reliable business case | free excel tool with great and intuitive design for cost-benefit analysis...

Quick introduction about method and how to use the tool (This ppt is made for reading rather than for presentation) • Overview • Why need a new methodology? • RBC Method • How to use RBC Excel Tool Please read more: www.reliablechange.eu

http://www.reliablechange.eu/

Reliable Business Case is a method - Investment analysis when business impact is expected

- Tell if money is visible, tangible and real, or intangible or non measurable values. You forecast what you actually will see.

- Compares ”all business benefits” with ”all expenses to create the business benefits”

- Evaluate systematically and reliable

- Result is presented in a way decision makers understand their own role in creating the resulting business benefits

- Compatible with PRINCE2 and Benefits Management strategies

- Gives control of calculations, documentation, KPIs, risk, and offer consistency and true comparability between cases

- Offer a quick analysis with included full control of the weakness in the calculations

Method is supported by Reliable Business Case Excel ToolTM

- Free to use, download at website www.reliabelchange.eu

- Superior design and usability

- Give ROI, Payback, Cash flow, IRR, Benefit-Cost Ratio, Benefit bubbles and much more

- Support Follow-ups and risk analysis

http://www.reliabelchange.eu/

Mission : Eliminate ROI By Chance

Cost

Business Benefits

-1 500 000

-1 000 000

-500 000

-

500 000

1 000 000

1 500 000

Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5

Development project

terminates

a.s.a.p.

Project manager

Project board

Risk & cost No control

Mission : Eliminate ROI By Chance - But the business case is worth nothing without a proper process, knowledge, and action RBC gives you the tool and enables you to work right

Framework Benefits Management Circle

What is wrong with the way we do today?

Method description

1

Just pick a variable your organisation does not standardized and size it as you like.

Reasons why your current BC method fails

You get index KPIs you can compare and prioritise between projects and programs

- Reliable ROI, BCR, Payback, and more – you can trust

A clear guideline how to calculate important variables usual for business case analyses

- E.g. value of saved labour hours, calculation lifetime, overhead calculation

- The result of the Business Cases will be consistent between projects, time, and analysts

The calculation process lacks guidelines, you use

“percentage lowest highest” to solve risk analysis, you

use cost-benefit methods that magically turn

intangible benefits into tangibles.

As answer to that, RBC method:

• Has guidelines telling how to estimate value from benefits

• Do not blend benefits and cost with different reliability

• Has a practical and solid guide how to write calculations formulas and identify variables with biggest risk

2


• ‘Ordinary ROI’ only suggests 2-3 years of results divided with an initial investment – no support for e.g. long-term sourcing decisions

• IRR rarely work at all with IT investments and should be avoided

• TCO is fully focused on cost, not business benefits, and is obsolete today

• Cost-Benefit methods’ estimation of intangible benefits lack standardisation and reliability (e.g. Return on IT/Alinean, TEI/Forrester, PENG/Dahlgren et.al)

• As answer to that, RBC method:

• Clearly defines what KPIs to use and how it should be calculated to show true decision quality

• RBC method is specifically made to be used together with e.g. PRINCE2, IT investments, sourcing investments, and business change improvements.

• Set standards of how and what to calculate to make business change investments, but still using current and common financial methods!

3


Studies have shown that despite e.g. PRINCE2’s talk about benefits realisation, it still has the ”ROI by Chance” spirit and little is defined how to measure, govern, and realise the actual behavioural change and to make benefits occur for real.

As answer to that, RBC: • Is made to fill the gap in most program management methods – it offer support and strategies to

encourage the business to carry out the actual business change!

• Is unique since it claims to actually improve the reliability and the chance the results will come true

• Methodology, definitions, and syntax in the documentation, visualise what need to change to make the results

• Method has steps and activities to enlighten and to encourage acceptance from business managers

• RBC Excel Tool has a outstanding ability to do follow-up

4


But antoher side of it is also the ignorance of the skill and competence a good analysis demands. With that in mind it is even more important to have a clear process, templates, tools, training, and a systematic model, to support the poor practisers.

As answer to that, RBC method:

• Means everything! These things are the very reasons you should use the RBC method and RBC Excel Tool in your organisation, analyses, and for your Benefits Realisation!

• Easy; fill in the tables in the RBC Excel Tool and look in the report

• RBC’s steps includes only what is needed; to define the scope, register benefits, register cost, analyse and report

• RBC has a Quick Analysis feature – you always can have control over the quality of the calculation and use no more and no less hours than you need for the situation

• RBC offers optional steps to return very reliable investment decisions and follow-ups during benefits management processes

5


… of six in the ‘Benefits Management Circle’ (But can play a role in most of the other steps as well)

You should not do follow-ups to see what happened

You should use follow-ups to actively create the results yourself

A very brief introduction of some of the things that accentuates • Read more about the methodology at www.reliablechange.eu


RBC method steps (standard)

Reliability categories Control of what you calculate and of the outcome you can expect, both financially and non-financially

You never blend benefit and expense values between the categories. You always know what to expect financially visible You include all benefits and all cost, also the more intangible ones. You get a better view of truth and make decisions accordingly.

Reliable: - Reliable data sources | Financially visible (e.g. budget acceptance, tenders)

Visible: - Unreliable data sources | Financially visible (e.g. saved/used FTE, margin)

Assumed: - Unreliable data sources | Financially invisible (labour minutes)

Not evaluated: - Not Evaluated into financial figures. It can be a potential

Reliable/Visible/Assumed, but e.g. analyse-time has not been available, or it has not been prioritised to be calculated. It can also be an intangible benefit with qualitative values.

