Building a Business Case for an Improvement Project

“Write your injuries in dust, your benefits in marble.” Benjamin Franklin.

How many times do we go into projects without defining the measure of success? That is what we do when we do not think through the cost and benefits of any investment in an improvement project. How can we measure how we haev achieved our improvement goals, if we do not have these quanitified in terms of the time and expense we put into building the improvements?

Building a business case does not have to be an exact science, and is simpler that many think. However, it does take effort, and requires buy-in from the project sponsor or the person who is signing the check.

Building the Business Case for a project is most commonly done using Excel. You want to estimate the costs & benefits over time with all of the assumptions that you will need to make, so that you can define the key project metrics that will help you decide whether to go on with the project or not. Below I have listed the elements of this business case: the costs and benefits over time, and the metrics.

Types of Costs

• One time costs to implement solution. Eg. project time & expense costs, hardware and software purcahses, etc.
• Recuring costs. Eg. depreciation, training, licensing, etc.

Types of Benefits. Below are examples of typicial quantifiable benefits of an business improvement project

• Increased number of customers
• Improved revenue per customer
• Improved customer retention
• Reduction in sales discounts
• Reduction in penalties, returns & credit notes
• Software portfolio consolidation
• IT maintenance cost reduction
• Reduction in capital costs
• Labor savings (by department)
• Improved cash collections
• Reduced stock holdings
• Faster training
• Other one-time benefits (
• Other monthly benefits

Business Case Metrics

• Payback. Payback period refers to the period of time required for the return on the project investment to "repay" the sum of the original investment. Calculating Payback Period using Excel
• Net Present Value: NPV measures the excesses of shortfalls of cash flows over time in terms of present value of the cash. Calculating NPV using Excel
• Internal Rate of Return: A project is a good investment if its IRR is greater than the rate of return that could be earned by alternative investments (investing in other projects, or even putting the money in the bank). IRR will be expressed as a percentage. Calculating IRR using Excel

ERP Systems Production Support's role in Continuous Improvement

"As you wander on through life, whatever may be your goal,

keep your eye upon the doughnut, and not upon the hole."

Deborah Osgood, Chief Architect and Cofounder of BUZGate.org

I recently came across a good article on ITtoolbox Blogs entitled Building a "SAP Support Model". The author, Bob White, outlines a step by step approach for building an ERP support model. This article was SAP-centric. This model also aims to support and solve the technical issues that you would find. Great if you are looking to only support your IT investment.
The question is, having made such a great investment in your system, and then this ongoing cost of supporting your application, how can you sweat this asset to drive real business benefit and continuous business improvement?

The answer lies in understanding the Continuous Business Improvement cycle for ERP systems. This cycle of

1. Adopting (the ERP system);
2. Sustaining (customizing, implementing and supporting the ERP system); and
3. Exploiting (driving business benefit from your ERP system)

This is what aligns technology-based business improvement to business strategy. The illustration above shows this cycle more clearly. Once the ERP system has been implemented, and is stablised with an effective support model (as the article above describes it); then it is time to make System Support a cornerstone of initiatives to drive real business benefits.

How does System Support help drive continuous improvement?

• Great support data gathered from users that will point to improvement opportunities.
• Issues identified by System Support are related directly to the ERP system. Any changes to address these issues will exploit the system capabilities - 'sweat the asset'.
• System Support team are often well positioned between Solution Managers who understand the system capabilities; the users who identify opportunities for improvement; and the deployment teams who can make the changes happen.

___________________________________________

How can you apply this to smaller businesses? Look into the capabilities of your current applications and the needs of your users to identify opportunities to drive productivity and improvement via automation in your business. No need to reinvent the wheel. Use what you have.Keep your eye on the doughnut around and not on the hole ...