Project Management

Business Justification – a Root-Cause Analysis

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By John Herman   PMP, CQE, MPM. 

 

There are many excellent articles and templates for demonstrating Business Justification, but a root-cause analysis reveals a very basic lesson in business acumen.   There are only four major reasons for undertaking any business process or project. 

 

Increase revenue:   Obviously, increased revenue is expected to lead to increased profits, and may also lead to increased market share, brand recognition, and other favorable results. 

Reduce costs:  Reducing costs will also impact the bottom line.  However, costs can’t be reduced below zero, so there are more limitations associated with reducing costs than with increasing revenue.

Improve quality:  Although sometimes difficult to measure, improvements in the quality of products and services impact customer satisfaction and growth of the brand.

Attain or maintain compliance:   Government regulations must be addressed or the business could be forced to close, or suffer irreparable damage to the brand.  Some aspects in the compliance area include taxes, safety, and privacy.

 

And, of course, projects can cross boundaries and have more than one business justification.

It’s always a good idea to inform the project team why any particular project is being done.  Not only is it good top-down communication, it will improve the team’s business acumen. 

Posted on: October 28, 2015 01:19 PM | Permalink

Comments (6)

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Today the main reason to justify a project is because you add value to the business thanks creating something which is a solution to a business problem. So, while the list above is valid if we do not demonstrate the value it is difficult to justify the investment. Perhaps the list can be used to think how to do that. And perhaps a root cause analysis could be used as a tool to think about that

Thanks for the response, Sergio. So, how do you define "value"? Let's say you are the owner of a business. How would you determine which projects are "valuable"?

Thats is the million dollar question because value is something subjective that we need to covert into objective. Value could be defined using a client centric approach where "client is the next in the process". All related to quality has to me taking into account

Thats is the million dollar question because value is something subjective that we need to convert into objective. Value could be defined using a client centric approach where "client is the next in the process". All related to quality has to be taking into account

Perhaps we could add sustainability as a reason for undertaking a project. While both compliance and sustainability may result in the same project taking place, they are different, as compliance is imposed from without. Sustainability, on the other hand, adds a long-term outlook to the whole "maximizing shareholder value" mantra.

Business Justification with data to substantiate it helps.

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