Built-in-strive to increase the reliability makes the business case more likely to become true - because the actual business- and behavioural change becomes visible for the managers in charge

SPOTS = Small Portions of Time Savings (tiny time saving thousands of times makes big value) TLP = Top Level Percentage (A tiny little percentage muliplied by a huge value, e.g. 0,5% of total turnover )

If you make a Quick Analysis you take what you find for the moment

You look into the ’Priority and follow-up table’ in the RBC Excel Tool’s result sheet

You identify the issues with most impact on the results, and with lowest reliability

‘High impact’ combined with ’Assumed’ category implies you should improve the analysis

You always get a precise reliability, making a precise effort, paying precise hours of analyse needed

RBC Example - P2P Purchase to Pay AutomationInstead of 'As-Is we choose 'To-Be'

Benefits Value Impact on result Avg per year

Reliable Column6

Automation reduces time and FTEs at finance department 711 146 20% 237 049

VisibleLess workload gives resource reduction in Internal mail 777 106 22% 259 035

Faster process & control gives reduction of penalties 580 052 16% 193 351

AssumedTime reduction from better invoice process 675 091 19% 225 030

Expenses Value Impact on result Column8Avg per year

ReliableBenefits Realisation Manager -201 298 -6% 67 099 -

Documentation -80 000 -2% 26 667 -

VisibleTesting -26 000 -1% 8 667 -

Development -110 000 -3% 36 667 -

AssumedAcceptance testing -8 000 0% 2 667 -

Cost Reduction Campaign' resources -123 719 -3% 41 240 -

Maintenace -281 717 -8% 93 906 -

Results 1 912 661 100% 637 554

… compare with the total money at stake 9 501 936 Avg per year

in 'As-Is' (both benefits and cost) (ABS value)

Reliable Business Case

Impact Table The impact table can be as follow

First, if you do a quick benefits screening or business case, you can in the impact table identify what has the combination low reliability + high impact. These should be the first to prioritise when you add hours to improve or complete your analysis.

With higher reliability category follows higher likelihood the money will occur for real in your future. A business case is not a forecast of money, it is a forecast of business change. Relibale Business Case method defines the categorise in a way, the insight of real business change and future actions of change is demanded, to improve the category.

Risk Analysis - Result KPIs; see at top of the report if results, ROI, BCR, Payback is ok.

- Reliability category; analyse the amount of Reliable, Visible, and Assumed. Much value based on Assumed carry more risk than from the Reliable category.

- Money at stake; analyse the results compared with the total amont of money in Alternative 1. Earning 1 000 might

be a great acheivement if you put 2 000 at risk, but not if you risk 1 000 000. Please note; When you estimate the risk, both cash outflow and cash inflow carries the risk to make results go wrong. Therefore, the total amount of money calculates ABS values. (Note: 'ABS' means you handle negative and positive values both as equal (positive) values)

- Impact on results; the benefits and expenses with highest 'Impact on result' is most important to carry out source data reviews in the case analysis, and to include higher cost in the busienss case for more extensive followreport day, highlight them to decision makers , and after decision, follow

- Remember 'Not Estimated'; The list starting with cell money. They are identified but of some reason, not estimated. The analysis' hours did not last, or you found it too difficult to estimate, or your original scope and limitation on the analysis did not include them. Please ensure all

decision-you estimated. Ensure you build an understanding about the complications, and challenge if some of them should be analysed more and added into the calculation.

Follow-up AnalysisSuppose we have an old business case with 'As'Follow-up' in the Project Setchoose "Follow

But better, you select difference between them in plain view. You get the money you outperformed or underperformed. This is especially useful when you execute your Change Program, or your Benefits Realisation Project.

Benefits RealisationIf you understand the concept of Benefits Realisation, you know how important the Impact table is. You will not use it to see if you historically underperformed. No activities and their impact on the results.

The method defines clear documentation of calculation formulas in a systematic way, e.g.

- #FTE * WkOccur * AnnualWks * SavedHrs * LabHourCost

You easily find what variables are with most risk; the smallest ones. Consider:

- [210 Full Time Employees] * [4 times per week] * [48 weeks] * [(6 min/60) Hrs] * [-53 EUR]

Small figures have a habit to make large differences with common uncertainty

- 4 or 5 times per week makes 20% difference

- 50 or 55 EUR makes 9% difference

- 210 or 220 makes 4,5% difference

RBC state you should document the risk variables. - The RBC Excel Tool Template has short guide in

the column were to do it.

INF: [Information about the variables used

in the formula, or other important data

about the case]

SOURCE: [Who- or what is the source of

the information]

DEP: [Dependency, secondary action to

add to make benefits arise]

NOTE: [Analyst's note or information

about the expense identified, or about the

formula, case or calculation.]

Q: [Open questions of the analyse, etc.]

RISK: Define the risk variables in the

calculation. Description of the most

potential risk not to acheive the benefit's

value

The RBC method defines business benefits as ‘Perceived Value from Change’

- Where change is human action, process change or behavioural change by staff, customers, patients, citizens

The label in the column ’Business Benefits’ always makes clear to decision makers what really had to be changed

- The behavioural change is always visible in tables and reports, making you never to forget the cause and effect linkage.

