Project management - business cases and gateways(一)
It can be assumed that whenever an organisation embarks on a project to improve its performance and results, the project is expected to bring benefits to that organisation.
This statement might seem self-evident, but it requires care to ensure that all the effects of a project (both benefits and disbenefits) are evaluated in advance as carefully as possible, and that the project is closely monitored and re evaluated throughout its progress. Furthermore, it is vital to ensure that benefits are realised. For example, a new IT system could be implemented on time and within cost budget, but if staff, customers or suppliers resist making use of new facilities offered, then no benefits will be realised from the project.
The challenges will be dealt with under the following headings:
1. Constructing a business case
2. Carrying out the project, keeping it under constant review
3. Reviewing the results
CONSTRUCTING A BUSINESS CASE
At its simplest, this could simply mean showing that a proposed project has a positive net present value (‘NPV’). Indeed, when you are carrying out an NPV calculation you are often presented with the cash flows expected to arise from a ‘project’. However, applying discount factors to a set of cash flows is by far the easiest part of any NPV calculation. The real skill is to be found in assessing what the cash flows are likely to be. It is here, for example, that predictions need to be made about changes in market share, revenue, and competitor reactions.
Constructing a business case, therefore, needs to be broken down into a series of steps:
• Identification of the organisation’s drivers and where improvement is required.
• Identification of the organisation’s stakeholders and how they are affected.
• Identification and classification of benefits and disbenefits.
• Planning of benefits realisation.
Identification of the organisation’s drivers and where improvement is required
An organisation’s drivers should relate back to its mission and its stakeholders’ perception of the organisation’s purpose. A profit-seeking organisation will ultimately be interested in increasing shareholder wealth and any project undertaken should, at least in the long term, lead towards that. Not-for-profit organisations are more complex, but in a school, for example, you would expect children’s educational standards to be important, and in a hospital you would expect patient care and effective treatment to be part of its purpose.
Complacent management might never see any need for improvement in organisations, but that approach is usually the road to ruin. Both internal and external changes will mean that management must continually respond to events so that improvement and benefits are constantly sought. This is simply the process of strategic appraisal and the tools and frameworks should be familiar. They include:
• PESTEL – looking at changes in the macro-environment. For example, a new government might establish strict requirements for hospitals to measure their success in diagnosing and curing certain diseases. This political driver could mean that the hospital has to respond with a project that involves buying new equipment and setting up new clinics.
• Porter’s five forces – looking at the activities of competitors, customers, new entrants, suppliers and the emergence of substitutes. For example, a new, powerful, low-cost competitor could be eyeing up the market. In response, the company might consider embarking on a project to allow it to personalise its production so that it can offer differentiation as a way of combating the increased competition.
• Resources and competences. For example, if the company’s research and development efforts have been disappointing then if might consider taking over a successful smaller competitor in order to buy in know-how and patent rights. Taking over that competitor might be defined as a project.
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