Cherry – Making the Business Case for an Information System (starting with Presenting the Business Case)
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Mart Doyle
There are some critical issues you need to know before presenting the business case. The first thing is your knowledge about the audience. Since the audience often contains people from across the company in different functional areas, they often hold very different perspectives about the investment itself and the management of the investment. The variety of the audience is one obstacle in presenting a business case.
The issue when presenting is to demonstrate in dollar value the benefit brought about by the implement of the new system. This would make it easier for managers to think and evaluate rationally about the case. It also makes the benefits seem more “real” and appealing.
With some benefits that cannot be stated in monetary term, it is critical to use proxy variables. Proxy variable is used to measure changes in term of value added to the organization. The benefits added would be more attractive if it can make an impact on the areas that the organization most value. The issue is to consider the important of the benefits to the managers.
Although the benefits the system can bring about can be great, they sometime do not match the concerns of the senior managers. These concerns are not always all about financial reports but can sometime about other aspects of management within the organization. Therefore, paying attention to what managers think important is a very critical issue when presenting a business case.
Question:
Which is NOT the way to demonstrating the benefits of the information system when presenting a business case?
a. Convert the benefits to monetary term
b. Use proxy variable
c. Pay more attention to what managers value
d. Use broad term to indicate the significant of the benefits.
The correct answer is D
Knowing one’s audience does seem like a very important asset to have. If they’re very formal then you would want a straight laced presentation, but if they’re more casual than you could have a more fun and off the wall approach. Knowing your audience and the way you approach them can possibly be the life or death of a presentation.
The audience does seem to be an important part of presenting a business case. Knowing the audience allows someone to determine the best way to present their idea, which is extremely important if you are trying to convince people of the benefits or an advantages of a particular system.
This is one of the most important parts of the whole process of getting a new information system because it determines whether the heads of the company agree with your business case. When presenting a person needs to know their audience and communicate accordingly. The business case should focus on the money because people want to understand what the company will gain from a profit perspective. After showing the monetary value, the person needs to present non-monetary benefits, using proxy variables. This measures the change due to an increase in value rather than financial gain. I like how Hanh focuses on presenting to the managers. Concentrate on who actually makes the decisions rather than people who do not affect the choice in the business case. Show the managers the benefits both financially and goodwill value in order to win them over to the new systems.
I think that knowing your audience is the most important part of presenting. If you present the wrong benefits to a group they might re-act saying “Who cares?” and even though these are good benefits they are never realized. Also you have to be able to get your audience to be motivated towards action and putting them to sleep or giving them things they don’t care about won’t work. Its like if two people have to give a presentation. The presentation requires it to be in Spanish but the 1st person does it in French. That person could know everything about French but nobody knows what they are talking about and therefore they get a bad grade.
I also agree with you shouldn’t have to really have to know the audience to be successful. I agree with the wall approach also but just having an great presentation should speaks for itself.
A good point was raised towards the end of your post. Managers, who represent the “business” side of MIS, and as Prof. Doyle repeated over and over in lectures, IT people would miss (and mess up) big time if they don’t lend an attentive ear to the businesspeople involved with the company’s operation and management. A failure to accomplish this objective can result in the failure of the entire system, no matter how sophisticated it might be.
Assessing Value for the IS Infrastructure:
IS infrastructure includes an organization’s facilities, hardware, software, personnel, and more. These things are vitally important, as well ashard to acquire and maintain. However, they are difficult to place value on. Four categories have been recommended that attempt to assess the value of these items with respect to the overall infrastructure.
First, Economic value is the contribution an investment makes toward improving the profitabilitymof the business. Second, Architectural value comes from an investment’s ability to extend the infrastructure’s capabilities to meet business needs today and in the future. Third, Opperational value comes from assessing an investments impact on allowing a system to meet processing requirements. Finally, Regulatory and compliance value involves how much an asset helps meet control, security, and integrity requirements put in place by government.