”A business case is not a forecast of future money - it is a forecast to future business change”

” Tyrone Skogström, Reliable Business Case Handbook”,

Short introduction – read the notes you find in the tool itself to get a more detailed understanding of how to use it.

Excel 2007, 2010, 2013 with macro enabled

- Does NOT work with Excel 2003

- Does NOT work without macro enabled

Read End User Licence Agreement - In the EULA worksheet in the file

Office 2013:

Office 2007:

1. Project set-up & scope definition/optimisation

EXPANDABLES - CAPITAL COST & OPERATIONAL EXPENSES

As-Is ISO9

Condensed rows

Reliability Int/Ext Cost Type Expenses Definition & Formula Notes Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 0 Yr 1

# Hardware

Reliable External CapEx Hardware Rack -500 000

Reliable External CapEx Hardware Servers2 -30 000 -30 000 -30 000 -30 000 -30 000 -30 000 -30 000

Reliable External CapEx Hardware Clients -2 000 000 -2 000 000 -2 000 000 -2 000 000 -2 000 000 -2 000 000 -200 000

Reliable External CapEx Hardware Back-up -10 000 -10 000 -10 000 -10 000 -10 000 -10 000 -10 000

Assumed External CapEx Hardware Redundancy -15 000 -8 500 000 -750 000

--------------- # Software

Visible External CapEx Software SAP server license -15 000 000 -10 000 000

Reliable External OpEx Software License per user & yr -2 000 000 -2 000 000 -2 000 000 -2 000 000 -2 000 000 -2 000 000 -20 000 -20 000

Reliable External CapEx Software License Oracle -300 000 -300 000

Reliable External CapEx Software License Business Objects -200 000 -200 000

Visible External CapEx Software OS -20 000 -70 000 -20 000 -70 000

--------------- # Development

Visible Internal CapEx Development Arkitecture -200 000 -1 000 000

Visible Internal CapEx Development Development -20 000 000 -20 000 000

Visible Internal CapEx Development Testing -4 000 000

--------------- # Maintenace

Visible External OpEx Maintenance Maintenance of hardware & OS -5 000 000 -5 000 000 -5 000 000 -5 000 000 -5 000 000 -5 000 000 -400 000

Visible Internal OpEx Maintenance Patches -500 000 -500 000 -500 000 -500 000 -500 000 -500 000 -100 000

--------------- # Support

Assumed External OpEx Support First line -1 100 000 -1 100 000 -1 100 000 -1 100 000 -1 100 000 -1 100 000 -30 000 -150 000

N/E Internal CapEx Support Training First line

Visible Internal OpEx Support Second line -500 000 -500 000 -500 000 -500 000 -500 000 -500 000 -10 000 -10 000

--------------- # Target changes

Assumed External CapEx Target environment Changes in PLUTT -500 000 -500 000 -5 000 000 -5 000 000

Assumed External CapEx Target environment Exit of SUNE -500 000 -3 500 000 -500 000 -3 500 000

--------------- # Management & realisation

Visible External CapEx Project management Project Manager -1 200 000 -500 000

Visible External OpEx Training Onsite trainers 0 -300 000

Assumed External CapEx Result assurance Realisation manager & reporting -800 000 -800 000

Condensed / normal view

The method enable you to mix cost reduction and and income increase in the same table: If it is e.g. labour cost reduction, the result should be a negative value. The variable representing the value, should be negative, e.g. labour cost

Expenses are

3. Expenditure Screening Best carried out in a smaller ’Calculation Group’

2. Business Benefit Screening Make a complete screening with qualified reference groups, and care about how RBC defines ’Benefit’.

4. Report Analysis & Recommendation The Report sheet have a comprehensive guideline how to understand the figures, but experience is the most reliable way.

You identify business benefits and improvement cost

- The expenses is everything needed to make the business benefits to arise

- Cost reduction is a business benefit and in the table you can both have negative figures (cost) and positive figures (income)

- E.g. if one benefit is lower maintenance cost of an IT system, it is a business benefit for the IT department. The cost you want to identify in the Expense sheet is the cost for the change, what made it possible.

It is a investment analysis tool, computing [To-Be] minus [As-Is]

- [To-Be] = SUM(To-Be Benefit; To-Be Expense)

- [As-Is] = SUM(As-Is Benefit; As-Is Expense)

The result considers full calculation lifetime

- Guideline; equals ”economic lifetime”

Project description

Project / Investment defined - KPIs and variables

Analysis set-up

Analyst/owner Tyrone Skogstrom, +46 702 94 32 02, [email protected] Time span

Project name RBC Example - P2P Purchase to Pay Automation Hourly cost

Date 10 november 2011 Currency sign

Interest

Names to be used in formulas

Hour1:

Hour2:

Hour3:

Variable1:

Variable2:

Variable3:

Alternatives - Shortform and scopes

Add 2-6 alternatives. Used short names affect charts and tables. Description is not used in any other sheet.

Short name 1 As-Is Short name for chart usage etc - restrict to about 15 letters

Description

Alt 1

[Description of alternative eg. current situation, as it continues for often 3,

5, 7 years ahead]

Short name 2 To-Be Short name for chart usage etc - restrict to about 15 letters

Description

Alt 2

[Description of alternativ e.g. with improvements, investments, life time

cost, business change, change governance, covering the same cash flow

life time as As-Is]

Short name 3 FollowUp April 2013 Short name for chart usage etc - restrict to about 15 letters

Description

Alt 3

Total of six alternatives to compare with, such as business scenarios,

different tenders, IT-solutions or systems. It can be totally different

alternatives, such as either investing in new IT systems, or take it as a

software as a service, or even outsourcing a whole Shared Service

department. They are the actual possible actions you compare.

