Project Management

Please login or join to subscribe to this thread

MP4PM: business case review - Cost/Benefit

linkedin twitter facebook   Benefits Realization   Business Case   Estimating   PMO  
avatar
Markus Kopko AI Enabler for Project & Program Mgmt | Founder PMotion.ai / The PM AI Coach| PMotion.ai Hamburg, Hamburg, Germany
Hi,

for the background to this discussion thread please refer to this posting here:

https://www.projectmanagement.com/discussi...ss-case-review-

===================================

Cost / Benefit

- Costs
-- Direct costs
-- Indirect costs
-- Initial costs
-- On-going costs
-- Capital costs

- Quantifiable Benefits
-- Direct Benefits
-- Indirect Benefits
-- Strategic Benefits

- Assumptions

=====================================

Any changes, additions or feedback here?
Sort By:
< 1 2 3 >
avatar
Markus Kopko AI Enabler for Project & Program Mgmt | Founder PMotion.ai / The PM AI Coach| PMotion.ai Hamburg, Hamburg, Germany
Dec 15, 2016 6:29 AM
Replying to Drew Craig
...
Thanks Markus, I will defer to your expertise. Although, unfortunately, there is not always a formulated business case prior to an initiative, or effort.

Good conversation though!
Hi Andrew,

you are right. "business case" is meant to understand as a synonym for any document/paper/information/contract what targets to initiate a project.
But especially for internal projects those information is just not existent. As i understand the PMBoK Guide therefore the "Statement of work" as an alternative has to be developed and in fact that will be exactly the next "MP4PM" installment after releasing the "review business case" map in a version 1.0. ;)

Thank you so much for your great contributions so far and please keep going.

Regards,

Markus
avatar
Thilo Wack Head of Existing Product and Test Lab| optimed Tholey-Hasborn, Germany
@All, @Markus,

interesting discussions here. Agree with Stéphane that the business case should contain data providing the rationale behind choosing the alternative which would of course include the financial data behind these options. Also agree with Rami, that typically the business case will present the cost/benefit data as a profitability analysis, whether this is a payback period, return rate or other.
And I was very intrigued about the sunk costs that Andrew mentioned. While I agree that a decision about continuing or abandoning a project should not consider sunk costs, but rather look at the situation as if the project would start from scratch, I have been wondering if that is also the case when preparing the business case for a new project. Coming from product development I’ll always consider cannibalization of existing product revenue in the business case and I wondered if maybe there are sunk costs associated with any obsoleteness of product or infrastructure that need to be considered in a business case.
What do you guys think?
avatar
Rami Kaibni
Community Champion
Senior Projects Manager | Field & Marten Associates New Westminster, British Columbia, Canada
Thilo,

Your point is interesting but why would you need to prepare a business case for an ongoing project ? Usually business cases are prepared for new projects or did I misunderstand something ?
...
1 reply by Thilo Wack
Dec 18, 2016 1:28 PM
Thilo Wack
...
Rami, sorry for being confusing. I did not mean that you need a business case for an ongoing project. You should revise it or create a new one when the question comes up whether to continue or abandon a troubled project, i.e. treat this as you would a completely new project. So when wondering what sunk costs mean for a troubled project it made me wonder what sunk costs might mean for a new project. So the real question is for me whether there are types of sunk cost that you actually should consider? The only thing that came to my mind were costs of obsolecence, which are not exactly sunk costs, but who knows maybe there is something...
avatar
Thilo Wack Head of Existing Product and Test Lab| optimed Tholey-Hasborn, Germany
Dec 18, 2016 12:28 PM
Replying to Rami Kaibni
...
Thilo,

Your point is interesting but why would you need to prepare a business case for an ongoing project ? Usually business cases are prepared for new projects or did I misunderstand something ?
Rami, sorry for being confusing. I did not mean that you need a business case for an ongoing project. You should revise it or create a new one when the question comes up whether to continue or abandon a troubled project, i.e. treat this as you would a completely new project. So when wondering what sunk costs mean for a troubled project it made me wonder what sunk costs might mean for a new project. So the real question is for me whether there are types of sunk cost that you actually should consider? The only thing that came to my mind were costs of obsolecence, which are not exactly sunk costs, but who knows maybe there is something...
...
2 replies by Markus Kopko and Rami Kaibni
Dec 18, 2016 5:58 PM
Rami Kaibni
...
Got it, thanks for your ellaboration Thilo.

I do not believe sunk cost is relevant to any new business case as they are retrospective costs but you can sometimes help in determenimg prospective costs.
Dec 19, 2016 6:29 AM
Markus Kopko
...
Hi,

what i have read about sunk cost so far is, that they never should be minded in the decision about initiating a new project or abandoning a troubled one.
Therefore i have not noted them in the map.
Of course, if it is usual in an organization to view sunk cost also, they can added in the map and in the calculation at any time.

May be when it comes to the webinar about the business case map/the develop project charter process we will explain that there a bit more.

For now i would not mention them on the map.