Q. All of the following are text recommended categories for assessing the value of an asset within an organization’s infrastructure except:
A. Economic Value
B. Operational Value
C. Community Value
D. Architectural Value
Answer: C
•Rubin’s 4 categories for assessing investments in regard to their value to the overall performance
oEconomic Value
Economic value is the contribution an investment makes toward improving the infrastructure’s ability to enhance the profitability of the business
oArchitectural Value
Architectural Value is derived from an investment’s ability to extend the infrastructure’s capabilities to meet business needs today and in the future
oOperational Value
Operational value is derived from assessing an investment’s impact on enabling the infrastructure to better meet business processing requirements.
oRegulatory and Compliance Value
Regulatory and Compliance value is derived from assessing the extent to which an investment helps to meet requirements for control, security, and integrity as required by the governing body or a key customer
oRubin also argues that, where possible, all evaluation measures should be compared with external benchmark s
I really feel community values are just as important as all the rest. Thoughts from others?
Presenting the Business Case
•Up to this point, we have discussed they key issues to consider as you prepare to make the business case for a system
•We have also shown you some tools for determining the value that a system adds to an organization
•Now you are ready to make the case-to present your arguments and evidence to the decision makers in the firm
Know the Audience
•Depending in the firm, a number of people from various areas of the firm might be involved in the decision-making process for a new IS investment
•Management
oRepresentatives or managers from each of the functional areas within the firm
oGreater strategic focus, largest project sizes, longest project duration
•Steering committee
oRepresentatives from various interest groups within the organization
o Cross functional focus; greater organization change; formal cost benefits analysis; larger and riskier projects
•User departments
oRepresentatives of the intended users of the system
oNarrow, nonstrategic focus; faster development
•IS executive
oHas overall responsibility for managing IS development, implementation, and maintenance of selected systems
oIntegration with existing systems focus; fewer development delays; less concern with cost-benefit analysis
Convert Benefits to Monetary Terms
•When making the case for an information systems investment, it is desirable to translate all potential benefits into monetary terms.
Devise Proxy Variables
•Not all cases are clear cut
•In cases in which it is not as easy to quantify the impact of an investment, you can come up with proxy variables to help clarify what the impact of the firm will be
oProxy variables can be used to measure changes in terms of their perceived value to the organization
Measure what is Important to Management
•One of the most important things you can do to show the benefits of a system is one of the simplest: measure what senior managers think is important.
•By focusing on what senior managers believe to be important, you can make the business case for systems in a way that is more meaningful for those managers, which makes selling systems to decision makers much easier
•Managers are more likely to buy in to the importance of systems if they can see the impact of areas that are important to them
Assessing Value for the Information Systems Infrastructure
•Rubin’s 4 categories for assessing investments in regard to their value to the overall performance
oEconomic Value
Economic value is the contribution an investment makes toward improving the infrastructure’s ability to enhance the profitability of the business
o Architectural Value
Architectural Value is derived from an investment’s ability to extend the infrastructure’s capabilities to meet business needs today and in the future
o Operational Value
Operational value is derived from assessing an investment’s impact on enabling the infrastructure to better meet business processing requirements.
o Regulatory and Compliance Value
Regulatory and Compliance value is derived from assessing the extent to which an investment helps to meet requirements for control, security, and integrity as required by the governing body or a key customer
oRubin also argues that, where possible, all evaluation measures should be compared with external benchmark s
Changing Mind-sets about Information Systems
•Successful managers now think of information systems as a competitive asset to be nurtured and invested in
•Managers have to become strategic about information systems and think of them as an enabler of opportunities
Which is NOT one of the 4 categories Ruben uses for assessing investments:
A. Economic Value
B. Architectural Value
C. Proxy Value
D. Regulatory and Compliance Value
C
“Presenting the Business Case” talked about what approach should someone take while presenting his or her case. It is very important to “know the audience”, because people from different areas of the company may prefer certain advantages different from others. By that I mean each of those people may stand on a different perspective and may want to invest in something different from others from other perspectives. “Convert Benefits to Monetary Terms” indicates that people should keep the benefits straight forward and assign them a number in terms of money. Because each person value different benefits differently, therefore bias on how much the benefit costs exist. Someone should “Devise Proxy Variables” when the investment is not too clear about the return rate, and he or she should assign a scale and present the case accordingly. It is easier for the audience to understand the rate of return of the investment when it is able to be related to something. It is important to “Measure What is Important to Management” because it is easier to get them to approve something and makes the project more meaningful.
Question:
Which of the following suggests that people should assign monetary terms to benefits of the investment during presentations?
a.It is easier for people to understand the benefits
b.Business people likes to see the money sign
c.Business people think in terms of money
d.Money gives the benefit a sense of value
Answer is A.
