Making the Case Part 2: What is a Business Case and How Is It Different from a Business Plan?
I often hear the terms business case and business plan used interchangeably in conversations. As I was starting my career in the field of product planning and management I wondered if these really are the same or are they different.
It turns out these terms do mean different things to different folks, so as always I advise we don’t get hung up on terminology but we do create common terminology inside our organization that we all agree on for better execution. Having said that let’s see if we can clarify the terms and put them into a useful context and definition to accelerate the time from ideas to profits. After all that is the whole reason for us in “making the case.”
Wikipedia defines a business case as: “A business case captures the reasoning for initiating a project or task. It is often presented in a well-structured written document, but may also sometimes come in the form of a short verbal argument or presentation. The logic of the business case is that, whenever resources such as or effort are consumed, they should be in support of a specific business need. ….”
So far so good, definitely when deciding to make a go/kill decision for developing a new product opportunity, we are asking our executive team to commit real resources for a very specific reason: Exploit an opportunity to create new customers resulting in new business growth and shareholder value. So do we need a business plan too? Let’s see:
Wikipedia defines a business plan as: “a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals….”
The definition goes on to say: “Business plans may be internally or externally focused. Externally focused plans target goals that are important to external stakeholders, particularly financial stakeholders…. Internally focused business plans target intermediate goals required to reach the external goals. They may cover the development of a new product, a new service, a new IT system, a restructuring of finance, the refurbishing of a factory or a restructuring of the organization.”
All righty then it kind of sounds like the same thing doesn’t it? Assuming of course you accept Wikipedia’s definitions – which seem reasonable to me. Perhaps a better way to think about business case vs. business plan may be to define it as:
“A business case is made through the preparation and presentation of a business plan.”
Further it’s helpful to put the activity in the context of the product development lifecycle time line – activity to justify investing in an opportunity is called the business case which creates a business plan that is used to execute the development and launch phases of the new product.
Frankly it’s a bit pointless to get hung up the definition because it is the activity and framework of going from an idea to launch that counts. Call it whatever you want but do be clear on what the activities will be to best go from idea to profit. We build a business case to justify the allocation of resources to invest in a product opportunity, and once the case is made and accepted, we plan the activities that follow in executing the launch and commercialization of the product concept.
So let’s think of the business case as the activity that happens before the portfolio go/kill decision point and in building the case a very useful artifact is the creation of a business plan that is used to execute the opportunity post decision point.
That’s my advice and I am sticking to it. What’s your opinion?