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Developing the Business Case for a Major e-Learning Courseware or Infrastructure Project

by Saul Carliner

October 11, 2010

Feature

by Saul Carliner

October 11, 2010

“A successful business case is one part research and one part persuasion. This article explains how to weave both parts together.”

A business case serves as a prospectus for proposed investment in a costly eLearning courseware project or in technology for learning. A business case provides a structured framework for investigating and reporting the costs and returns of these projects. Specifically, business cases ask learning professionals to provide decision makers with the following information: (1) background of the project, (2) description of alternatives, (3) estimation of project returns, and (4) recommendation of an alternative. Ideally, a business case provides a basis for approval for a project. If a sponsor still chooses not to approve the project, the business case also provides a framework for determining why.

Editor’s Note: Parts of this article may not format well on smartphones and smaller mobile devices. We recommend viewing on larger screens.

Introduction

Some of the projects attempted by learning groups have high price tags, such as complex e-Learning programs and enterprise learning systems (like learning and talent management systems). Unfortunately, trainers don’t always hear a “yes” when they request the funding for these projects.

Preparing a complete and persuasive effective business case increases the likelihood that decision makers will accept the proposals for such learning projects. The process of doing so guides learning specialists through the sequence of all of the important issues they need to consider before requesting the funds, so the request for funding is a well-reasoned one.

A successful business case is one part research and one part persuasion.

This article explains how to weave both parts together. It first describes what a business case is. Then it describes the research component: the key sections—or building blocks—of an effective business case. The rest of the article focuses on the persuasive component of business cases: first suggesting how to present the case to decision makers, then offering suggestions for ensuring the success of the business case, and closing with a reminder about the limitations of business cases.

What is a business case?

A business case is a request for investment in a project. Just as a prospectus tells potential investors of a mutual fund or stock about its assets, liabilities, opportunities, and threats, so a business case tells decision makers the purpose, alternatives, and returns of a proposed learning project compared with other possible investments.

Depending on the cost of the project and the decision making process within the organization, the decision maker may be an executive of the learning group, a manager or executive outside of the learning group, or a combination of the two.

Also note that you do not need a business case for every project: just those that require a significant financial investment that could change the way in which the organization conducts its business, or that have similarly significant implications.

As a result, you would not need to prepare a business case for a routine update to a classroom course but you would likely need one to replace a popular and profitable classroom course with an e-Learning course. Similarly, the purchase of a replacement netbook would not require a business case, but the purchase of 50 licenses of Adobe Creative Suite might.

Note, too, that a business case is not a project plan. If the business case convinces a sponsor to fund a project, you would then prepare the project plan.

Lastly, a business case is a persuasive document. Its goal is to convince decision makers to invest in the option that you’ve recommended for a project. Realistically, that means that preparing a business case comes with no guarantee that decision makers will accept the recommendations.

You can increase the likelihood of persuading decision makers by providing persuasive arguments. Although the arguments that ultimately persuade a particular decision maker are often unique to that person, given that most decision makers take their responsibilities to do best for their organizations seriously, most are persuaded by business cases reflecting due diligence.

Due diligenceis the process of conducting a thorough investigation of a situation before making a decision. Due diligence, in business case terms, means identifying and investigating all viable courses of action. For each of those alternatives, due diligence also involves investigating all costs and potential concerns.

Building blocks of effective business cases

Preparing the business case provides a structure for performing due diligence; writing the case provides a framework for showing what you learned.

The business case specifically covers these areas: (1) executive summary, (2) background of the project, (3) description of alternatives, (4) estimation of project returns, and (5) recommendation of an alternative.

The following sections explain each of these areas. Appendix A provides a template you can follow when preparing a business case.

Executive Summary

The Executive Summary condenses the report for someone who will not read it in its entirety.

That’s key—because the executive who ultimately makes the decision might only have read the Executive Summary, not the entire report. The decision maker might ask others to read the report in-depth and report on any issues of which the decision maker should be aware.

So the Executive Summary must provide a summary of key conclusions, not a listing of topics covered.

When writing the Executive Summary:

  1. Provide a one- to two-sentence summary of the background statement.

  2. Repeat—and clearly label—the business objective, and name—but do not define—the constraints affecting the project. (The Background section provides guidance in writing a business objective.)

  3. List the criteria you considered when choosing alternatives, but do not define or explain the criteria unless readers will have no familiarity with the terms.

