investiledysfunction

The best definition I’ve heard of a business case is that “It’s the lie people tell to get funding.”  And that is the truth.  Growth is high and expenses are low leading to unreasonable expectations in the majority of business cases.  So what is the key to reducing the lies that people present in business cases.

It comes down to tracking what they deliver, e.g., benefits realization, tracking actuals, etc.  Roger Goodell, NFL Commissioner, has a good suggestion on this.  When talking about the New England Patriots videotaping opponents’ signals, he stated,

“The most important thing is to take decisive action.  We discovered that they were taping the signals of visiting coaches, which is against our rules, and we made very clear it was not going to be permitted. [Patriots coach Bill Belichick was fined $500k and the team was fined $250k and denied a draft pick].  Sending a message that you’re going to enforce the rules is the best way to deal with integrity and make sure that our fans understand that games are going to be played by the rules.”

When it comes to investments in projects and initiativess, companies rarely hold folks accountable ensuring the cycle of lies and rosy projections continue.  Instead, they should take a page from Roger Goodell and reward those who deliver and ‘punish’ those who don’t.  The punishment can take the form of reduced funding going forward, greater oversight or even diminished responsibilities or dismissal.  Only by doing this will you ensure that people come with their best ideas and are incentivized to put forward their best ideas and deliver per their business case.

One of the 7.5 Sins of Portfolio Management is that your portfolio management effort cannot be a tunnel but must be a funnel. By that, we mean that projects must get killed as part of your portfolio management effort to give it some teeth. This could mean killing projects at the proposal stage or shedding underperforming projects along the way. If you don’t do this, you’ve just created bureaucracy (checklists, business cases, etc) but you are really not changing investment and project selection processes and the behavior that goes along with them. If you really want to create useless work in your organization, there are probably other ways to do this. If, on the other hand, you genuinely think that there is no project in your organization that should be stopped or that should not have been started in the first place, then we should talk as I have some real estate in Florida which is expected to go up 100% this year which I’d like to sell you.

Given this sin, it’s nice to see a company living by this mantra especially in the area of R&D. One notable example is HP Labs where Prith Banerjee, the new labs director, is planning to unveil a list of 20-30 major projects down from the 150 or so currently being pursued.

According to Business Week, “The labs’ $150 million annual budget will remain the same, but he’ll group the most promising related projects while dropping those with little shot at a profitable payoff.”

Banerjee himself asserts that “Just because it’s scientifically interesting won’t do it. We need to create whole new business opportunities for HP.” He is also forcing researchers to compete for money by pitching projects and writing business plans and then having those goto a central review board that will approve ideas and track progress.

It sounds like HP Labs’ is avoiding many of the 7.5 deadly sins namely:

1. They’re making it a funnel by killing projects whose proposals are not good or that are not performing
2. They’re reducing the decibels in the decision making process by requiring more intensive business cases/plans
3. They are tracking results

It sounds like HP Labs is onto the right path. There will inevitably be culture change and resistance that emerges from such an overhaul, but if they can work through these impediments (not easy), HP will go a long way in making each R&D dollar go further.

I heard a quote recently which I thought very accurately described the term “Business Case”. 

Business Case, n. - The lies people tell to get funding for a project or initiative. 

Ultimately, this definition is on the mark with respect to what business cases often become.  An effort to say in 10 words what you could say in 2 words in order to convince some decision makers that you should get funding and resources.  It’s an inherently unproductive process to create them and then evaluate them. 

One of the things that I’ve seen work very well is forcing people to keep their business case to a single page.  This forces them to pick their words carefully and articulate their strategy, goals, etc in plain English.  It will prevent people from hiding behind large decks of pretty pictures and rambling jargon and perhaps get you to the salient points you want to evaluate the value of the project.