It can also be result check, one or more control points, maybe as a part of

a proactive busines change and benefits realisation program.

Description of the alternative - what differs between them

New line within cell; Alt-Enter






In this sheet you defind the case and variables. 'Years' is the calculation time span used, and RBC rule of thumb tell it should be the same as your financial time span. Please note, the ROI and results accumulate all cost and

benefits during this time span (ROI in other cases in general is 2 to 3 years of benefits divided by initial capital cost). RBC reason is, because you want to take full consideration to also operational costs etc.

'Hours' and 'variables' to the right can be used in formulas.. A value in 'Hour1' can be used in the calculations as

i.e.: [Cost per Hr] * Hour1 . This allows you to easily change the calculation with only one cell to update.

Calculation’s time span

- ’Years’ – same as financial time

Interest rate

- ’Real interest rate’

Add between 2 – 6 alternatives

- Typically; ’As-Is’, ’To-Be’, Follow-up’

Describe the scope of change for each alternative

- Tell the properties that differ and what to expect

- Tell what [investment] enables what [business/ process change], giving what [outcome]

Define your formula variables

INF: Variable definitions etc REF: Reference, data source DEP: Dependency to additional actions, projects etc Q: Still open questions RISK: Identified risk NOTE: Analyst’s personal note

Buttons [Alt-Enter] give a new line within Excel cells

Define benefit's name - Define a benefit label, to describe cause and effect in a short form suitable for

tables and listing.

- Keep it into the column with max. 6-7 words.

Subhead in blue - Start the line with [#+Space] if you want to have a "Blue Headline Format"

What is a benefit ? - RBC method states the benefit is 'Perceived Value From Change'.

- This column asks for a 'label' to be used in lists and charts. In a general cause- and effect linkage diagram, you have a 'IT system's function', enabling a 'action or process change', enabling a 'tangible or intangible result'.

- Here, the benefit label should describe them all if possible, but with the few words restriction, focus on syntax: [End result] from [Process change]

- E.g. benefit label should neither be 'New beneficial information to customers', nor 'Retained customers'. It rather be 'Retain customers through new beneficial information'.

Edit both Definition and Formula in these cells - Use button combination <Alt-Enter> to create new lines within excel cells.

Definition - A complete explanation how it can be considered as a benefit; the change and the result in

one or max. two sentences.

Formula - How the value of the benefit is calculated. Keep definition and calculation in each year's

value column mirrored and updated.

Syntax in formula - Use documentation strategy, syntax and abbreviations, as described in the RBC method.

Shortly: Join first syllables into understandable abbreviations. If recognised abbreviation (English; found in e.g. 'http://www.acronymfinder.com') in your language exists, use it instead of the general 'first syllable rule'.

- See example in slide 19

No figures - Avoid to write figures in the formula, instead define each variable in 'Notes' column after the

'INF: ' prefix. If a figure in the calculation can be considered as 'constant', it can be suitable to use, e.g. if saved labour minutes convert into hours by ' (Min/60) '

Positive or negative value in the cells? - RBC Excel Tool is analysing the difference between two alternative s.

- The benefits can arise from both cost reduction and income increase, and you mix them both in the Benefits Screening

- If cost is -100 in alternative 1 and -75 in alternative 2, the Result Sheet gives a +25 result (-75--100=25).

Example ’IT Cost reduction investment’ - It is considered to be a ‘ IT department Business Benefit' and should be on the

BusBenScreen sheet. IT department is a business as everything else. Since business benefits arise from peoples’ new behaviour/action/processes (aka. business change…), you put the cost-of-change in the ExpenseScreen sheet.

3. Expenditure Screening

Expand row height and use Excel’s ’Alt-Enter’ for new rows within cells

Expand number of years (depends on stated calculation time span)

Define Reliability Category, Internal/External, Opex/CapEx, and type of expense (drop list)

4. Analyse and Report IMPORTANT: Define what alternatives you want to analyse

Check the key index figures

RBC Report - RBC Template

Result sheet - 'To-Be' minus 'As-is' makes following results

3 yrs accumulated cash flow (discounted 5%) Instead of … … we choose … … with reliability

Choose scenario & reliability mode: As-is To-Be RVA

Benefits -10 032 446 -636 240 9 396 206

Cost 0 -3 879 512 -3 879 512

Net Benefit between Alternatives 5 516 694

Measures Results

Discounted Payback 0,93 Years

Benefit Cost Ratio (3 yr, discounted) 242%

Return on Investment (3 yr, discounted) 142%

Net Benefit between Alternatives 5 516 694

Benefit Cost Ratio & Return On Investment EUR (RVA, 3 yrs NPV discounted 5%)

Cost-Benefit AnalysisColumn3 ResultColumn1

BCR (Lifetime 3 yr), NPV 242%

Cost-Benefit Life (RVA) 5 516 694

Benefits 9 396 206

Cost -3 879 512

Return Of InvestmentColumn1 ResultColumn2

ROI (Lifetime 3 yr), NPV 142%

Profit (RVA) 5 516 694

Benefits 9 396 206

Cost -3 879 512

CashFlow and Payback EUR (RVA, 3 yrs NPV discounted 5%)

10 Aug 2012

Reliable Business Case Excel toolThis tool supports the methodology described in Reliable Business Case Handbook. Freeware; Usage under Licens Agreement see worksheet 'EULA'. All risk lay upon the user. Download newest tool from source: www.reliablechange.eu

Primary usage is IT investment analysis, giving a comprehensive base for decision if you should continue with the current situation 'As -Is', or choose between 'To-Be' or 'Follow-up' alternatives. Beside common financial key figures such as Benefit Cost Ratio, ROI, Cash flow, NPV, Payback diagrams, IRR, th e method define benefits and expandables in three reliability categories. These tell you what results are reliable and will become visible in your financial statements, but also encourage you to include intangible beneftis into the case.