  4. Name all of the alternatives.

  5. In each of the following sentences, describe one of those alternatives—describe the alternative and its cost.

  6. In the closing sentence, state the choice and the reason for choosing it, and project the return from that choice.

Keep the Executive Summary to 250 words.

Background of the Project

This section provides readers with a brief background of the need driving this request so they can knowledgeably assess the business case. The background serves two purposes: it reassures the sponsor that you understand the situation and, because business cases are occasionally distributed outside of the organization for review, familiarizes reviewers with the project.

Specifically, the background:

  • States what the project is about (such as a new Learning Management System or a comprehensive training curriculum) and why it’s being considered.

  • States the business objective that this proposed initiative supports, in order to establish a clear link to the needs of the business as early as possible in the business case.

    Business objectives vary by project; some are intended to generate revenue for the organizations (usually those associated with sales and introducing new products), others are intended to contain costs (usually those related to efficiency), and still others are intended to help an organization meet an organizational, industry, or government regulation (such as adhering to occupational safety standards).

  • Lists key constraints and criteria affecting the project, such as the need for the Learning Management System to seamlessly integrate with the technology infrastructure of the organization, or the need for all members of a division to complete the proposed training curriculum by a particular date. If you are suggesting that the sponsor replace existing equipment or curricula, you might also explain why the replacement is needed and the constraints that should be considered to ensure a smooth transition.

Ideally, this background should not exceed 150 words.

Description of Alternatives

This section presents the core of your business case. It explains how you conducted due diligence.

It describes how you identified alternatives and your efforts to determine what each alternative will really cost the organization. In the process, it provides decision makers with a measure of assurance that your recommendations are well-considered ones.

The section first explains how you identified and researched alternatives. It should describe the process for selecting among alternatives: the criteria you used to identify the alternatives presented in the business case, how you found possible alternatives, and how you determined which alternatives would become “finalists” in your search.

For example, suppose you are considering the purchase of a Talent Management System. Scores of systems exist, but you can only investigate a few in depth. Explain how you chose the few you would consider in more depth. Similarly, suppose you are requesting funding for a new blended learning training curriculum. Outline what other options existed for teaching that curriculum, such as all classroom or all online instruction.

One option that you should always explore and report is the option of doing nothing. In many instances, learning professionals present one and only one option to decision makers and, in some instances, decision makers reject that choice. In such instances, decision makers have essentially chosen “no,” even though no one has formally presented “no” as an option, much less explored the consequences of choosing “no.” In some instances, in fact, choosing nothing might appear to incur no cost. But doing nothing might allow a bad situation to become worse, causing significant emergency costs. For completeness, a business case should also present the implications of doing nothing, and raise awareness of costs that might arise as a result.

In most instances, learning professionals choose three or four alternatives to explore, along with the option of doing nothing.

In the first part of this section, also explain how you conducted the in-depth research of each alternative. Did you consult a market research report, or people with previous experience with this type of technology or project, or historical information within your own organization?

In the second part of this section, present what you learned about each alternative, one alternative at a time — but present the same information about each alternative and present it in the same order.

  • Component costs of choosing the alternative. The types of issues vary based on the project, but typically fall into a few key categories.

    • For capital expenditures, such as enterprise technology and facilities, the component costs to consider include the cost of buying the technology or facility as well as the cost of leasing it.

      Next, for any capital expenditures, consider the cost of customizing the technology or facility to meet the needs of the organization. For technology, this may involve some construction, setup, programming, installation, and testing. For facilities, this may involve construction and outfitting the facility with furniture and equipment.

    • For learning programs, such as training curricula and complex online simulations, the component costs to consider include the cost of conducting a complete needs assessment, designing and prototyping the materials, completing design work, developing the materials, production (including programming, graphics, video, and audio), conducting technical and pilot tests, marketing the materials, facilitating instruction, and providing ongoing technical and educational support.

    Collecting these component costs often presents learning professionals with many challenges. The most basic is that learning professionals might need to anticipate costs for types of projects with which they have no familiarity. As a result, he or she might overlook a component cost or inaccurately estimate these costs. That’s why research is the key to successful anticipation of estimates.

  • In addition to anticipating component costs, the background research should also identify criteria other than costs to consider. For example, as part of the research, learning professionals might find out that certain problems might arise when converting data for a new talent management system, and this could delay the planned installation. In other cases, management might be interested in learning the implementation schedule before agreeing to invest in a proposed project.

