Business Need:
Business need may be based on the following:
Market Demand - e.g Electric cars
Strategic opportunity - e.g. Investment bank trying to increase its presence in emerging markets
Social needs - e.g. promote potable water, Paint a school, Home for habitat
Environmental considerations - e.g. reduce pollution by changing the industrial waste disposal method, clean a lake.
Customer request - e.g. shorten the SLA for generating periodic reports
Technological advance - e.g Mobile and touch screen. Rise of Apple v/s death of Blackberry
Legal & compliance - e.g. Dodd Frank, Basel III, SOX, FDA regulations
Every needs assessment template consists of a brief introduction that includes the background of the company. When you start, it is important that you provide readers with brief information about the company, including its mission, vision, aims, and objectives.
Desired Result: In this section you must mention about the desired result of a particular business process. You have to write about all the expected outcomes with details. For example, if you are trying to analyze training needs, then mention what you want to achieve from the training or what is the ultimate goal of the training.
Current Performance: Here, you have to talk about the current performance of the business or employees. Continuing with the same example, you need to mention about what has been achieved by the training till now or how effective has been the training till now, etc.
Addressing the Deficiency: Now, you have to address the deficiencies that needs to be filled up. You must mention the gap in details, such as, where is the problem, what is lacking and why, since when the performance has gone down, how it has affected the overall business or a particular business process, etc.
Solutions: Only addressing the deficiencies is not enough, you must also come up with probable solutions for it. You have to mention all the solid solutions in this section. You have to mention the scope of the new solutions and how did you derive them.
Implementation: At this stage, you need to write about how you are planning to execute the new changes as solutions in the business plan. You also have to write about the assessment of the progress that will happen after implementation. It is also advisable to write about the follow-up process when it comes to completing the template.
Cost Benefit Analysis
A cost benefit analysis finds, quantifies, and adds all the positive factors. These are the benefits. Then it identifies, quantifies, and subtracts all the negatives, the costs. The difference between the two indicates whether the planned action is advisable. The real trick to doing a cost benefit analysis well is making sure you include all the costs and all the benefits and properly quantify them. Should we hire an additional sales person or assign overtime? Is it a good idea to purchase the new stamping machine? Will we be better off putting our free cash flow into securities rather than investing in additional capital equipment? Each of these questions can be answered by doing a proper cost benefit analysis.Example Cost Benefit Analysis
Explicitly or implicitly, nearly every public and private decision involves some comparison of benefits and costs.Here are a few brief examples.
Example 1: You must decide whether to go out with your friends to a local "watering hole" on a Thursday night. Going out will have associated benefits and costs. The benefits include spending time with your friends and receiving free drinks from the bartender (who happens to be your best friend). The costs of the night include (at minimum) a cab ride home, missing class the next day (and possibly missing a surprise quiz), and waking up with a nasty hangover. Costs could run higher.
Example 2: Society must decide whether to open-up an old-growth forest for logging. Logging would provide a variety of benefits, but will also entail costs. The products and employment generated by logging are benefits. Some of the costs of cutting the old-growth forest include the cost of cutting, the loss of wildlife habitat, damages to local streams due to runoff, and the loss of an opportunity to cut the forest sometime in the future.
Example 3: As the Production Manager, you are proposing the purchase of a $1 Million stamping machine to increase output. Before you can present the proposal to the Vice President, you know you need some facts to support your suggestion, so you decide to run the numbers and do a cost benefit analysis. You itemize the benefits. With the new machine, you can produce 100 more units per hour. The three workers currently doing the stamping by hand can be replaced. The units will be higher quality because they will be more uniform. You are convinced these outweigh the costs.
There is a cost to purchase the machine and it will consume some electricity. Any other costs would be insignificant.
You calculate the selling price of the 100 additional units per hour multiplied by the number of production hours per month. Add to that two percent for the units that aren't rejected because of the quality of the machine output. You also add the monthly salaries of the three workers. That's a pretty good total benefit.
Then you calculate the monthly cost of the machine, by dividing the purchase price by 12 months per year and divide that by the 10 years the machine should last. The manufacturer's specs tell you what the power consumption of the machine is and you can get power cost numbers from accounting so you figure the cost of electricity to run the machine and add the purchase cost to get a total cost figure.
You subtract your total cost figure from your total benefit value and your analysis shows a healthy profit. All you have to do now is present it to the VP, right? Wrong. You've got the right idea, but you left out a lot of detail.
Running The Numbers Means All The Numbers
Lets look at the benefits first. Don't use the selling price of the units to calculate the value. Sales price includes many additional factors that will unnecessarily complicate your analysis if you include them, not the least of which is profit margin. Instead, get the activity based value of the units from accounting and use that. You remembered to add the value of the increased quality by factoring in the average reject rate, but you may want to reduce that a little because even the machine won't always be perfect. Finally, when calculating the value of replacing three employees, in addition to their salaries, be sure to add their overhead costs, the costs of their benefits, etc., which can run 75-100% of their salary. Accounting can give you the exact number for the workers' "fully burdened" labor rates. In addition to properly quantifying the benefits, make sure you included all of them. For instance, you may be able to buy feed stock for the machine in large rolls instead of the individual sheets needed when the work is done by hand. This should lower the cost of material, another benefit.As for the cost of the machine, in addition to it's purchase price and any taxes you will have to pay on it, you must add the cost of interest on the money spent to purchase it. The company may purchase it on credit and incur interest charges, or it may buy it outright. However, even if it buys the machine outright, you will have to include interest charges equivalent to what the company could have collected in interest if it had not spent the money.