Benefit Cost Ratio & Return On Investment For comparing several investment projects and to be able to prioritise the most valuable choice, Benefit Cost Ratio is a great onedepreciated ROI and BCR, and from the full calculation lifetime's cost and benefits.

BCR = (Benefits/(ROI = ((Benefits

ROI and Cost Benefit based on what variables?Reliable Business Case method states you should use Net Present Value results from the financial lifetime. In Project Sheet percentage, etc.

When you make a Reliable Business Case, you calculate in the most fair way possible. The majority of other cases you might want to benchmark against - you will encounter poor cash flow analysis; neglection to include the expenses you have for business change; human resource expenses for FTE reduction etc. The two most common errors probably are neglection to take enough operational expenses into consideration, and complete absence of capital expenses for the important business change. You also find in other business cases, calculations based on labour cost reduction without any staff reduction, but just based on used time reduction. Also note, other ROI figures usually use a variation of [only] 2timespan. Further, ROI usually is not based on depreciated NPV values. When you compare results between projects, e.g. with ROI index, please ensure your other benchmark data are equalised up to Reliable Business Case standardconditions and founded on the same data variables.

Unfortunately, ROI is a well recognised index between business cases but lack decent definitions, scope and methodology behind it.

Is this a good result?Above 0% ROI or the equal 100% BCR, your case is positive. Question is; what hurdle rate does your organisation have? The RBC Excel Tool template gives a yellow 'maybe'' with ROI 0and a green 'OK' with ROI > 100%. Same hurdles for BCR are 100can be altered in the 'UserAdj' sheet

Decide after evaluating following:

1. Can any other investment alternative offer better results? 2. Can any other investment alternative offer better cash with earlier payback? 3. Is there any Not Estimated, intangible benefits, excluded in the results that matter?4. Are the results reliable and likely to occur for real?

0% 50% 100% 150% 200% 250%

242%

BCR (NPV, RVA, 3 yrs)


0% 50% 100% 150%

142%

Depreciated ROI (NPV, RVA, 3 yrs)


BCR242%

ROI 142%

Benefits

71%

Cost

-29%

Benefit Cost Life (RVA)


Reliable317

Visible-1 711

Assumed6 911

BCA Reliability (Yr 0 + 3 yrs)

Th

ou

san

ds


Benefit Cost Ratio & Return of Investment

Overall results - select alternatives and reliability

Reliable Business Case usageRBC is suitable for all initiatives to improve organisations' business, and is made to support decision, project prioritisation, project and program budgets, and follow

Comparing alternatives You can compare any alternative with another, making it possible to find out more than the common [To-Be] minus [Asalternatives and ownership/sourcing models. Easily do your followscenario and compare with Aswhat benefits and expenses fail or outperforme when follow

Reliability categories ReliableVisibleAssumed

The reliability chioce

You enables to either show the report based on all three levels of reliability ('RVA'), or a choice where Assumed category leaves out ('RV'). As default use 'RVA' choice since the RV delimiting keeps you from full controll of the scope. As reporting strategy you might report in two steps, first with RV data, and then RVA. The latter added Assumed category usually enables a essenssial discussion about benefits realisation and cost expectations, from important issues.

Time2Money (T2M adjustment and RBC result)Small portions of time savings ('SPOTS', e.g. saved minutes) rampants today errorously often as fully labour cost savings from FTE reductions. The usage is so common, the RBC method had to turn spotlights to it, and to guide in a correct and standardised way. RBC states, SPOTS always is Assumed category, and you reduce the labour value with 75%. If your Business Benefits Screening includes this, column 'T2M adjustment' and 'RBC estimate' tell the adjusted results.

Usage conditions and copyright: Tool usage is entirely at your ow n risk, for which creator shall not be liable. Read the w hole EULA statement sheet (black w orksheet tab). The tool is free to use for any, but the tool or part of the

design, or code, are not to be copied or sold neither in w hole nor in part. Any usage, or distribution of the f ile, must comply to EULA and refere to www.reliablechange.eu Reliable Business Case

… or analyse the details far down …

4. Analyse and Report

IMPORTANT: Define what alternatives you want to analyse

Check the key index figures

And analyse further details far down …

Push ”Recalculate!” button when you want to renew the diagrams and tables.