“Presenting the Business Case” summarizes four seperate strategies to increase the chances that a proposal gets approved. The four strategies are as follows: Know the Audience, Convert Benefits to Monetary Terms, Devise Proxy Variables, and Measure What Is Important to Management. A brief summary of each strategy is given below.
Know the Audience:
By knowing your audience, you can focus on the information that is relevant to them based on their position in the company. At the same time, you can strip away information that would be found superfluous.
Convert Benefits to Monetary Terms:
By showing executives of the company how your project will directly save the company money, they are more likely to approve the project. For exampe, saying that investing in a IT project will save the company thousands of dollars is far less effective than saying that spending $40,000 in an IT project will save the company over $300,000 over the next 10 years.
Devise Proxy Variables:
When it isn’t practical to directly measure the savings a company will gain, you can indirectly measure how an IT project will benefit a company through proxy variables. For example, if on a scale of 1 to 5, worker productivity is currently at a 3, and a new IT project will change this 3 to a 5, then you can use this measurement to help get the IT project approved.
Measure What is Important to Management:
This strategy is directly linked to “Know the Audience.” By measuring, whether directly or indirectly through proxy variables, issues that are more important to top managers and showing how these issues will be positively affected by the IT project, you increase your odds of getting the project approved.
Question:
Which of the following is most likely to get your project approved?
A) Adding additional, often trivial, information.
B) Being vague and failing to give precise numbers.
C) Citing exactly how much the company will benefit from a project.
D) Deceiving the managers with false information.
Knowing the audience should definitely guide the way the business case is going to be presented– each case should be specifically geared towards the intended audience. The case should address exactly what the viewer needs to know, rather than overwhelming them with too much information. Knowing the audience will also help determine the financial or technical sophistication that should be involved in the presentation.
Converting the benefits to monetary terms makes a lot of sense. Having a budgeted plan with specific scheduled benefits presents a much better case to your bosses.
I think converting benefits to monetary terms is an extension of knowing the audience. Rebekah stated “The case should address exactly what the viewer needs to know, rather than overwhelming them with too much information.” When you convert benefits to monetary terms, you are expressing them in a way that any audience, regardless of their department, can understand. Money is the universal language that everybody speaks.
I think by converting it into monetary language it is definitely much easier to understand as a whole. As stated above it is the language of all. People no matter what their education or background can easily understand money and the value placed on it.
I like how you kept your post fairly short but detailed in how to present the business case. The four main focuses of the business case are presenting to your audience, convert benefits to monetary terms, devise proxy variables, and measure what is important to management. These four facets help remove extraneous information, while demonstrating not only the financial value of the new system but also the internal benefits such as increased productivity or better morale because of the decrease in hassles, and know basically what the higher managers are looking for in order to focus on that. These four facets increase the likelihood of success in presenting your business case. In today’s world, presentation is just as important as the new system as a whole, if you cannot present the case in a convincing manner, even a good system will not be approved; therefore, preparation and practice are also important in order to win over your audience.
When presenting a business case to a company IT professionals have to deal with measurement problems. This is based on misconceptions. The main issue comes with recognizing the difference between system effectiveness and system efficiency. System effectiveness deals with the extent to which a system enables a firm to accomplish certain goals/tasks. System efficiency deals with to what extent a system enables a firm to complete tasks/goals in a faster manner, at a lower cost, or with less effort. System effectiveness is difficult to measure, meaning the real benefit of the system is harder to prove to a company. Most companies look for system efficiency. An example where this may become troublesome is the use of ATM machines. ATMs are not efficient if you look at statistics of transactions. However, if you look at how effective they are for businesses and companies they have become e a system necessity.