Check with finance on the amortization period. Just because the machine may last 10 years, doesn't mean the company will keep it on the books that long. It may amortize the purchase over as little as 4 years if it is considered capital equipment. If the cost of the machine is not enough to qualify as capital, the full cost will be expensed in one year. Adjust your monthly purchase cost of the machine to reflect these issues. You have the electricity cost figured out but there are some cost you missed too.
Business case
Mathematically business case = Business need + Cost Benefit analysis.A business case captures the reasoning for initiating a project or task. It is often presented in a well-structured written document, but may also sometimes come in the form of a short verbal argument or presentation.
The logic of the business case is that, whenever resources such as money or effort are consumed, they should be in support of a specific business need. An example could be that a software upgrade might improve system performance, but the "business case" is that better performance would improve customer satisfaction, require less task processing time, or reduce system maintenance costs. A compelling business case adequately captures both the quantifiable and unquantifiable characteristics of a proposed project.
Reasons for creating a business case
Business cases are created to help decision-makers ensure that:- the proposed initiative will have value and relative priority compared to alternative initiatively based on the objectives and expected benefits laid out in the business case
- the performance indicators found in the business case are identified to be used for proactive realisation of the business and behavioural change
Key Elements of the Business Case Report
A good business case report, which brings confidence and accountability into the field of making investment decisions, is a compilation of all information collected during enterprise analysis and the business case process. The key purpose is to provide evidence and justification for continuing with the investment proposition. Here is a recommended structure:[2]- Preface
- Table of Contents
- Executive Briefing
- Recommendation
- Summary of Results
- Decision to be Taken
- Introduction
- Business Drivers
- Scope
- Financial Metrics
- Analysis
- Assumptions
- Cash Flow Statement (NPV)
- Costs
- Benefits
- Risk
- Strategic Options
- Opportunity Costs
- Conclusion, Recommendation, and Next Steps
The output from this new cycle was measurements and targets that were directly
linked to the business objectives, which in turn were directly linked to the business
strategy. A go decision to continue on to the next cycle (new cycle C) was made,
which involves transforming the above into projects
potential projects, the first being requirements management and the second
project integration management. The former, requirements management, covers
the process of defining the business and technical requirements in a solution-free
way . The requirements should be specified in a manner
that allows the solutions that are subsequently proposed to be traced back to the
requirements in a structured way and to be tested against the requirements. The use
of requirements management ensures that the resulting specifications are typically
of a higher quality than those done on an ad hoc basis (McKay, De Pennington &
Baxter 2001). The latter method or mechanism, project integration management,
covers the processes used to identify projects that will address specific needs (PMI
2004), the primary goal being to successfully manage stakeholder expectations and
to meet requirements.
What is a Business Goal?
A goal is a statement that clearly describes actions to be taken or tasks to be accomplished by a company, a department or an individual.
The dual purposes of goal setting are (a) to establish a measure for evaluating the success of the business and (b) set priorities for its management and staff, who should be held accountable for the accomplishment of the goals. Goals help keep management focused on success and away from distractive activities that drain business resources and accomplish little.
Business goal characteristics: Common characteristics of a business goal are:
- Derived from the mission statement: The starting point in writing business goals is to ask "what do we need to do to accomplish our mission." In other words, a mission statement says "what" and business goals say "how."
- Task-oriented: A business goal must state what is to be accomplished as clearly as possible. Effective goals use action-oriented verbs such as deliver, implement, establish, and supply; avoid poor activity indicators such as facilitate and analyze that can mean nothing significant or measurable gets done.
- Specific: A goal must state, in one or two sentences, the conditions that will exist if the goal is to be accomplished. The better defined a goal is, the easier it will be to understand what is required and to measure successful achievement.
- Implement an online store that contains a range of top quality Purma-made products that our customers will want to buy.
- Create a well-designed Web site that is fast, easy to navigate, responsive, and gives visitors the information they need.
- Set up a product distribution system that offers flexibility and reliability to our customers.
- Establish a partnership program that generates increased exposure and income for Purma Top Gifts and provides additional services for our customers.
- Promote Purma Top Gifts selectively in traditional and online media.
- Put in place a management structure that is able to accomplish the business of Purma Top Gifts efficiently and profitably.
Project Objectives:
A popular rule for writing good objectives is that they be SMART objectives. The characteristics of a SMART objective are:- Specific: The objective tells exactly what, where, and how the problem or need is to be addressed.
- Measurable: The objective tells exactly how much, how many, and how well the problem/need will be resolved.
- Action-oriented: The objective uses "activity indicators" to insure that something will be done. As with goal setting, use action-oriented verbs such as deliver, implement, establish, and supply.
- Realistic: The objective is a result that can be achieved in the time allowed.
- Time-bound: The objective includes a specific date for its achievement.
- A prototype Web site with 90 percent of all planned features and information will be available for testing 20 days before the launch date.
- The Purma Top Gifts site will be hosted by an external provider and be available to customers 99.5 percent of the time.
- Any page on the Purma Top Gifts site will download in 12 seconds or less using a 56kbps modem in America on 90 percent of all tests. All pages will download in 17 seconds or less in 100 percent of all tests.
- In a customer focus group, 80 percent of Purma Top Gifts customers will rate the site 45 or better on the Web site scorecard.
- Any information on the Purma Top Gifts site will be available within three mouse clicks from the home page.
- A standard navigation menu at the bottom of each page will list each second level Web page.
- A comments e-mail link will be included at the bottom of each page. A visitor who submits a comment via this link will receive a personal reply within one working day.
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