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Skip to 0 minutes and 4 seconds DOUGLAS MACBETH: Building a business case– anything that needs investment in business has to be justified by some process of building a case for that investment. This we call the business case. Need– the first thing that has to be recognised is a need for some change, which will often come from a user or client or customer. But there are at least three types of situation which drive a need. The first is an opportunity to either satisfy a new demand from the market facing side or alternatively a cost reduction opportunity on the supply side. Competitive threats from a competitor’s innovation can also compel the need to change, to react to the new challenge.

Skip to 0 minutes and 53 seconds And finally, regulators might impose a new law or performance requirement, which must be accommodated. Specification– often customers do not know specifically what they need or indeed what is possible. So there has to be effort to further define the details of the need. And so a detailed specification of what they need is and how it can be satisfied is required. It is important to now differentiate between what absolutely must be delivered, what would be nice to have but maybe cannot be justified at the price expected, or what changes will be needed in order to allow some variations or developments in the future. This is detailed design work. If customers are largely determining their requirements, this is called market pull.

Skip to 1 minute and 49 seconds And it is relatively low risk, if the perceived delivered value is correct. However, sometimes experts are the only ones who can understand what might be possible in a technology. And so we have technology push, where the innovation is pushed onto the marketplace in the hope customers actually do want what is offered. This is high risk. But these innovations can change the world, rather than be simple, incremental improvements. Resources needed– part of the design process is not just to develop the solution but also to define the costs to satisfy the need in which all resources need to be fully evaluated. There is also the strategic decision whether this activity should be done in-house or outsourced.

Skip to 2 minutes and 45 seconds And cost and availability of the required resources will be evaluated. This is the make or buy decision. Solution options– largely these revolve around technical choices and any trade-offs, where one choice makes it difficult to get as good a result in some other area. Other considerations are the ease of change to existing processes and/or people and skills. What risks are envisaged? And what can be done to mitigate them, the confidence levels of any estimates or forecasts? What needs to be spent initially to introduce the change? And what is needed to support it through the life of the project? And then what options there are likely to be at the end of the project life?

Skip to 3 minutes and 38 seconds The final decision is back to the customer to clarify what service levels are required to be supported, as these also affect the design choices. Speed and reliability often are more expensive to support, for example. These need to be built into any contractual specification and subsequent agreement.

Building the business case

In this video, Douglas Macbeth guides you through why you need a business case for any investment (whether to buy or to sell) and what needs to be considered:

  • Identify need

  • Create specification

  • Resources needed

  • In-house or out

  • Solution options

  • Define the service levels with customer

A copy of the mind map used in this video is available to download in PDF format from a link at the bottom of this page.

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This video is from the free online course:

Contract Management: Building Relationships in Business

University of Southampton