2. business case analysis

8/19/2019 2. Business Case Analysis

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ELECENG 7075

Business case analysis

Alfio Grasso

[email protected] from material provided by

Prof L A Wood

Life Impact The University of Adelaide 1

mailto:[email protected]:[email protected]


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Life Impact The University of Adelaide

“The purpose of a company

is to take risks with other people’s money”

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Company

• The control of a company is usually separated

from the ownership, in Medium to Large

Enterprises.

• In Small Enterprises the owner is usually the

Managing Director (or Chief Executive Officer)

• When a company is about to spend money,

especially on a project, the proposal has to be

justified

3Life Impact The University of Adelaide


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The business case story

The business case tells a cohesive story:

• Why is the project needed (issues & opportunities)?

• What is the recommended solution(s)?

• What are the risks, advantages, and disadvantages of the

existing and proposed alternatives?

• What will happen if the project is not undertaken (the do

nothing scenario)?

• When will the solution be deployed?

• How does the solution address the issues or opportunities

(benefits)?

• How much money, people, and time will be needed to deliver

the solution and realize the benefits?



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Business case approval

• The BCA assists the organisation’s management to makedecisions on whether or not to proceed (initial and final

approvals) with the proposed investment

• The business case forms the framework for those decisions

• If the decision is made to proceed with the investment, theprogram needs to operate within the context of the approved

business case and investment analysis

• If, as the program proceeds, conditions change which take it

beyond the approved context, it will need to be revisited – the investment analysis will be reviewed to determine if the program

should be continued, and with what potential modifications



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Business case analysis

Business case analysis captures the reasoning forinitiating a project or task, in terms of:

– Cost – Benefit

– Risk

– Schedule – Economic analyses



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Cost Estimation

Life Cycle Cost Estimate (LCCE)

• An initial business case analysis is conducted during the Initial

Investment Analysis phase and usually considers alternatives

• Several LCCEs will usually be developed – the alternatives will

be measured against the Legacy Case (or Status Quo)

• LCCE includes all costs, i.e. concept, design, implementation,

system integration, operation, etc, and includes people costs

(employees, consultants, contractors), facilities, equipment,

hardware and software.• The “Legacy Case” is the existing and planned near-term

capability including the operating and planned near-term set of

assets, systems, facilities, people and processes



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Work breakdown structure

• A standard life cycle WBS may be used when developing costand schedule estimates

• The WBS is the complete set of activities required to provide a

solution that satisfies the business need

• Solutions include products and services such as hardware,software, facilities, communications services, employees,

technical assistance services, infrastructure, training,

procedures, etc)

• After the activities are defined, resources are identified, timephased, and costs are estimated



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Cost estimating

methodologies

Techniques range from simple arithmetical calculations to

complex multivariable mathematical models

• Analogy: Based on a one-to-one comparison with an existing

product similar to the system being developed

• Parametric: Uses statistical analysis from a number of similar

products and their relationship to your product

• Engineering: A bottom-up estimate using the detailed WBS to

price discrete components: material, design hours, labor, etc

• Extrapolation from actual costs: Used after actual cost data are

available from the same system at an earlier time



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Benefit analysis

• The process of determining benefits resulting from the project -

quantifiable and non-quantifiable

• They may result from operational efficiencies, cost avoidance,

improved safety, or improved security among others• Usually compares options, one of which may be the “status

quo” or legacy environment

• Quantitative benefits identified in the benefits analysis must be

able to be tracked so that the program will be able to report itsprogress in achieving the benefits claimed



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Economic analysis

• Economic analysis is the process of translating a program’s Cost/Benefit Analysisinto Net Present Value (NPV) and other financial statements about investments

• NPV is the nett of income-expenditure. It uses the time value of money, for

example $100 today will be able to purchase less than $100 in a years time, due

to Consumer Price Index (CPI) or inflation. This is why you invest in spare cash in

an interest bearing investment, which hopefully returns more than the CPI

• NPV compares the value to a base year, usually the first year.

• It is always better to receive income now and pay costs later (this is pretty much

the job of accounts receivable and accounts payable)

• Economic analysis provides a systematic approach to answer these questions –

what objectives should be pursued and how they should be accomplished

• NPV is probably the most commonly applied criterion for deciding whether a

program can be justified on economic principles, but there are other criteria.