… and paste the results as pictures and charts in another sheet for external use

The thresholds can be customised in the sheet … “Customise”

The alternatives are edited in the sheet Project

Report - Cash Flow View

CashFlow and Payback EUR (RVA, 3 yrs NPV discounted 5%)

Cashflow Benefits & Expenses (NPV) Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10

Benefit totals 0 3 117 302 3 216 024 3 062 880

Expendable totals -2 360 000 -580 952 -480 726 -457 834

Result per Year -2 360 000 2 536 349 2 735 299 2 605 046

Cumulative -2 360 000 176 349 2 911 648 5 516 694

Payback yrs 0,93

RVA Kolumn1Last yr (3 yr) Internal Rate of Return (IRR) Please take care,

Benefits 3 062 880 IRR can fail to

Cost -457 834 107,5% correctly represent

Cost-Benefit Result 2 605 046 IT investments

Benefits Breakdown

Pay BackPayback is probably the most important factor to consider when taking investment decisions. Early payback is low risk and usually be tter profit, and it set you free to continue with further investments. Please note this is discounted cashflow - if you compare it with another project's payback, you should ensure they are equalised. Each year shows the result from Alternative 2 minus Alternative 1, benefits and expenses summed together. The "reliability view" separates it into the method's reliability categories, depending on your choice at top of this page (cell reference "I21").

The "Cash Flow changes" chart have another approach, it do not show the product between the two alternatives, as the other do . It tell us about the cashflow difference between the two alternatives instead.

Last year in time spanLast year in time spanThis is interesting when you consider the functional lifetime, and stretch your analysis beyond calculation lifetime.The meth od has 'financial lifetime' as the calculation's time span, but succeeding years after the lifetime can be important in the decision too.

Internal Rate of ReturnsThe RBC Excel Tool offer IRR for convieneance, but does not recommend it as a decision factor for IT investments. IRR works well only if you have one single initial year of investment (yr 0), followed by only positive yearly cash flows. More, it also assume each pos itive yearly cash flow can be reinvested with the same discount as you total IRR will be. These two issues can rarley be accomplished. Many IT inves tments have unsymetric cashflows, such as outsourcing, and by failing these issues , it return a wrong result. Therefore, many organisations do not use IRR for investments in business change projects. However, IRR sometimes is needed, your organisation might define a minimum allowed IRR, e.g. Hurdle Rate, and you need the data to pass throuhg the case.

-3 000

-2 000

-1 000

0

1 000

2 000

3 000

4 000

5 000

6 000

Yr 0 Yr 1 Yr 2 Yr 3

Th

ou

san

ds

Cash flow & Payback (RVA)


- 200 12 259 246

-2 160

108 175 1670

2 417 2 302 2 192

-2 360

176

2 912

5 517

-3 000

-2 000

-1 000

0

1 000

2 000

3 000

4 000

5 000

6 000

Yr 0 Yr 1 Yr 2 Yr 3T

ho

usa

nd

s

Cash flow & Payback - Reliability view (RVA)


Internal Rate of Return

Yr 0 Yr 1 Yr 2 Yr 3

Benefits (To-Be) - -391 -125 -119

Expenses (To-Be) -2 360 -581 -481 -458

Benefits (As-i s) - -3 509 -3 341 -3 182

Expenses (As- is) - - - -

Benefits (To-Be)

Expenses (To-Be)

Benefits (As-is)

Expenses (As-is)

-4 000

-3 500

-3 000

-2 500

-2 000

-1 500

-1 000

-500

-

Cash Flow changesAlternative 2 <-> Alternative 1

All other charts show benefits and expenses as the sum difference between 'Alternative 2 minus Alternative 1'. This chart shows how benefit and expense look like, for each alternative.

NOTE; In case of T2M adjustment, it affects the sum between the two alternatives, not an alternative .

However, in this chart theT2M adjustment charges an alternative;Alternative 2.


Th

ou

sand

s

Report – Benefits Detail View Benefits Breakdown

Benefits earned - from what? EUR (RVA, 3 yrs NPV discounted 5%)

Top Ten Benefits Chart - many big bubbles better Benefits - Reliable Categories

Benefits without monetary evaluation

Not Estimated Benefits Not Evaluated

Time efficient recruiting process

Better employees recruited

Cost reduction in customer service

Compliance to ITIL in IT Change process

Question calls reduction in call centre

Time reduction in accounts receivable process

Revenue increase from increased sales

Cost reduction by manufacturing automation

Sales return from advertising improvement

Reduced time with purchase process

Increased customer life time from new reports

Cost - breakdown

The definition of benefitsReliableValue from Change'. The mindset from a IT investment perspective should be [End result] from [Process change] enabled by [IT function]. Process change is a simplification representing process change, behavioural change, but also 'one time' activities. Benefits can only arise by activities made by people.

The benefits can be tangible, a financial value, but also intangible, quality property. sheet often includes intangible benefits, but they are defined with t

Not Estimated Benefits ListNot estimated benefits (and expenses) are just as important as the issues just as big impact on the results as the ones you add to the calculation.

Reasons to be Not estimated are; a problem to make monetarily evaluations; or they are not prioritised in the analysis; or the project's time was not sufficient; etc.

Bubbel chartBubble chart to tell us the top ten benefits, and to what reliability and monetary size. The larger bubbles, the better.

Pie chart Pie chart tell what sum each reliability category add to the result. A high amount of Assumed increase risk and obstruct a investment decision. However, in a strategy of a twoanalysis, the initial PreAnalysis usually consist of mostly Assumed.

