Showing Opportunity Isn’t Enough

Building A Business Case That Drives Decisions

Early in my career, I developed a Pareto analysis showing top bad actors broken down by process area and equipment type.  Armed with an impressive slide deck full of tables and bar charts I presented the information to the site leadership.  They were impressed with the information and it generated great discussion.  One manager said it was “perfectly timed” and the maintenance manager said he’d check in with me the following week to flesh out the numbers a bit more.  A week went by, then two.  Slowly, the discussion about the analysis died away.  Eventually the slide deck was archived in a shared drive and forgotten.  

Years later I helped a site put together a ballpark estimate of the value potential for hiring a planner.  We looked briefly at reactive work order costs and estimated the savings potential for having more planned, and hence cheaper, work.  The team knew the annual salary range for the position and appreciated the fact there’d be a ramp-up time to see the benefit.  The net benefit was conservatively rounded down and a summary of the entire case took up only half a whiteboard.  The conversation with corporate leadership lasted about half an hour.  After getting confidence in the numbers the conversation shifted from “Should we hire a planner?” to “Should we hire two planners and how soon can we get started?”.  

On the surface, these two situations look very different.  They dealt with different topics and had different outcomes.  Looking deeper, it’s obvious they share a lot in common.  Both needed to use available data and information and both needed to be presented in a way the audience could understand and have confidence in.  In the Pareto analysis, something was missing; while the business case for hiring a planner led to immediate action.  

While analysis is necessary, it should never be the goal.  To succeed, business must convert information to insight, make decisions about where to focus, and act on those decisions.  A business case plays an important part of the process. 

Three Essential Attributes of a Business Case That Drives Decision

A business case must have three attributes to enable leaders to make sound decisions. 

1. Clear
2. Credible
3. Compelling

Clear: Simple and clean

A business case must be clear to drive action.  Keep the business case aligned around a simple equation that cleanly lays out the size of the opportunity, costs necessary to achieve the goal, and the overall net benefit.  

OPPORTUNITY – COSTS = NET BENEFIT

To calculate the opportunity, determine the overall size of the prize and over what time it could be realized.  Consider both implementation and sustainment costs necessary to capture the full opportunity.  Subtracting the costs from the opportunity will reveal the project’s net benefit.  Common ways to show net benefit include payback period, benefit to cost ratio, net present value, and internal rate of return.  

Stakeholders and decision makers should be able to quickly understand the net benefit and how the number was derived.  Using a clean organized structure is a necessity.

Credible: Not necessarily perfect, but trustworthy

The second necessary attribute for a business case to drive action is credibility.  To take action, leaders must have confidence in the overall net benefit number and expected timing of the return.  Obviously, this means data used for the opportunity and costs must be realistic.  

To improve the credibility of a business case, spend time with a diverse team.  Get a wide base of input on the current situation.  A business problem will be experienced differently depending on an employees’ position and job role.  Uncovering how the problem is affecting different levels of the organization will paint a full picture of the size of the opportunity.  

Validate estimates of the implementation and sustainment costs with the team.  Underestimating the costs to seize the opportunity will quickly lose the trust of the decision makers.  Keep a record of assumptions made when estimating the business case and who you worked with to develop the numbers.  Often, leadership concerns can be allayed by showing them you involved their teams when developing the business case.  

Compelling: Not just valuable, but worth doing today

Leaders daily face a multitude of options and possible paths.  Your project is competing with other good ideas for limited capital and organizational focus.  Often overlooked, but just as important, is the need to overcome the inertia necessary to start a new initiative.  Your project must show sufficient value to overcome these challenges.  To drive action, ask decision makers to consider what work they would stop doing or what will be postponed during the implementation of your project.  Your business case should make the tradeoffs clear.  

It’s not uncommon for maintenance and reliability leaders to speak of benefits only in terms of what’s important to them.  Benefits in terms of lubrication cleanliness codes, changes in inches per second of overall vibration, or percent changes in planned maintenance work orders will struggle to get traction.  To drive action, the business case must show the overall net benefit in terms of something that leaders care about.  Convert maintenance-centric benefits to business-centric value by expanding the cause and effect logic to a level where benefits can be shown in throughput, costs, capital or reduced risk.  Operations leaders are well aware of how these numbers directly impact profitability and can quickly show benefits to cost of goods sold and other financial measurements.  

Bringing the Elements Together

The goal of a business case isn’t to drive discussion but decision.  Looking back, it’s clear that’s what was missing from my Pareto analysis.  I had developed great information but had stopped short of providing actionable insight.  Without developing concrete next steps, costs can’t be determined and it’s impossible to show the net value of your recommendations.  Validating assumptions with the team isn’t wasted effort – it’s aligning the team around action.  Smart leaders know tradeoffs are necessary.  To overcome organizational inertia, the net benefit of the recommendation must be worth stopping or delaying work that’s already in progress.  It’s a high bar but maintenance and reliability is a fantastic lever to increase profitability.  Build a business case that makes the overall net benefit clear, credible, and compelling.  Showing the opportunity alone isn’t enough – it may lead to great discussion but it will never lead to great decisions.