Regards,

Markus
avatar
Rami Kaibni
Community Champion
Senior Projects Manager | Field & Marten Associates New Westminster, British Columbia, Canada
Dec 18, 2016 1:28 PM
Replying to Thilo Wack
...
Rami, sorry for being confusing. I did not mean that you need a business case for an ongoing project. You should revise it or create a new one when the question comes up whether to continue or abandon a troubled project, i.e. treat this as you would a completely new project. So when wondering what sunk costs mean for a troubled project it made me wonder what sunk costs might mean for a new project. So the real question is for me whether there are types of sunk cost that you actually should consider? The only thing that came to my mind were costs of obsolecence, which are not exactly sunk costs, but who knows maybe there is something...
Got it, thanks for your ellaboration Thilo.

I do not believe sunk cost is relevant to any new business case as they are retrospective costs but you can sometimes help in determenimg prospective costs.
avatar
Markus Kopko AI Enabler for Project & Program Mgmt | Founder PMotion.ai / The PM AI Coach| PMotion.ai Hamburg, Hamburg, Germany
Dec 18, 2016 1:28 PM
Replying to Thilo Wack
...
Rami, sorry for being confusing. I did not mean that you need a business case for an ongoing project. You should revise it or create a new one when the question comes up whether to continue or abandon a troubled project, i.e. treat this as you would a completely new project. So when wondering what sunk costs mean for a troubled project it made me wonder what sunk costs might mean for a new project. So the real question is for me whether there are types of sunk cost that you actually should consider? The only thing that came to my mind were costs of obsolecence, which are not exactly sunk costs, but who knows maybe there is something...
Hi,

what i have read about sunk cost so far is, that they never should be minded in the decision about initiating a new project or abandoning a troubled one.
Therefore i have not noted them in the map.
Of course, if it is usual in an organization to view sunk cost also, they can added in the map and in the calculation at any time.

May be when it comes to the webinar about the business case map/the develop project charter process we will explain that there a bit more.

For now i would not mention them on the map.

Regards,

Markus
avatar
Markus Kopko AI Enabler for Project & Program Mgmt | Founder PMotion.ai / The PM AI Coach| PMotion.ai Hamburg, Hamburg, Germany
What do you think about that questions here:

"
How much is it going to cost?

What are the alternatives?

Do we have the right people to perform the project?

How will we know when the project is going well or when it is in trouble?

What are the major risks and how are they being mitigated?

How can I help?
..."
...
1 reply by Rami Kaibni
Dec 19, 2016 6:49 AM
Rami Kaibni
...
Now you are mixing the risk section with the cost one. Id rather keep them separate.

I would change the questions to:

1- What is your high level estimate of the project ?
2- What is the estimate of other alternatives ?
3- What should be the limit for the cost or cost ceiling ?
avatar
Rami Kaibni
Community Champion
Senior Projects Manager | Field & Marten Associates New Westminster, British Columbia, Canada
Dec 19, 2016 6:44 AM
Replying to Markus Kopko
...
What do you think about that questions here:

"
How much is it going to cost?

What are the alternatives?

Do we have the right people to perform the project?

How will we know when the project is going well or when it is in trouble?

What are the major risks and how are they being mitigated?

How can I help?
..."
Now you are mixing the risk section with the cost one. Id rather keep them separate.

I would change the questions to:

1- What is your high level estimate of the project ?
2- What is the estimate of other alternatives ?
3- What should be the limit for the cost or cost ceiling ?
...
1 reply by Markus Kopko
Dec 19, 2016 6:53 AM
Markus Kopko
...
Hi Rami,

i am sorry, i wanted to post this in another thread, it didn't belong here.
Sorry for confusing you.

Regards,

Markus
avatar
Markus Kopko AI Enabler for Project & Program Mgmt | Founder PMotion.ai / The PM AI Coach| PMotion.ai Hamburg, Hamburg, Germany
Dec 19, 2016 6:49 AM
Replying to Rami Kaibni
...
Now you are mixing the risk section with the cost one. Id rather keep them separate.

I would change the questions to:

1- What is your high level estimate of the project ?
2- What is the estimate of other alternatives ?
3- What should be the limit for the cost or cost ceiling ?
Hi Rami,

i am sorry, i wanted to post this in another thread, it didn't belong here.
Sorry for confusing you.

Regards,

Markus
avatar
Drew Craig Sr. Agile & Product Coach| Vanguard Philadelphia, Pa, United States
Thank you everyone for your great comments regarding sunk cost.

@Thilo, yes, that is essentially what I was trying to get across.

Although, it may not be directly associated with a business case formerly, it may contribute to igniting the conversations that realize the need for a business case. So sunk costs from another effort, becomes the motivation for a business case to go in another direction

It was a good discussion. I appreciate the great inputs
...
1 reply by Thilo Wack
Dec 19, 2016 12:41 PM
Thilo Wack
...
Andrew, thanks for bringing the topic up. Love it, when something gets me thinking ;-)
< 1 2 3 >

Please login or join to reply

Content ID:
ADVERTISEMENTS

"Sacred cows make the best hamburger."

- Mark Twain

ADVERTISEMENT

Sponsors







Vendor Events

See all Vendor Events

Newsletters

Jun 3: The Career Problem Facing New PMs
May 20: Your PM Career as a Project Life Cycle
May 13: The Big Lie After Layoffs

See all newsletters