    For example, one of the issues that might affect the choice of a Learning Management System would be the standards under which it runs. Similarly, one of the issues that might affect the choice of an alternative approach to a training curriculum is the length of time needed to develop the materials. For example, an hour of classroom instruction may require between 20 and 40 hours of development time; in contrast, an hour of a complex simulation may require between 450 and 1500 hours. Although the designers might recommend using a complex simulation, the budget might only cover a virtual-class session.

When possible, use tables to present this material, to assist readers with making easy comparisons among alternatives.

Estimation of Project Returns

After anticipating the costs associated with alternatives, next consider the returns that each might provide. Calculating returns has three parts.

First, calculate general returns. You should link the manner in which you calculate returns with the business objective of the project. For example, if the business objective of the proposed initiative relates to generating revenue, then the returns should indicate how the project will generate revenue. If the business objective of the proposed initiative relates to containing expenses (reducing expenses or, at the least, having them grow more slowly than other types of expenses), then the returns should indicate how the project will contain expenses. And if the business objective of the proposed initiative relates to conforming to an organizational, industry, or government regulation, then the returns should describe this compliance.

Second, calculate the return on investment. Calculating the return on investment involves solving this equation:

(Amount returned) ÷ (Investment) = Return on investment

Last, multiply the return by an anticipated risk factor. The risk factor is the likelihood that everything will work out as planned. This provides an opportunity to factor in concerns such as “I might have under-estimated the costs,” “I might have over-estimated the returns,” or “I am concerned that, despite all of my careful research, something isn’t going to go as planned.” The risk factor indicates the likelihood that something will actually happen. This is, admittedly, your best guess.

For example, suppose you think that the costs for one of the options for a Learning Management System are under-estimated. You might estimate that achieving the return you just calculated is only 60 percent likely to occur. So you would multiply the return you just calculated by .6. Similarly, you might be concerned that an estimate of 80 percent of workers taking an e-Learning course on hearing safety is a bit high; and there’s a possibility that only 65 percent will take it (or 15 percent lower than expected). That means the likelihood of that course achieving its return is only 85 percent. So you would multiply the return calculated earlier by .85.

In most instances, the first benefit that you calculate represents a best case. So repeat this process for each alternative using progressively less optimistic cases: a medium case and a worst possible outcome.

Recommend an Alternative

In the last part of the business case, you recommend an alternative and explain how you made the choice.

You might choose the alternative likely to give the best return. But, given the risk factors identified at the end of the last part, you might also recommend an alternative that has a smaller return, but has lower risk.

Each organization has a different tolerance for risk; that’s why the alternative that has the highest return might not always work best. The level of risk associated with achieving that return might be higher than the level of tolerance for risk in the organization.

In addition, make sure that you calculate the returns on the “doing nothing” option.

Although most efforts to create a business case will result in the recommendation of an alternative, in some instances doing nothing may prove the most effective choice after investigating the alternatives. If the data supports doing nothing, feel comfortable recommending it. In most instances, organizations appreciate the honesty and integrity underlying such a recommendation.

Presenting the business case

After completing the preparation for the business case, create both a written report and an oral presentation. Although you create the written report first, you introduce that report to decision makers through the oral report.

The written report follows the format described earlier.

The Executive Summary precedes the formal business case. Written afterthe business case is complete, the Executive Summary presents the Reader’s Digest version for a decision maker who will not read the detailed report.

Using this Executive Summary as its basis, the oral presentation has four parts: (1) an explanation of the situation, (2) the executive summary of the business case, (3) discussion of the business case, and (4) a request for approval by a particular date. (If the decision makers need more time, they’ll ask for it.)

Brevity is essential to successful presentation of a business case because the decision makers participating in the presentation usually have packed schedules that leave them with limited “mind space” for your business case.

Provide decision makers with printed copies of the business case as their take-away from the presentation. Follow up with an electronic copy for those who prefer to read online.

Ensuring a successful business case

At some point after the meeting — and before the date by which you have requested action — decision makers will likely meet to discuss the case. Several criteria will affect their discussions and form the basis of their discussions about your proposal. These criteria include the following.

Does the business case address a real concern of decision makers?

Some business cases are prepared in response to a request by a sponsor. In such instances, the sponsor identifies a list of requirements for the project.

In some instances, sponsors also outline components of the solution. For example, for a LMS, the sponsor might indicate that the system must be compatible with a particular technology or technical standard. For a training curriculum, a sponsor might request that the curriculum address six specific topics.

