Business Justification : What are the Factors that Affect the Business Justification of a Project?

Business justification demonstrates the reasons for undertaking a project. It answers the question “Why is this project needed?” Business justification drives all decision making related to a project. So, it is important to assess the viability and achievability of a project not only before committing to significant expenditures or investment at initial stages of the project but also to verify the business justification for continuance throughout the project’s lifecycle. A project should be terminated if it is found to be unviable; the decision should be escalated to the relevant stakeholders and to senior management. The business justification for a project must be assessed at the beginning of the project, at pre-defined intervals throughout the project, and at any time when major issues or risks that threaten the project viability arise. Business justification for a project is typically analyzed and confirmed by the Product Owner. It is documented and presented in the form of a project Business Case prior to Initiate phase.

Once documented, the Product Owner should create a Project Vision Statement and obtain approval of the Project Vision Statement from the key decision-makers in the organization. Once the decision makers approve the Project Vision Statement, it is then baselined and forms the business justification. The business justification is validated throughout project execution, typically at predefined intervals or milestones, such as during portfolio, program, and Prioritized Product Backlog Review Meetings and when major issues and risks that threaten project viability are identified. The Product Owner confirms the achievement of organizational benefits throughout the project, as well as upon completion of the User Stories in the Prioritized Product Backlog.

The factors that influence a project’s business justification are: project reasoning, business needs, project benefits, opportunity costs, major risks, project timescales and project costs.

Here is a video on a project’s business justification: http://www.scrumstudy.com/watch.asp?vid=593

Let us now look at each of these factors. Project reasoning includes all factors which necessitate the project, whether positive or negative, chosen or not. For example, inadequate capacity to meet existing and forecasted demand, decrease in customer satisfaction, low profit, legal requirement, etc. Business needs are those business outcomes that the project is expected to fulfill, as documented in the Project Vision Statement. For example, automation of processes, enhanced efficiency of staff, etc.

Project benefits include all measurable improvements in a product, service, or result which could be provided through successful completion of a project. For example, increase in revenue by 5%, reduction in operational costs by 10%, etc. Opportunity cost covers the next best business option or project that was discarded in favor of the current project.