The Business Case is used in most project management methodologies as a fundamental tool for capturing, articulating and rationalizing the call for taking a particular business action (in our context – approving the initiation or the continuation of a project or a program).

The need to have a Business Case arises from the fact that organizations (or those who ‘own’ the money) need to make investment decisions and select those investments that provide a better value for money proposition then other possible investments.

The key for understanding business cases is to understand the notion of ‘decision-making’. Business Cases are a tool used to assist in the process of rational decision making and as such they need to provide the necessary information, and only the necessary information, required to help facilitate that process.

The professional literature is rife with examples of public and private sector projects that have failed to deliver on their expected benefits; and while not all these failed projects represent an invalid or defunct business case, a case can be made (pun not intended) to suggest that some proportion of these business cases have been found, in hindsight, to be – at the very least – incorrect if not completely invalid.

Furthermore, business cases (as pointed out by Andrew McAfee in “The Case Against the Business Case“) by their very nature, are premised on a notional ROI that is – almost by definition – greater than 100% (a point Andrew used to pose the following question: If so many business cases promise a ROI > 100%, shouldn’t they start them all “and not stop until the marginal return is less than the return from traditional investments like advertising, R&D, capacity expansion, etc?”). With the influx of business cases, all promising a positive ROI, organizations lack a sustainable process for determining which of these business cases ought to go through the investment pipeline and which ones should be put on hold or outright rejected.

This post is the first in a series of posts I plan to publish on the topic of IT Investments. Each post will focus on reviewing a single idea / approach published in the professional literature.

Beyond the Business Case: New Approaches to IT Investment

In a 2002 article in the MIT Sloan Management Review, Jeanne W. Ross and Cynthia M. Beath propose a framework for tying business objectives with successful investments. Their framework (see chart below) is built around the association between two dimensions: Technology Scope and Strategic Objectives.

A Framework for IT Investment

A Framework for IT Investment

The intersection between these two dimensions results in the identification of four types of investment opportunities (see chart below):

Investment in Transformation:

Transformation investments are necessary when an organization’s core infrastructure limits its ability to develop applications critical to long-term success…Transformation initiatives are often risky, undertaken when companies have determined that not rebuilding infrastructure significantly is even riskier“.

Investment in Renewal:

The shared or standard technologies introduced when infrastructures are transformed eventually become outdated. To maintain the infrastructure’s functionality and keep it cost-effective, companies engage in renewal“. Renewal Investment enables “the same business outcomes, but reduces downtime and maintenance costs“.

Investment in Process Improvement:

Business applications leverage a company’s infrastructure by delivering short-term profitability through process improvements. Business-process improvements should be low-risk investments because, unlike transformation initiatives, they focus on operational outcomes of existing processes“.

Investment in Experiments:

New technologies present companies with opportunities or imperatives to adopt new business models. To learn about those opportunities or imperatives and about the capabilities and limitations of new technologies, companies need a steady stream of business and technology experiments. Successful experiments can lead to major organizational change with accompanying infrastructure changes or to more incremental process-improvement initiatives“.

Characterizing IT Investments

Characterizing IT Investments

The authors acknowledge that while, on the surface, these four types of IT investment are conceptually unique and easily distinguishable, in practice they are much more difficult to categorize.  For example, a successful experiment may trigger an investment in process improvement; and a process improvement may result in a transformation, etc. With that in mind organization need to be able to deal with the following two challenges:

  1. How much of should be allocated to each investment type; and
  2. How to select projects within each type.

The authors suggest that “The process of distributing funds across investment types demands a vision for how IT will support its core business processes…most companies constantly compare their core-process-support capability with their desired capability. The comparison usually provides the initial basis for allocating funds to transformation, renewal and process improvement. In contrast, funding for experiments may depend more on perceived opportunities of new technologies and the condition of the infrastructure“.

They acknowledge that “No single technique can guide investment within all four types. Ways of prioritizing differ according to the investment’s technology scope and business objectives” but then go on to offer various considerations and case studies to show how some companies have determined what investments they will initiate within each of these types.

Some final thoughts

The article is a great brain teaser in that it provides a tool that can be easily integrated into the organization’s decision-making process. The parameters introduced are easy to understand and can be integrated into the organization’s vocabulary without a need to make substantial vocabulary adaptations. The investment spectrum of transformation, renewal, process improvement and experiments is one that most will be comfortable one and one which executives will be able to use without the need to under go substantial conceptual learning.



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  1. Shim: overall a good article. Too bad the referenced article is behind a paywall.

    Shim: certainly the premise that all business cases promise a ROI > 0 (not > 100%, which is quite unreasonable) is false on its face. Many public sector projects don’t even apply the ROI metric to their business cases, nor do all not-for-profit philanthropy projects. Instead, they are looking for a “return of benefit”, said benefit may be monetized, but often is not — cure world hunger, establish the surveillance state, etc

    And, many for-profit businesses take on projects that have short term ROI < 1 but yet have essential strategic business advantages, again perhaps not monetized.


    • Hi John, fair point re. the share of business cases that are approved on the basis of ROI as well as the point about the importance of benefit identification in the process o establishing business cases. This was the first of a number of reviews I plan to write so let’s see where this is going.


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