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Net present value

• NPV indicates an investment’s net value in today’s dollars

• All costs and benefits are adjusted to "present value" by using a

discount rate to account for the time value of money

• NPV is a way of making costs and benefits occurring in differentyears commensurable

• It forecasts when the investment will generate sufficient cash

flows to repay the invested capital and provide the required

rate of return on that capital



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Payback period

• The payback period helps to answer the question “how long

will it take to make back the money spent on the investment?”

• This is beneficial information to decision-makers because out-

year benefits are often less certain than benefits that occurearly in the life cycle

• The payback period represents the time required for the

cumulative savings to equal to the cumulative value of

investment

• It measures the time (i.e., years, months) needed to recover

the initial investment and break even, ignoring the time value

of money

• Payback is NOT calculated using NPV techniques. Life Impact The University of Adelaide 13


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Assessment Task: BCP

• See Statement of Work: 7057.161.00-G-PE5-002 SOW Business Case

• This SOW requires the preparation of a business case to be

presented to the InterPro Management Board. The case

presented to them needs to be brief, but very tightly arguedand compelling from a business perspective.

The source of the improvement could emanate from:

Business opportunities Technology trends

Potential safety improvements Extension of the service

Improvement to the service Competitor evaluations

Market trends Or any other source …



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BCP Presentation (Seminar)

“Communicating and arguing your value proposition”

Cover slide

1. Statement of the Business Proposal (one slide)

2. Assumptions, Constraints, Conditions (one slide)

3. Current State Description – “Status Quo” (one slide)

4. Future State Description – “To Be” (one slide)

5. Analysis (two slides)

6. Conclusion (one slide)

Your slides are due, uploaded onto MyUni, 24 hours BEFORE yourscheduled workshop session in which you will present

DO NOT ADD ANY SLIDES, DO NOT DELETE ANY SLIDES, DO NOTAMEND THE TEMPLATE, otherwise marks will be deducted



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XBMS Resources

• PCX 004 TPL Business Case Presentation (powerpoint template)

– This is the powerpoint template that you will use for your presentation

– Follow the document numbering convention

– Follow the file naming convention

• COR 091 HBK Guide to Powerpoint Presentations

– This is a useful guide to making presentations – read it!



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Argue Your Case!

Remember: in a business case, you are

arguing for the case, not merely

presenting information

Design is something that does NOTexist yet, you have to envisage the

future product or serviceLife Impact The University of Adelaide 17


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Peer Review of BCP

• You will be required to review and comment on

the presentations of your peers

• This will help to prepare you for your finalassessment which is a formal review of the

engineering outputs of another team



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Creating Effective Visual Aids

Modified from the original source:

www.mld.metu.edu.tr/.../Preparing%20effective%20visual %20aids-without%20samples.ppt

Accessed 1 February 2013 19


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OUTLINE

• The rationale behind using Visual Aids

• Tips for preparing effective Visual Aids

• Preparing effective PowerPoint slides• Sample Visual Aids

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Visual Aids Should…

• Supplement presentation

• Outline the main points

• Be simple and clear

because...

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The Purpose of Using Visual Aids

• support your ideas

• improve audience comprehension

• add variety to presentation (a break from listening)• enliven a difficult / boring subject

• help illustrate complex ideas/concepts

• help the presenter to stick to the plan

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Visual Aids - Examples PowerPoint Slides

Overhead Transparencies Graphs/Charts

Pictures

Films/Video Flip Charts

Sketches23


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Tips on Preparing Visual

Aids

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TIPS...

• Start with an outline of the goal

• Keep visual aids BRIEF

• Do not read the visual aid directly, however, what you say

should be consistent with the visual aid.• Check relevance to topic

• Use charts and graphs

• Make sure graphics are not too crowded

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TIPS...(cont.)

• Don't let handouts become a distraction

• Practice with your visual aids

• Once you have finished practicing

– Practice some more!• Seek feedback on the clarity of visual aids

• Check grammar and spelling

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Making PowerPoint Slides

Avoiding the Pitfalls of Bad Slides

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ADVANTAGES OF POWERPOINT SLIDES

• Professional image• Minimal expense

• Compact and portable

• Easy to – email – sort and practice

– edit

– insert graphics – share

•

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ADVANTAGES OF POWERPOINT SLIDES (cont.)

• Can be – printed

– copied

– provided as handout material

• Many options: – animation

– video clips – sound

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DISADVANTAGES OF POWERPOINT SLIDES

• None really, if they are done well.

