As the great IT budget freeze begins to thaw, you must either sharpen your project presentation skills or be cut out of the loop. Take heart - our five rules practically guarantee business case success.
- Why business case writing is a core competency for CIOs
- The importance of teaming up with business partners
- The key success factors for effective business cases
Which would you rather do: prepare a business case for your latest project or sit for a root canal? No surprise if you chose the latter; most CIOs hate everything about business cases - the politics and the mystifying financial lingo. But these days, the ability to put together a compelling business case is a core competency for CIOs.
A strong business case is critical for effective IT governance, and having one is more important than ever with the increased scrutiny on corporate decision-making. "There's real urgency to get this right. Decision-making is much more visible than it used to be," says Jack Keen, president and co-founder of IT consultancy The Deciding Factor, co-author of Making Technology Investments Profitable and a CIO columnist. "CIOs have an unusual opportunity to come to the rescue in terms of defining the business value of IT."
That opportunity is key, since many CIOs are finding their credibility is at an ebb. If you can't demonstrate technology's worth to your organization, you risk losing your spot in the boardroom. The good news: CIOs who succeed at building solid business cases attain greater visibility. It is undeniably positive for your career to lead a successful project backed by a sound business case and with proven benefits. How do you know if your business case skills need improvement? If you've been turned down on any of the major projects you proposed in the past year, chances are you haven't done your homework. By adhering to the five essential rules that follow, you can sell your project as a winning initiative.
Know your company's needs
Before you start to build a business case, you need to obtain some financial information about your company. For instance, most companies have a hurdle rate, or the rate of return required by the organization to fund a project. "If a project has been diligently reviewed and can achieve a 12 per cent or 13 per cent or better rate of return, then it's in the best interests of our shareholders to pursue," says Doug Horton, vice president and director of strategic technology initiatives for $US2.6 billion LandAmerica Financial Group, a title insurance company.
Hurdle rates don't change much in the short term. Except in the case of a technical infrastructure investment (such as a network upgrade), you're going to have to prove you can meet this threshold or there's no point in continuing.
Sometimes IT leaders make the mistake of believing the corporate hurdle rate does not apply to IT projects. Or they assume there isn't one. "In many cases, people don't even bother to find out what the hurdle rates are," says Keen.
You also need to know what other corporatewide projects are vying for funding. "I assess the financial value of each project as if it were a machine tool because that's what I'm competing against," says John Nordin, vice president and CIO at AM Castle, a $US538 million distributor of specialty metals. There is no separate pot of money labelled "IT". The CEO sees technology projects as going head-to-head with mainline business projects; you should too.
That same competition for resources also happens within IT. Prior to deciding which IT projects to undertake for the year, Bob Weir, vice president of information services at Boston's Northeastern University, interviews his business counterparts, asking them 60 questions that get at the heart of the project's value to the institution. Based on the answers, he derives a numerical score. "The point of the exercise is to get a score relative to the other opportunities that we could undertake," says Weir. In 2003, there were 36 potential IT projects. Of these, the top 17 were selected, and the rest were put on hold. That is an example of IT portfolio management, in which the CIO, in conjunction with business leadership, categorizes the proposed projects (such as those that will help run the business, those that aim to grow the business and those that have the potential to transform the business) and sets targets for how many projects the enterprise will undertake in each category (see "Portfolio Management: How to Do It Right", CIO June 2003).
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