In such instances, all of the alternatives considered in the business case must address these requirements. If the business case does not address the requirements, decision makers feel as if you did not listen to them. To avoid this concern, make sure that the business case addresses all of the requirements. If an alternative does not do so, openly acknowledge it and explain why.

In other instances, learning groups prepare the business case opportunistically—that is, of their own initiative. Decision makers did not request or anticipate it. Although the intent of the business case is to generate an investment in the learning group, to increase the likelihood of it doing so the business case needs to seem relevant to decision makers.

To make the case seem relevant, the business case must show that it directly affects a concern these decision makers already have. A well-stated and relevant business objective meets this need.

Does the business case address all of the pertinent alternatives?

Even if you considered several likely alternatives, did you explore in the business case the same ones that the decision makers would have considered? For example, when considering alternatives for a LMS, did the business case examine the alternative of using the LMS provided by the vendor who already provides the company’s other enterprise software (such as Oracle or SAP)? When considering alternatives for a training curriculum, does it only consider classroom learning or does it investigate other media?

Has the business case identified a complete list of component costs?

As suggested earlier, a component cost is a partial cost of a project.

For a LMS, component costs might include (but are not limited to) the costs of periodic updates and training staff. For an online training curriculum, these might include (but are not limited to) the costs for training and instructional design services, and training on authoring software.

For classroom courses, component costs include estimated the costs of delivering the courses, which includes the costs of classroom rentals, catering, and travel and lodging for instructors and participants.

One of the concerns about many business cases is that they inadvertently omit one or more of these costs, or they under-estimated component costs.

To avoid such concerns, consider past cost estimates (if available), or check your proposed costs with people who have experience with similar projects.

How realistic are the projections of returns?

Business cases for learning projects often present a single projected return, and that often represents a best-case scenario. For example, a proposal for purchasing off-the-shelf online courses might assume that every worker in the organization takes every course in the library. Or the proposal for a revenue-generating course might assume the highest possible level of enrollment, even though, under some scenarios, enrollment could stray far from that optimistic high.

To avoid such concerns, present three or four potential scenarios: at one end of the spectrum a worst-case scenario and, at the other end, a best case. For example, for a revenue-generating course, your worst-case scenario might represent the minimum threshold and the best-case scenario might represent the anticipated best.

Does the business case provide adequate explanation of its content?

Some business cases fail to provide sufficient background on the situation, so decision makers have no idea what the proposal covers or why it’s important.

Other business cases use technical terms and concepts related to the project or work — terms and concepts that you should not assume decision makers know. This is especially true with technology, which uses many terms and acronyms unique to the technology and that have no meaning to people who have limited familiarity with that technology.

Similarly, the descriptions of course strategies might include “eduterms,” which usually sound like psychobabble to decision makers in other disciplines. All of these failures to clearly explain concepts and terms create an intellectual barrier to the proposal, and they usually create an emotional barrier, too.

When possible, use plain language and use technical terms sparingly. When using technical concepts and terms, explain them in terms familiar to the sponsor (even if it means you can't show off all that you know).

The limits of business cases

Despite the most thorough preparation, decision makers might choose an alternative other than the one recommended; they might choose to do nothing, or, most frustratingly, they might choose to defer decision making (often without a date when the decision will be made).

Rather than taking such decisions as setbacks, approach them as learning experiences. In some instances, decision makers choose another alternative because they have a different perspective on the situation than you do. In most of those instances, they have access to different information than do those who prepared the business case. The possible lesson to learn from such an experience is, “Could I have anticipated this?” so that you conduct deeper analyses with the next business case.

Similarly, in some instances, decision makers raise an alternative that you never considered or that did not make the list of alternatives you considered in depth. The lesson to learn in such an instance is whether you should have anticipated that alternative, or, if you did consider it, but did not investigate it in depth, that you need to tighten the criteria for choosing “finalists.”

In other instances, decision makers choose a different alternative because it requires less of an initial outlay. The lesson to learn in such instances is to better assess the financial capabilities of the organization. In some cases, the organization simply cannot afford some alternatives. Even though such alternatives might provide the best returns, the organization cannot afford the initial investment in them.

And in some instances, decision makers choose not to invest in a project because they feel that the investment is not strategic at this time. That is, decision makers do not see the investment as one that supports the organization in achieving either its mission or a strategic initiative. In such situations, the focus of the proposal by the learning professionals somehow is off-track from the mission or strategic objectives of the organization.

