A business case that secures investment requires more than just the numbers
A business case that secures investment requires more than just the numbers
By Hamish Ride
You’ve identified the problem. You’ve gathered the data to build an evidence base. And you know solving the problem will require significant investment from your government, business or funder. Possible solutions, though, will impact a broad range of people, and funding will be highly contested. To gain traction, you’ll need a business case that wins hearts and minds – and ultimately dollars.
Business cases, the key documents to support funding for projects and initiatives, outline specific problems and the benefits of solving them. The benefits that matter for decision-makers could be financial (Will the investment make the hurdle rate of return?), but can also include the economic, social, environmental and cultural impacts of investment.
Business cases are a tool to help decision-makers who might fund them and are crucial in communicating to the people they serve why the investment is going ahead.
Traditionally, the decision to proceed with an investment relied on political will and an often-optimistic narrative about the impact of investment; the underpinning analysis was mostly financial metrics and occasionally economic indicators. Yet in recent years we have observed a demand for a more sophisticated approach to informing investment decisions that needs complex analysis and careful navigation of the authorising environment that generic business case formulas cannot provide.
Why the recent shift in emphasis?
For the public sector, the desire for a more ‘joined up’ government has prompted a growth in importance of costs and benefits that fall outside a portfolio or the current budget cycle. This requires more broadly considering longer-term consequences – including the impact it might have on other levels of government or agencies.
Private firms, which previously focused more on financial (often short-term) returns, are also under increased pressure from shareholders and the public to better understand the impact of their investment on communities, governments and the built and natural environments.
This is especially true of high-value proposals. Often funded by multiple parties, they need timely agreement on assumptions and program logic in busy stakeholder and authorising environments. Multiple parties bring diverse and sometimes disparate expectations – with varying motivations, needs, and levels of understanding.
To deliver in this environment, we believe there are five critical factors for success:
1. Explore a range of economic, social and environmental impacts. Business cases increasingly require you to understand non-financial considerations, including political, social and environmental impacts. For governments, the longer-term fiscal impacts are a key consideration where investments alter demand for government services and need for transfer payments. For private businesses, environmental and community impacts can pose risks to profitability, and the short-term financial gain might come at a longer-term financial cost. Analysis of these types of impacts require expert economic modelling.
This was in action in our efforts to develop a business case for the creation of a new STEM (science, technology, engineering and mathematics) precinct at a university. A sophisticated and rigorous economic, social and environmental impact assessment was vital to demonstrating the benefit of the investment, making it the first education initiative endorsed by Infrastructure Australia.
2. Weigh against alternatives – including non-action. Your funders may be aware of the need for investment but not yet have grasped the impact of not acting. This includes cases where the baseline is shifting, so action may be needed just to maintain current performance. Funders also need confidence that all sensible alternatives have been explored. Exploring options using human-centred design, and drawing on levers such as capital and output, demand and supply, and carrots and sticks will increase the integrity of the proposal.
When we were asked to develop a business case to decommission an outdated inpatient mental health facility, it was essential to take a structured approach to estimating locations, timing, spatial requirements and costings across four options, including no action, to analyse the capital expense and operational impact over a 15-year horizon. Without this the government’s funding decision would have been clouded in uncertainty.
3. Explore creative funding approaches. Sometimes delivering the best outcomes requires working with multiple partners, creatively pursuing sources of funding rather than approaching government cap in hand. Options such as multi-agency funding, co-funding and user-funding must be explored.
This creativity was integral to our success in facilitating collaboration between four leading universities to develop the business case for the Sydney Quantum Academy – a training academy to advance quantum technologies. By developing a common narrative and building trust, we helped create a unique proposal for joint funding, which was endorsed by the NSW Government, delivering funding greater than each individual university was likely to receive.
4. Bring your stakeholders on the journey with a compelling narrative. Key to successful business cases is winning the support of the broader authorising environment. We find an effective way of winning that support is co-developing a compelling business case narrative that resonates with key stakeholders. Including stakeholders’ voices in its development can also aid a smoother approval process and eliminate last-minute objections.
When we helped design and support the implementation of a major government data infrastructure project, success depended on consulting extensively with stakeholders to agree on the required investments and commitments on data usage. This allowed the department to develop a clear narrative and cost-effective implementation plan, presenting a cabinet-level report to secure ongoing investment.
5. Find consensus early then structure to solve differences. Finding common ground, especially when defining the problem, will save you much time and grief. But there will always be disagreement. You must work hard and smart to resolve these issues, by structuring an approach that informs and iterates to bring parties closer. This is not just about delivering strong analysis – although integral – but also about ensuring stakeholders are engaged through multiple iterations that respond to their interests and concerns. This helps bridge the gap and design better solutions.
Navigating these challenges can unlock hundreds of millions of dollars in funding
Using expanded thinking will help you unlock funding and deliver the change needed. By combining established techniques for modelling economic and social impact – using human-centred design where appropriate – and aligning stakeholders to ensure they become advocates of your project, you can develop a clear and pragmatic path to investment and implementation.
Your business case partner will need to be expert: sensitive to your political environment, knowledgeable of your challenges and highly credible in assessing impact – all while helping you facilitate consensus. This is not a tick-box exercise.
Nous excels in creating business cases in these contested environments. We combine sector-specific stakeholder approaches with content expertise to help you define the problem, analyse the impacts, design compelling solutions and present the case for change.
If you have a complex problem that requires securing investment get in touch to discuss how we can help you build your business case.