Reliable1 224 646

Visible580 052

Assumed7 591 508

Benefits Totals (Yr 0 + 3 yrs, RVA)


Lower cost in internal post office Reduction of

penalties

Time reduction from better invoice process

Sales increase from time saving in sale

dep

-2 000

-1 000

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

Th

ou

san

ds


Report – Expense Detail View Cost - breakdown

What cost is needed to create the benefits? EUR (RVA, 3 yrs NPV discounted 5%)

Top Ten Cost Chart - few small bubbles better Cost - Reliability Categories

Cost TypesFrom Opportunity & Expenses Screening Table (RVA)

Types of expenses Value

Maintenance -680 812

Software -408 487

Support -272 325

Testing -150 000

Training -77 232

Customisation -2 100 000

Benefits Realisation -190 655

Capital or Operational ExpensesFrom Opportunity & Expenses Screening Table (RVA)

Expenses Values

CapExLicense -408 487

Acceptance test -150 000

Training -77 232

Programming -2 100 000

Realisation Manager -190 655

OpExMaintenace -680 812

Support -272 325

Expenditure Internal / ExternalFrom Opportunity & Expenses Screening Table (RVA)

Expenses Values

ExternalLicense -408 487

Support -272 325



InternalMaintenace -680 812


Training -77 232

Impact Table - Follow Up Support, Reliablility & Risk

Be fair to you, your case and your businessReliabAs-Is, with one or more alternative scenarios. To achieve the other alternatives, you not only had to forecast all your IT project expenses, but all expandables your organisation will have.

RBC method advise you to include part of overhead resources and intangible expenses. Even more! RBC method encourages you to to set up a Benefits Realisation Project/Program and to have a Realisation Manager supporting the business change, and behavoural change of the staff and customers. The realisation includes measuring change, reporting to management, and propels action if it looks like the business change fail the objectives. All these should be included into the business case from start.

Bubbel chartBubble chart to tell us the top ten expenses, and to what reliability and monetary size. The smaller bubbles, the better.

Pie chart It gives you an understanding how reliable the cost side of your project is. This will be a great help in your Risk Analysis, and a support to take further actions to reduce risk.

Expense Types List & ChartThe types are editable by the user in the 'UserAdj' sheet, and therefore offer some flexibility of what you like to analyse. RBC Excel Tool template offers IT investment types, such as hardware and software. It also include Benefits realisation etc.

Internal/External Cost List & ChartIt is important to see and to better understand the expenses in the business case, if you follow Reliable Business Case method's guideline, to also include expenses many organisations neglect: e.g., time from your own developers, internal ITtesting groups. Even worse, if you take a step away from the IT implementation project, your rarley see anything of exepenses from the business change. RBC method suggest you to consider all internal expenses needed to make the results should be included into the business case.

Capital/Operational Expenditure List and ChartThe chart with Operational Expenditure (OpEx) and Capital Expenditure (CapEx) can be interesting in an accounting point of view, but also remember RBC method state cost from the 'business change' actually is a kind of 'nondefined as CapEx.

You suggest to define these costs in this tool as Capital Expenses, despite you probably cannot claim them as deductable assets (depending on your country's laws). Discuss the matter with financial department. Expenses you add to change the organisation and staff's behaviour might asset to be used in businessnot agree.

Objectives larger than the caseIf you systematically include all expenses during the ITlifetime, you will more easily be able to monitor the operational cost of the IT department. It encourages you to allocate future OpEx in the budget, and you will stop considering 'ITof expense.

The objective with this is larger than the single investment. It is more important than ITCase systematically on all larger investments, you will consider IT expenses as investments, and you will measure and govern the business change. The CIO will be able to tell exactly how much business benefits the IT

Keep yourself updated on

Opex-953 137

CapEx-2 926 375

OpEx/CapEx - (RVA, 3 yrs)


External-2 971 467

Internal-908 044

Internal/External Expenditures - (RVA, 3 yrs)


Reliable-908 044

Visible-2 290 655

Assumed-680 812

Expenditures Reliability - RVA


Maintenance-680 812

Software-408 487

Support-272 325

Testing-150 000

Training-77 232

Customisation-2 100 000

Benefits Realisation-190 655

Expense Types (RVA, 3 yrs)

Reliable Business CaseReliable Business CaseReliable Business Case

License

Support

Acceptance test Training

Programming

Realisation Manager

Maintenace

-2 500

-2 000

-1 500

-1 000

-500

0

500

Th

ou

san

ds

Reliable Business CaseReliable Business Case

Capital or Operational ExpensesFrom Opportunity & Expenses Screening Table (RVA)

Expenses Values

CapExLicense -408 487


Training -77 232



OpExMaintenace -680 812

Support -272 325

1. In the ’Customise’ worksheet’ you can edit your own set of ’Types’

2. Use them in the drop down menu in ’Expenses’ sheet

3. Find the results in ’Report’ sheet’

Report – Impact & Follow-up Remember to use it regularly! Impact Table - Follow Up Support, Reliablility & Risk

What issues drive the result - or demand improved reliability work? EUR (RVA, 3 yrs NPV discounted 5%)

RBC TemplateInstead of 'As-is' we choosed 'To-Be' (RVA)

Benefits Value Impact on result Avg Per Yr

Reliable Column6

Lower cost in internal post office 1 224 646 9% 408 215

VisibleReduction of penalties 580 052 4% 193 351

AssumedTime reduction from better invoice process 6 502 209 49% 2 167 403

Sales increase from time saving in sale dep 1 089 299 8% 363 100

Expenses Value Impact on result Column8Avg Per Yr

ReliableLicense -408 487 -3% 136 162 -

Support -272 325 -2% 90 775 -

Acceptance test -150 000 -1% 50 000 -

Training -77 232 -1% 25 744 -

VisibleProgramming -2 100 000 -16% 700 000 -

Realisation Manager -190 655 -1% 63 552 -

AssumedMaintenace -680 812 -5% 226 937 -

Results 5 516 694 100% 1 838 898

… compare with the total amount of money 12 102 114 (Sum Avg per år)

in 'As-is' (both benefits and cost) (ABS value)

Impact Table The impact table can be as follow

First, if you do a quick benefits screening or business case, you can in the impact table identify what has the combination low reliability + high impact. These should be the first to prioritise when you add hours to improve or complete your analysis.

