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E. Recommendations

Specific actions recommended.

Table 5.2 Sample business case structure

5.2.1.1 Business objectives

The structure of a business case varies from organization to organization. A generic form is given in Table 5.2. What they all have in common is a detailed analysis of business impact or benefits. Business impact is in turn linked to business objectives. A business objective is the reason for considering a service management initiative in the first place. Objectives should start broadly. For example:

 The business objectives for commercial provider organizations are usually the objectives of the business itself, including financial and organizational performance.

 The business objectives for not-for-profit organizations are usually the objectives for the constituents, population or membership served as well as financial and organizational performance.

Table 5.3 illustrates possible business objectives.

Operational

Financial

Strategic

Industry

Shorten development time

Improve return on assets

Establish or enhance strategic positioning

Increase market share

Increase productivity

Avoid costs

Introduce competitive products

Improve market position

Increase capacity

Increase discretionary spending as a percentage of budget

Improve professionalism of organization

Increase repeat business

Increase reliability

Decrease non-discretionary spending

Improve customer satisfaction

Take market leadership

Minimize risks

Increase revenues

Provide better quality

Recognized as producer of reliable or quality products or services

Improve resource utilization

Increase margins

Provide customized offerings

Recognized as low price leader

Improve efficiencies

Keep spending to within budget

Introduce new products or services

Recognized as compliant to industry standards

Table 5.3 Common business objectives

5.2.1.2 Business impact

While most of a business case argument relies on cost analysis, there is much more to a service management initiative than financials. The scope of possible non-financial business impacts is summarized in this way: a business impact has no value unless it is linked to a business objective. There need not be a one-to-one relationship between business impact and business objective. Examples are given in Figures 5.7 and 5.8.

Figure 5.7 Single business impact can affect multiple business objectives

Figure 5.8 Multiple business impacts can affect a single business objective

It is easy for a business case to focus on financial analysis and neglect non-financial impacts. The end result is a business case that is not as convincing as it should be. By incorporating business impacts linked to business objectives, a business case is more compelling.

5.2.2 Pre-programme ROI

The term capital budgeting is used to describe how managers plan significant outlays on projects that have long-term implications. A service management initiative may sometimes require capital budgeting. It is the commitment of funds now in order to receive a return in the future in the form of additional cash inflows or reduced cash outflows (earnings or savings).

Capital budgeting

Capital budgeting is the commitment of funds now in order to receive a return in the future in the form of additional cash inflows or reduced cash outflows.

Capital budgeting decisions fall into two broad categories: screening and preference decisions. Screening decisions relate to whether a proposed service management initiative passes a predetermined hurdle, minimum return for example. Preference decisions, on the other hand, relate to choosing from among several competing alternatives. Selecting between an internal Service Improvement Plan (SIP) and a service sourcingprogramme is an example.

5.2.2.1 Screening decisions (NPV)