaction, increase sales, and streamline internal processes. The proposed solution is to implement a new CRM system at a cost of $500,000, with projected benefits of $1 million in increased sales and cost savings of $250,000 per year. The recommended course of action is to proceed with the implementation of the new CRM system.
9. Appendices:
   • Financial projections for the new CRM system
   • Vendor comparison and selection report
   • Project timeline and milestones

This is an example of a business justification, but it should be noted that the contents, format, and details of the justification should be tailored to the specific project and organization.

Benefits of business justification

There are several benefits of creating a business justification for a project, including:

• Alignment with organizational goals and objectives: By clearly outlining the problem or opportunity the project addresses and the projected benefits, a business justification helps to ensure that the project is aligned with the organization's overall goals and objectives.
• Securing resources: A well-written business justification can help to secure the necessary resources, such as funding and personnel, for the project by providing a clear and compelling argument for the project.
• Identifying potential risks and contingencies: A business justification helps to identify potential risks and contingencies associated with the project and outlines a plan for mitigating them.
• Improving project planning and execution: By providing a clear and measurable set of objectives and benefits, as well as a detailed plan for implementation and governance, a business justification helps to ensure that the project is well-planned and executed.
• Demonstrating the value of the project: A business justification demonstrates the value of the project to the organization by outlining the projected costs and benefits and showing the potential return on investment (ROI) for the organization.
• Communicating with stakeholders: A business justification serves as a communication tool between the project team and stakeholders, providing them with a clear understanding of the project's goals, objectives, and expected outcomes.
• Evaluating project's performance: A business justification serves as a benchmark for evaluating the performance of the project and determining whether it met its objectives and delivered the expected outcomes.
• Improving decision making: A business justification provides a clear and comprehensive analysis of the problem or opportunity, proposed solution, projected costs and benefits, and risks and contingencies, which helps to improve decision making.

Limitations of business justification

There are several limitations of creating a business justification for a project, including:

• Uncertainty: Business justifications rely on assumptions and predictions about the future. These assumptions and predictions may turn out to be inaccurate due to changes in the market, economy, or other external factors, which can affect the project's outcome.
• Limited perspective: Business justifications are typically created by the project team, which can lead to a limited perspective and potential biases. This can result in an incomplete or inaccurate assessment of the problem or opportunity, proposed solution, projected costs and benefits, and risks and contingencies.
• Lack of flexibility: Once a project is approved and resources are committed, it can be difficult to change the scope, objectives, or deliverables of the project. This can lead to a lack of flexibility in addressing unforeseen issues or taking advantage of new opportunities.
• Time-consuming: Business justification process is time-consuming and requires a significant investment of resources, including the time and expertise of the project team and other stakeholders.
• Limited focus on implementation: Business justification process focuses more on the upfront planning, and may not have enough focus on the implementation and execution of the project. This can lead to a lack of attention to the details that are required to make the project a success.
• Limited consideration of social and environmental factors: Business justification may not consider the broader social and environmental impact of a project. This can lead to negative consequences for the

Other documents necessary in early project stage

In addition to a business justification, there are several other documents that are typically necessary in the early stages of a project, including:

• Project charter: A project charter is a document that formally begins a project and outlines the project's scope, objectives, deliverables, and key stakeholders. It also includes information on the project's budget, schedule, and governance structure.
• Statement of work: a document that outlines the specific tasks, deliverables, and expectations for a project or a specific phase of a project. It serves as a guide for the project team and stakeholders, outlining the work that needs to be done and how it will be accomplished.
• Stakeholder analysis: A stakeholder analysis document identifies and analyzes the key stakeholders of the project, including their roles, responsibilities, and interests. It helps to identify potential conflicts or areas of concern and outlines a plan for communication and engagement with stakeholders.
• Project plan: A project plan outlines the tasks, milestones, and deliverables for the project, as well as the resources and schedule required to complete them. It also includes information on project management, risk management, and quality control.
• Resource plan: A resource plan outlines the resources, including personnel, equipment, and materials, needed to complete the project. It also includes information on resource allocation, scheduling, and costs.
• Risk management plan: A risk management plan identifies potential risks and hazards associated with the project and outlines a plan for mitigating or avoiding them. It also includes information on risk monitoring and reporting.
• Communication plan: A communication plan outlines the communication channels and frequency for project updates, progress reports, and other communication with stakeholders.
• Change management plan: A change management plan outlines the process for managing and controlling changes to the project scope, objectives, and deliverables.

References

• Clark, K. B. (2003). Project Scope and Project Performance. Operations Management: Critical Perspectives on Business and Management, 3(10), 446.
• Khan, A. (2006). Project scope management. Cost engineering, 48(6), 12-16.
• Kraus, W. E., & Cressman, K. R. (1992). Project Scope Definition-A Practical Approach, COST ENGINEERING-ANN ARBOR THEN MORGANTOWN-, 34, 15-15.
• Meredith, J. R., & Mantel Jr, S. J. (2011). Project management: a managerial approach. John Wiley & Sons.
• PMI (2001). Project Management Body of Knowledge (PMBOK® GUIDE). In Project Management Institute.