Hand-picked resources for product owners, business analysts, and product managers working in tech-enabled organizations. Check out the resources I offer below and sign up for my newsletter!
A business case tells you if it’s worth it
A couple of weeks ago I mentioned I had an appealing collection of potential opportunities for my next adventure.
Fortunately, three opportunities turned into actual offers - all on the same day. I then had the rare luxury of having multiple offers to choose from.
They were all great opportunities, so to decide which one to take I compared the characteristics of each offer. The key characteristics included what product I’d be working on, the nature of the team I’d be working with, the compensation, and the schedule and location freedom each opportunity afforded.
In one sense, I created a business case for each offer.
Ok, that analogy may be a bit of a stretch, but organizations frequently have to decide which opportunities to pursue or forego, and they often ask product teams to put together business cases to help decide.
Here’s a collection of resources about how business cases help teams and organizations choose which products to pursue and some suggestions on how to put those business cases together.
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Business Cases Are Stories About Money
Rich Mironov often has conversations with Heads of Product about business cases, usually framed as“do you have a template we should use so that our team can prioritize big investments?”
He realized their product teams wanted to jump straight into generating numbers and spreadsheets to present to executives, but were unclear about the high-level objectives of their various investments. In fact, their product details included radically different items that were hard to compare one-to-one. The hope was that running business cases (revenue numbers) would provide a uniform way of sorting cats, dogs, sheep, goldfish and elephants.
Templates and canvases are helpful, but you can’t rely on tools to do your thinking for you. Rich’s coaching conversations invariably shift toward clarity of objectives and audience. In other words, business cases are stories about money and you need to know what kind of story to tell before you can crunch the right numbers.
Process More Important Than Models
A critical responsibility of product management is to drive revenue through new products. Unfortunately, business cases are usually required to secure the funding needed. Yet, despite insistence on formal business cases, over 90% of new products in 2020 failed according to Harvard professor Clayton Christensen.
Harvard Business School lecturer Shikhar Ghosh says in a WSJ article that 75% of venture-backed companies never return cash to investors and in 30–40% of the cases investors lose their whole initial investment (he works with a dataset of 2000 venture-backed startups).
If even the most sophisticated VC firms have such a high failure rate, product managers face equally daunting odds of getting their new product ideas funded. John Mecke has found that building a product management business case is as important as the models it contains.
The Many Faces of Business Cases
If you are working in product management eventually you’ll be asked to make a business case. When you take any course in management or business, one topic on the agenda certainly is ‘how to create a business case’. Searching for the term business case in Google gives billions of results. So, if you’re being asked to make a business case, where do you start?
Remco Magielse shares his experiences with creating business cases and reflects on the different roles they have played in the organization. Remco views business cases as:
- a (project) deliverable to support a go/no-go decision
- a method for prioritization
- a process for communication
- a way of presenting
The Only 6 Metrics You Need for Your Business Case
One of the key activities in developing new products and planning a business strategy is to develop a solid and realistic business case. Not only will a business case help you calculate what is a realistic expectation for your product, it also serves as a means of communication to senior management. A business case also brings some common sense to any strategic discussion.
Remco Magielse shows you how to develop a business case by defining six metrics: (1) Customer segments, (2) ARPU, (3) Margin, (4) NDR, (5) Churn, (6) Customer base
The Difference between a Business Case and a Business Plan
The terms Business Case and Business Plan are sometimes used interchangeably, but they are very different constructs.
Gabriel Steinhardt outlines the difference between a business case and a business plan and what they are used for.
Thanks for Reading
Thanks again for reading InsideProduct.
If you have any comments or questions about the newsletter, or there’s anything you’d like me to cover, just reply to this email.
Talk to you in a couple of weeks,
Kent J. McDonald
Founder | KBP.Media
InsideProduct
Hand-picked resources for product owners, business analysts, and product managers working in tech-enabled organizations. Check out the resources I offer below and sign up for my newsletter!
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