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Tips to be Covered

• Outlines

• Slide Structure

• Fonts• Color

• Background

• Spelling and

Grammar• Conclusions

• Questions

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Outline

• 1st or 2nd slide ---- outline

•Only main points on the outline slide

– Ex: Use the titles of each slide as main

points

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Slide Structure

• 1-2 slides per minute

•Point / bullet form (no complete sent.)

• 4-5 points per slide

• Key words and phrases only

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Slide Structure - Bad

• This page contains too many words for a presentation

slide. It is not written in point form, making it difficult

both for your audience to read and for you to present

each point. Although there are exactly the same number

of points on this slide as the previous slide, it looks much

more complicated. In short, your audience will spend

too much time trying to read this paragraph instead of

listening to you.

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Slide Structure – Good

• Showing one point at a time will:

– help audience concentrate on what you are saying

– prevent audience from reading ahead

– help you keep your presentation focused

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Slide Structure - Animation

• Do not use distracting animation

•Do not go overboard with the animation

• Be consistent with the animation that you use

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Fonts - Good

• Use at least an 18-point font

• Use different size fonts for main points and

secondary points

– this font: 28-point

– main point font: 30-point

– title font: 42-point

• Use a standard font like Times New Roman

or Arial

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Fonts - Bad

• If you use a small font, your audience won’t be able to read what you have written

• CAPITALIZE ONLY WHEN NECESSARY. IT IS

DIFFICULT TO READ

• Don’t use a complicated font

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Color - Good

• Use a color of font that contrasts sharply with

the background

– Ex: blue font on white background

• Use color to reinforce the logic of your

structure

– Ex: light blue title and dark blue text

• Use color to emphasize a point

– But use this only occasionally

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Color - Bad

• Using a font color that does not contrast with the

background color is hard to read

• Using color for decoration is distracting and annoying.

• Using a different color for each point is unnecessary – Using a different color for secondary points is also

unnecessary

• Trying to be creative can also be bad

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Background - Good

• Use backgrounds such as this one (attractive

but simple)

• Use backgrounds which are light

• Use the same background consistently

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Background – Bad

• Avoid backgrounds that are distracting or

difficult to read from

• Always be consistent with the background

that you use

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Graphs

• Use graphs rather than just charts and words

– Data - easier to comprehend & retain

– Trends - easier to visualize

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Spelling and Grammar

• Proofread your slides for:

– speling mistakes

– the use of of repeated words

– grammatical errors you might have make

• Have someone else check your presentation!

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Conclusion

• Use an effective and strong closing

– Audience is likely to remember your last words

• Use a conclusion slide to:

– Summarize the main points

– Suggest future avenues of research

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Questions??

• End with a simple question slide to:

– Invite your audience to ask questions

– Provide a visual aid during question period

– Avoid ending a presentation abruptly

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Thank you

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BCS presentation template

PCX 004 TPL Business Case Presentation

48

X l


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eXemplar

eXemplar solutions 49

X l


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Statement of the Business

Proposal• Describe the business improvement that you are proposing

eXemplar solutions

eXemplar

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eXempla


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Assumptions, Constraints,

Conditions• Briefly describe important assumptions, constraints, and

conditions having major influence on the proposal. The

following could be considered: the remaining contract period

of the currently fielded project, the required implementationdate for the proposed changes, the assumed economic service

life of any proposed investment, and the operational

framework within which any changes must function.

eXemplar


eXemplar


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Current State Description

• Describe the set of existing or anticipated conditions if

policies, configurations, processes and management

strategies remain unchanged. Describe the current service and

support capabilities that will be addressed by the proposedchanges. Describe impacts to current operations from an end-

user perspective.

eXemplar


eXemplar


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Future State Description

• Describe the future capabilities and changes needed to

support the changes in the solution architecture. Describe

impacts to operations from company and customer/user

perspectives

eXemplar


eXemplar


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Business Analysis (1)

Briefly describe the anticipated benefits. In this instance, it will

be possible to consider only qualitative benefits, incorporating

one or more of the following benefits:

• Schedule benefits

• Risk reduction

• Safety improvement

• Qualitative financial analysis

• Competitive positioning

• Other qualitative benefits

eXemplar


eXemplar


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Business Analysis (2)

• As per previous slide

eXemplar


eXemplar


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Conclusion

• Summarise the recommended course of action and the overall

rationale for the recommendation

eXemplar



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• REMEMBER YOUR SEMINAR IS TO PRESENT

AN IMPROVEMENT TO ALC.

• DO NOT JUST PRESENT THE ALC PROJECT

2. business case analysis

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