What does it mean for an IT system to increase system effectiveness?
a) The system enables a firm to accomplish certain goals/tasks <—————-Answer
b) The system cuts costs of certain goals/tasks
c) The system improves the efficiency of certain goals/tasks
d) The system decreases the amount of effort a company needs to perform certain goals/tasks
When presenting a business case, an employee should do a number of things to ensure that he or she clearly articulates the value of the investment being presented and conveyed. First, you want to know the audience. Many people with different perspectives on investments and how they should be utilized will be present. Next, you want to convert the cost benefits to monetary terms. For example, if a manager is going to save 1 or 2 hours of his time based on this new investment, the presenter wants to convey the total number of hours a week, per month, and per year are saved as a result. Furthermore, all of those hours saved can be converted into a money amount of savings ($$ saved per week, per month, or per year). Thirdly, you want devise proxy variables which help to clarify what the impact on the firm will be. You are essentially analyzing changes in perceived values. One question you may tackle may be, “what areas are low-value and high-value to the company?” or “how can we add value to the lower-value areas?” In introducing a new technological investment, you want to communicate differences using percentages, increases, decreases, and so on to allow decision makers to have solid information and data on which to base their decisions. Finally, you want to measure what is relevant to management. When presenting your case, it is essential to please senior managers and to meet their specific needs because they will have a strong influence over decisions. Also, managers may be more inclined to pay into a system that directly benefits their area and work. If all of these elements are effectively presented to a company, you will have made a solid business case.
Multiple Choice:
Which of the following is NOT considered an element in presenting a business case?
A. Knowing the audience
B. Measuring what is important to managers
C. Devising proxy variables
D. Conveying importance to stockholders
Correct Answer is D.
Knowing what the managers want seems to be one of the most important parts since they are the ones deciding on whether or not to implement the system. If what you are proposing does not go along with their goals, the chances are slim that they will approve it.
Stockholders need to be convinced the company is running efficiently and up to date. However, maybe new technologies are better left for presentation AFTER they have been successfully implemented.
i definitely agree that presenting new technology right off the bat without checking to making sure it runs smoothly and is implemented correctly is a very important procedure that cannot be looked over. I definitely agree that before introducing any new technology to shareholders or stockholders it should be tested that it is correctly implemented.
I agree, but I think that there are two crucial points that have to be considered when it comes to stockholders for public companies, and stakeholders for private ones:
1. First, transparency is a key in investor relations. Some companies would WANT to inform stockholders of future investments, as it is their money at stake.
2. Second, beyond corporate policy, I think companies are required to report such investments by law, so stockholders would find out anyway.
Presenting a business case can make or break a company. There are few things that need to be considered while preparing to present a business case. Most importantly, one must know there audience. Secondly, the presenter should convert benefits to monetary terms. The argument behind this is simply a question of what sounds better. Would you rather have someone tell you a certain system will “save time and money” or the “increase production capital by 300% and earnings by 30 million”? Thirdly, being straightforward is the best bet. In cases which are not easily to predict the impact of investment, it is best to come up with proxy variable to help clarify what the impact on the firm will be. Basically, proxy variables are numeric educated guesses. Finally, measure what is important to management. They are the most important people, right? Find out the “hot button” issues are and run with them.
Why should presenters convert benefits to monetary terms?
A. They will sound more intelligent
B. People give in when they hear statistics
C. It’s straightforward
D. Money is all the company cares about
Answer:C
nothing speaks louder then money. More technical departments may want to see performance figures instead of monetary figures.
I’m not too sure if I agree on this yes, the technological side may not be as concerned with the monetary figures however as stated early in this it is the language that speaks to almost everyone. It is highly recommended that it too focuses on the monetary side.
I think that performance figures and monetary figures are tied together (perhaps even inseparable). In other words, present performance figures would eventually transform into monetary figures
Assessing value for the Information Systems Infrastructure is very important to a company. There are four categories for assessing investments in regard to their value to the overall infrastructure
1) Economics Value: contribution an investment makes towards improving profitability
2) Architectural Value: how an investments will extend to the future
3) Operational Value: how an investment will meet business processing requirements
4) Regulatory and Compliance Value” how an investment helps to meet standard/government requirements.
Which category for assessing investments does NOT belong?
A. Architectural Value
B. Monetary Value
C. Regulatory and Compliance Value
D. Economics Value
Answer: B. Monetary Value
Personally, I feel that operational value can be most beneficial to a company. It helps them to understand and get a better knowledge of how these business investments are to help in meeting the requirements. It helps you to better understand the requirements and what you need to help reach your goals. This can be a form of strategic analysis and thinking.
Making the business case is the process of identifying, quantifying, and presenting the value provided by an information system. Developing an information system costs a lot of money, and it is easy to calculate how much money went into the system. It is difficult, however, to quantify how much productivity you are gaining by implementing the system. With IS expenditures continually rising and total worldwide IS spending over $2.6 trillion a year, people expect the productivity figures to increase significantly as well. Productivity hasn’t increased as expected. This is known as the productivity complex, and there are four possible explanations behind it.
