Chapter 3 - MOV and Business Case

What is Chapter 3 mainly about?

Defining project success through MOV, developing a business case and selecting projects.

What does MOV stand for?

Measurable Organizational Value.

What is MOV?

The measurable value a project should deliver to the organization. It acts as the project's measure of success.

What organizational elements must MOV support?

The organization's vision, mission and strategy.

What four characteristics must MOV have?

It must be measurable, provide value, be agreed upon and be verifiable.

What does measurable mean for MOV?

The desired benefit has a metric and a target.

What does verifiable mean for MOV?

Evidence can be collected to check whether the target was achieved.

What are the four project objectives that support MOV?

Scope, schedule, budget and quality.

How does MOV differ from project objectives?

MOV describes the organizational benefit. Project objectives describe delivery requirements such as scope, time, cost and quality.

Can a project meet its delivery objectives but miss its MOV?

Yes. A system may be delivered on time and within budget but fail to produce the intended organizational benefit.

Give an example of an MOV for an attendance system.

Reduce average attendance-recording time from 10 to 5 minutes per class within three months of deployment.

What are the six steps for developing MOV?

Identify the area of impact, identify desired value, develop a metric, set a time frame, verify and get agreement, and summarize the MOV.

What are the five potential areas of MOV impact?

Customer, strategic, financial, operational and social.

What is an example of customer impact?

Improving customer satisfaction.

What is an example of strategic impact?

Helping the organization enter a new market or achieve a strategic goal.

What is an example of financial impact?

Increasing revenue or reducing expenses.

What is an example of operational impact?

Reducing processing time or errors.

What is an example of social impact?

Improving community awareness or access to services.

What are the four types of desired organizational value?

Better, faster, cheaper and do more.

What does do more mean as an MOV value?

Increasing capacity or growth, such as serving more customers with the same resources.

What three forms can MOV metrics take?

Money, percentages and numeric values.

Why does an MOV need a time frame?

It specifies when the expected benefit should be achieved.

How does an MOV time frame differ from a project delivery deadline?

The delivery deadline specifies when the project is completed. The MOV time frame specifies when its benefit should be achieved.

What is the project manager's role in developing MOV?

Guide the MOV development process.

What is the sponsor's role in developing MOV according to the slides?

Identify and specify the metrics and their acceptable target values.

How can MOV be summarized?

In a clear statement beginning with This project will be successful if, or in a table.

What is a business case?

An analysis of the organizational value, feasibility, costs, benefits and risks of proposed alternatives.

What is the purpose of a business case?

Support a decision about which option to pursue and why it is worth pursuing.

What are four attributes of a good business case?

Thorough, clear and logical, objective, and systematic.

What are the eight steps for developing a business case?

Define MOV, form a cross-functional team, identify alternatives, assess feasibility and risk, define TCO, define TBO, analyse alternatives, and recommend an option.

What is a cross-functional business case team?

A team containing people from different relevant departments or roles.

What are the six advantages of a cross-functional business case team in the slides?

Credibility, alignment with organizational goals, access to real costs, ownership, agreement and bridge building.

What alternatives can a business case consider?

Improve a process without IT, reuse another department's application, reengineer an existing system, buy software, or build a custom application internally or through outsourcing.

What does feasibility ask?

Can the option be carried out, and is it worth doing?

What three feasibility types are named in the slides?

Economic, technical and organizational feasibility.

What is economic feasibility?

Whether the expected benefits justify the costs.

What is technical feasibility?

Whether the required technology and technical skills are available or achievable.

What is organizational feasibility?

Whether the option fits the organization and can gain the support and adoption needed.

What are the three risk activities in the business case?

Identification, assessment and response.

What happens during risk identification?

The team identifies what could go wrong and what must go right.

What happens during risk assessment?

The team evaluates the impact of identified risks.

What happens during risk response?

The team decides how to avoid or reduce risks.

What does TCO stand for?

Total Cost of Ownership.

What is TCO?

The total cost of acquiring, implementing, operating and supporting an option over its useful life.

What three cost categories does TCO include in the slides?