With higher reliability category follows higher likelihood the money will occur for real in your future. A business case is not a forecast of money, it is a forecast of business change. Relibale Business Case method defines the categorise in a way, the insight of real business change and future actions of change is demanded, to improve the category.

Risk Analysis - Result KPIs; see at top of the report if results, ROI, BCR, Payback is ok.

- Reliability category; analyse the amount of Reliable, Visible, and Assumed. Much value based on Assumed carry more risk than from the Reliable category.

- Money at stake; analyse the results compared with the total amont of money in Alternative 1. Earning 1 000 might be a great acheivement if you put 2 000 at risk, but not if you risk 1 000 000. Please note; When you estimate the risk, both cash outflow and cash inflow carries the risk to make results go wrong. Therefore, the total amount of money calculates ABS values. (Note: 'ABS' means you handle negative and positive values both as equal (positive) values)

- Impact on results; the benefits and expenses with highest 'Impact on result' is most important to carry out source data reviews in the case analysis, and to include higher cost in the busienss case for more extensive followreport day, highlight them to decision makers , and after decision, follow

- Remember 'Not Estimated'; The list starting with cell money. They are identified but of some reason, not estimated. The analysis' hours did not last, or you found it too difficult to estimate, or your original scope and limitation on the analysis did not include them. Please ensure all decision-makers become aware, that a benefit not evaluated can have just as much impact on the results, as such you estimated. Ensure you build an understanding about the complications, and challenge if some of them should be analysed more and added into the calculation.

Follow-up AnalysisSuppose we have an old business case with 'Asalternative 'Follow"As-Is"... we choose

But better, you select difference between them in plain view. You get the money you outperformed or underperformed. This is especially useful when you execute your Change Program, or your Benefits Realisation Project.

Benefits RealisationIf you understand the concept of Benefits Realisation, you know how important the Impact table is. You will not use it to see if you historically underperformed. No activities and their impact on the results.


The RBC Excel Tool Report Executive summary

Results in detail

Cash flow, Payback, Net Present Value, IRR etc

Business Benefits - details

Cost needed to make the business benefits to arise

Impact and follow-up table

12/02/2015 Tyrone Skogström, 0702 - 94 32 02 40

Ensure you have read the EULA before using the RBC Excel Tool The risk of using the tool is of course your own. Always do sanity checks.

Freeware License Agreement

FREEWARE License Agreement

Definition of SOFTWARE includes:

1. GUI Reliable Business Case Excel Tool2. Concept of Reliable Business Case method and Reliable Business Case Excel Tool3. Design and colour scheme in context with similar applications and methods

5. VBA macro code in context with similar applications and methods .

Definition of Owner:Mr. Tyrone Skogström, Sweden650707151

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Owner expressly disclaims any warranty for the SOFTWARE. THE SOFTWARE AND ANY RELATED DOCUMENTATION IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OR MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NONINFRINGEMENT. THE ENTIRE RISK ARISING OUT OF USE OR PERFORMANCE OF THE SOFTWARE REMAINS WITH YOU.

In the ’Customise’ worksheet you can switch between English and Swedish.

If you want to support translation to other languages …

- The tool has a hidden GUI with all text needed for translation. With your translation effort you can get the tool in your own language! Contact Tyrone at www.reliablechange.eu if interested!


Reliable Business Case Handbook on its way … - Both a Swedish and a English version is under the pen - Apply for a email notification when the handbook is available to order - just add your email

address in the contact form at www.reliablechange.eu

Training in Sweden - Standard introduction content - As part of an organisational improvement program, alignment to PRINCE2, or any other project

or program management method

International training offered as defined assignments - Request for your organisation now, worldwide

Training and documentation in English (or Swedish)

Developed by Tyrone Skogström - Based on many assignments from Business Case Analysis, Business

Change Management, Benefits Realisation, and Training Tyrone’s experience spans from a 20 hour ‘QuickAnalysis’ scope at a small

municipal, to full business value or cost reduction analyses at global corporations

with improvement value from 50 - 150 MEUR Tyrone Skogström [email protected] +46 702 94 32 02


mailto:[email protected]

Training & RBC framework - Tyrone can adapt the RBC method’s templates and Benefits Management

framework to your organisation’s processes, such as: Aligned with your project portfolio systems and project management methods

Decision – Purchase – Follow-up – Program management – IT budgeting – Business change

- Interested to be a native RBC consultant or coach in your country? Contact Tyrone

Tyrone - Senior Management Consultant at HiQ, Sweden

- You can ask for his services worldwide RBC analyses, Business Benefits analysis, purchase advise, requirement

analysis, investment analysis and strategy based on benefits, cost and risk

Training, deployment in your organisation, template- and tool development

IT Cost reduction, investment strategies of IT services/ IT systems, spending analyses, sourcing strategies, merges, due diligence

CIO Office support

Business Change Manager, Business Benefits Realisation Manager, Project Manager

Tyrone Skogström [email protected] +46 702 94 32 02

mailto:[email protected]

Good luck with the analysis!

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/Tyrone Skogström, [email protected]

www.reliablechange.eu