The lesson to learn from such instances is that a problem exists in the alignment between the project and the organization. That misalignment probably results from a misreading of organizational initiatives or a misunderstanding of them. The failed business case provides an opportunity to correct that misalignment.

 

Appendix A: Template for a Business Case

Prepared by Saul Carliner

Note: Please use this template in your work. The onlycondition of copyright is citing this source in your work. Iwill also appreciate your field-based feedback on how toimprove the template.

Cover letter

Paragraph 1: “Attached is the business case....”

Paragraph 2: A 50- to 75-word description of the purpose ofthe case.

Paragraph 3: State the type of action needed (approval?review?) and when you need a response.

Note: Follow standard business letter format

Executive Summary

Note:Prepare the Executive Summary last, after writingall of the other sections.

One- to two-sentence background

 

 

Description of alternatives, no more than one-sentencedescription of each alternative

 

One-sentence explanation for recommendation, includinga brief reason why the alternative was recommended

 

 

Part I: State the background of the project

State a rationale for the project.

 

 

Identify and state the business objective (remember,only state one business objective for the project).

 

 

 

List constraints and criteria affecting it, includingrelationships to existing projects

 

 

 

 

Part II: Consider alternatives

List all relevant alternatives.

__________________________________________________________

__________________________________________________________

For each alternative:

Alternative 1

Brief verbal description (200 words or less)

What this alternative is:

 

How the program or purchase would look:

 

Advantages and disadvantages of this alternative:

 

Time to performance (when organization will start torealize the full  benefits of the option if it is implemented):

 

Identify component costs

Number of Units and Per Unit Costs

Note: Do not complete. This is an ExecutiveSummary— you would provide this information in acomplete business case.

Total Anticipated Cost

Note: Do not complete. This is an ExecutiveSummary— you would provide this information in acomplete business case.

 

 

 

 

 

 

 

 

 

Identify other selection criteria besides cost

 

 

 

 

 

 

 

 

 

 

 

Alternative 2

Brief verbal description (200 words or less)

What this alternative is:

 

How the program or purchase would look:

 

Advantages and disadvantages of this alternative:

 

Time to performance (when organization will start torealize the full  benefits of the option if it is implemented):

 

Identify component costs

Number of Units and Per Unit Costs

Total Anticipated Cost

 

 

 

 

 

 

 

 

 

Identify other selection criteria besides cost

 

 

 

 

 

 

 

 

 

 

 

Alternative 3

Brief verbal description (200 words or less)

What this alternative is:

 

How the program or purchase would look:

 

Advantages and disadvantages of this alternative:

 

Time to performance (when organization will start torealize the full  benefits of the option if it is implemented):

 

Identify component costs

Number of Units and Per Unit Costs

Total Anticipated Cost

 

 

 

 

 

 

 

 

 

Identify other selection criteria besides cost

 

 

 

 

 

 

 

 

 

 

 

 

Part III: Project returns

Option 1: How much the organization will eithergenerate in revenue, reduce expenses, or will save inviolations of a regulation. How?

Note:Establish the variables and equations: do notestimate their values or perform the calculations.

Will the option:

  • Generate revenue

  • Contain expenses

  • Comply with regulations

Estimate either the cost savings or revenue generated.State all assumptions on how you generated this.

Option 2: How much the organization will eithergenerate in revenue, reduce expenses, or will save inviolations of a regulation. How?

 

Note:Establish the variables and equations: do notestimate their values or perform the calculations.

Will the option:

  • Generate revenue

  • Contain expenses

  • Comply with regulations

Estimate either the cost savings or revenue generated.State all assumptions on how you generated this.

Option 3: How much the organization will eithergenerate in revenue, reduce expenses, or will save inviolations of a regulation. How?

Note:Establish the variables and equations: do notestimate their values or perform the calculations.

Will the option:

  • Generate revenue

  • Contain expenses

  • Comply with regulations

Estimate either the cost savings or revenue generated.State all assumptions on how you generated this.

 

Part IV: Recommend an alternative

Name the alternative.

 

 

Explain why you recommend it

 

 


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Well written article!
A thought provoking article for those of us who are mostly focused on solving training/instructional problems with the use of technology.

The difficult part is in estimating Return on Investment since most will not have the information or possibly even access to the information needed to estimate project returns.

This missing information is something that most organizations need to share better with those designing the materials.
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