Direct or upfront costs, ongoing costs and indirect costs.

Give examples of upfront, ongoing and indirect costs.

Upfront costs include development and setup. Ongoing costs include hosting and maintenance. Indirect costs include staff time and transition disruption.

What does TBO stand for?

Total Benefits of Ownership.

What benefits are listed under TBO in the slides?

Increasing high-value work, improving accuracy and efficiency, improving decision-making and improving customer service.

What happens in business case step 7?

The team analyses and compares alternatives using financial and scoring models.

What four financial models appear in this chapter?

Payback period, breakeven point, Return on Investment and Net Present Value.

What does payback period measure?

The time needed to recover the initial investment from net cash inflows.

What is the payback formula for a constant annual net cash inflow?

Payback period = Initial investment divided by annual net cash inflow.

What is the payback period for RM100,000 invested with RM20,000 annual net cash inflow?

5 years.

How is payback calculated when annual cash inflows vary?

Add the net cash inflows year by year until the initial investment is recovered.

What does breakeven point measure in the chapter's example?

The number of units that must be sold for accumulated profit margin to cover the initial investment.

What is the chapter's simplified breakeven formula?

Breakeven units = Initial investment divided by profit margin per unit.

What is the margin if an item sells for RM30 and costs RM25?

RM5 per unit.

What is the breakeven volume for RM100,000 invested and RM5 margin per unit?

20,000 units.

How do payback and breakeven differ?

Payback measures time to recover an investment. Breakeven in the chapter's example measures units needed to recover it.

What does ROI stand for?

Return on Investment.

What does ROI measure?

Net expected benefit relative to total expected cost.

What is the ROI formula?

ROI = (Total expected benefits minus total expected costs) divided by total expected costs, multiplied by 100%.

What is ROI if expected benefits are RM115,000 and expected costs are RM100,000?

15%.

What does NPV stand for?

Net Present Value.

What does NPV calculate?

The present value of future net cash flows minus the initial investment.

Why does NPV discount future cash flows?

To account for the time value of money by expressing future cash flows in today's value.

What is the NPV formula?

NPV = -I0 + sum of [CFt divided by (1 + r)^t].

What do I0, CFt, r and t mean in the NPV formula?

I0 is initial investment, CFt is net cash flow in period t, r is the discount rate and t is the time period.

How is net cash flow calculated?

Cash inflows minus cash outflows for the period.

What does a positive NPV indicate?

Discounted future net cash flows exceed the initial investment at the chosen discount rate.

What is the present value of RM108 received in one year at an 8% discount rate?

RM100, calculated as 108 divided by 1.08.

What NPV does the example in the slides produce?

Approximately RM77,371 using an 8% discount rate.

What is a scoring model?

A method that compares alternatives using weighted criteria and ratings.

What is the weighted score formula?

Total score = Sum of each criterion's weight multiplied by the alternative's rating.

What should the weights in a scoring model total?

100%, or 1 when expressed as decimals.

How much does a rating of 8 contribute when its criterion has a 30% weight?

2.4, calculated as 0.30 multiplied by 8.

How do financial and scoring models differ?

Financial models compare monetary outcomes. Scoring models can combine financial, qualitative and other quantitative criteria.

What is a limitation of scoring models?

Weights and ratings can be subjective and affect which alternative scores highest.

What is reverse scoring?

Using a scoring direction where a higher score represents a more desirable result, even when lower raw values are better.

How is risk reverse-scored in the slides' comparison table?

A higher risk score represents lower actual risk.

What caution do the slides give about financial models?

They can be biased toward short-term results.

How can past experience help a business case?

It can improve estimates and assumptions, making the analysis more realistic.

What happens in the final business case step?

The team recommends an option and supports it with evidence from the analysis.

What main sections appear in the business case template?

Cover page, executive summary, introduction, alternatives and analysis of alternatives, including the recommendation.

What should an executive summary briefly explain?

The problem or opportunity, organizational direction, MOV, alternatives and recommended option.

What should guide project selection and approval?

Alignment with organizational values, vision, mission and strategy, plus an MOV that can be verified.