Measurement Problems: Firms focus too much on system efficiency instead of system effectiveness (the extent to which a system enables goals or tasks to be accomplished well). Also, there may be secondary benefit such as a good customer service image, that is hard to manage.
Time Lags: There is often a significant amount of time between the moment the company invests in the system and the point at which that investment is translated into improvement of the bottom line. This occurs because it takes time for people to learn and become adjusted to a new system. Lags of 2 to 3 years are typical.
Redistribution: IS may be beneficial for a certain company but not the other companies in its industry. It can allow a company to gain greater market share. Also, as technology improves, the expectations of what people can accomplish are raised.
Mismanagement: IS is sometimes implemented poorly and mismanaged. If it doesn’t suit the needs of the company or is used improperly, then productivity gains will not be seen.
Question:
How long do time lags typically last?
A:6 months-1 year
B:2-3 years <—– Answer
C: 4-5 years
D: 5 years +
There are 3 main ways to base an argument in the business case for information systems. These are the three F’s: Faith, Fear, and Fact
Faith: A business case argument based on faith holds that the information system must be implemented for the company to achieve its business strategy and that it is key to gaining a competitive advantage. Arguments based on faith should clearly describe what you’re trying to achieve, the strategy for achieving it, and the types of information systems needed to enact the strategy.
Fear: A business case argument based on fear holds that if the information system is not implemented, the firm will be beaten on price, lose market share, or even go out of business. It is marketed as the only means of survival. This method is especially effective In competitive industries where use of information systems are widespread.
Fact: A business case argument based on data, quantitative analysis, and indisputable facts that proves that the benefits provided by implementing an information system outweigh the costs. The most common way to do so is through a cost-benefit analysis. In a cost benefit analysis, the total cost of ownership is calculated. This is all the acquisition costs plus the costs for using and maintaining the system. All of the costs, tangible and intangible must be taken into consideration. Then all the benefits, tangible ($250,000 more in sales for example) and intangible (improvements in customer service), are calculated. A simplified cost-benefit analysis looks at the break-even point, where tangible costs equal tangible benefits, for this new system.
Question:
Which of these ways to base an argument in a business case for information systems is the least effective method?
A:Faith
B:Fact
C:Fear
D:Fiction <——
It is important to know which of the 3 main ways to base an argument in a business case will be most effective in a specific situation. They each target and appeal to different scenarios.
When presenting a business case, the most important thing to know is who is your audience. You don’t want to spend all that time preparing it and then realize that your argument isn’t going to convince accounting because your argument might focus on more non-financial matters. The other thing that is very important is to convert the benefits into monetary system. Every good business has one major goal: to make money. So in order to convince management to do something you must show the benefits outweigh the costs. You have to be able to justify the benefits and show that it will make the company profit in the long run.
What is the purpose of a proxy variable?
A. To show how an IS system will impact a company using a scale like 1 to 5 or 1 to 10
B. To compensate for costs that can’t be traced and must be estimated
C. To rate how well a company does a certain task like customer service
D. None of the above
Answer: A
I really like this post, too many times when businesses are presented with too much information they get confused, especially when the information they are being presented with is confusing. If the information was broken down into simpilar steps on how the company is going to make money, it would make the argument more convincing.
When making a business case argument based on fact, what is needed is a cost-benefit anaylsis. The steps to this process is indentifying both the costs and benefits. The costs would includes nonrecurring and recurring costs, tangible and intagible costs. Benedits would be those both tangible and intangible. Once all the costs and benefits are indentified, the cost-benefit analysis can be performed. A simplied example of a type of cost-benefit analysis would be one that contrasts total expected tangible costs verus the tangible benefits. Also break-even analysis and net-present-value analysis would be useful cost-benefit analyses.
A cost that is one time and not expected to continue after the system is implemented is what type of cost?
A:Recurring
B:Nonrecurring
C:Tangible
D:Intangible
Answer: B
All of these costs really combine to help tell the employer what the costs of systems will really be. Sometimes costs can be hidden though, and they may surprise certain people. Therefore cost-benefit analysis are highly important.
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