{"id":396,"date":"2019-02-01T21:08:23","date_gmt":"2019-02-02T03:08:23","guid":{"rendered":"https:\/\/lindagorchels.com\/blogs\/?p=396"},"modified":"2019-05-01T21:51:52","modified_gmt":"2019-05-02T02:51:52","slug":"developing-the-business-case-for-new-products","status":"publish","type":"post","link":"https:\/\/lindagorchels.com\/blogs\/developing-the-business-case-for-new-products\/","title":{"rendered":"Developing the Business Case for New Products"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Developing\nand defending a new product business case can be an intimidating task for many\nproduct managers. &nbsp;Let\u2019s start with two\ncommon myths.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Myth One:<\/em>&nbsp; The more a precise business case is, the more\naccurate it is.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>Ironically, this is not true. Business cases rely on assumptions and estimates about the future: forecasted sales, customer intent, and expected costs. Adding more decimal points may provide the appearance of precision, but the reality is there is still a lot of subjectivity to the numbers.<\/p><\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Myth Two<\/em>: A\nsuccessful business case always gets funded.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>A successful business case is one that helps make the right decisions. Keep in mind that the purpose of the business case is to determine the business potential for a product concept. Or it might be to determine what changes are necessary. But some product managers believe they HAVE to get approval. As a result, they are tempted to pad projections or become wildly optimistic on their assumptions. On the other hand, if they presents realistic data and truly believes in the value of the proposed product, it defines a successful business case and should be funded.<\/p><p><br><\/p><\/blockquote>\n\n\n\n<h3 class=\"wp-block-heading\">Definition of Business Case<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">What\nexactly is a business case? I define it as a structured proposal for investment\nin a new product. It will contain: <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>market requirements (i.e., needs or benefits)<\/li><li>general statement of the feasibility of building a product\nthat addresses the requirements<\/li><li>discussion of the size of the opportunity<\/li><li>financial overview<\/li><li>resources required to address assumptions and risks<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">In\nother words, it provides the case (i.e., rationale) to support economic\ninvestment in the new product project. It may also suggest contingency plans if\nthe assumptions become invalidated.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What&#8217;s the REAL Purpose of a Business Case?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The goal is to provide ammunition for decision-making. It should explain why other concepts were rejected in favor of this one.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Start with gathering data on market potential. Assess what factors increase or decrease potential market acceptance, and then forecast accordingly. The business case should predict the <em>outcome<\/em> if this decision is taken. Determine reasonable cash flow projections with rough probabilities of achieving various cash flows during an acceptable payback period. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Include Soft Benefits<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Beyond the forecasted revenues and costs, there may be soft benefits to consider. These could include increased brand awareness, referrals, or higher customer satisfaction. For example, if the assumption is that a new product will prevent defection to the competition, the financial value of this business can be estimated.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Remember, This is a Proposal<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The\nbusiness case is a skeleton plan that provides the financial, competitive and\nmarket justification for the project. It is essentially an economic proposal\nfor an investment, and should build from data. Think of a business case in the\ncontext of an entrepreneur compiling a business plan in an effort to get\nventure capital, or a loan from a bank. But in this case, the company is the\n\u201cbank.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Answer\nthese questions. <em>Why<\/em> are you\nconsidering this concept at this time? Consider its fit with the business\nstrategy, product strategy, and\/or product roadmap. Is this a proactive or\nreactive product?&nbsp; Will it fill a gap or\nopen new opportunities?&nbsp; What is the size\nof the opportunity and the expected financial performance? Is the concept\nmanufacturable, and do we have the capabilities to do it? What might be the\nconsequences of NOT pursuing this concept? What are the risks and how will they\nbe mitigated? Don\u2019t assume the answers to all of these questions are obvious.\nThey might not be.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Components\nof the Business Case<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Companies\nwill require different content for a business case depending on the type of\nindustry or product and on the needs of the individual business<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The\nfollowing figure lists the primary components and sub-components of a business\ncase. Note that underlying all of them are your assumptions. Clearly state\nimportant assumptions and &#8220;pressure test&#8221; them against other people&#8217;s\nperspectives. What would happen to the outcome if these assumptions changed?\nLook at best- and worst-case scenarios. Challenge yourself as you examine your\nbeliefs about each component of the business case.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"960\" height=\"720\" src=\"https:\/\/lindagorchels.com\/blogs\/wp-content\/uploads\/2019\/04\/Business-case-components.jpg\" alt=\"Business case components\" class=\"wp-image-399\" srcset=\"https:\/\/lindagorchels.com\/blogs\/wp-content\/uploads\/2019\/04\/Business-case-components.jpg 960w, https:\/\/lindagorchels.com\/blogs\/wp-content\/uploads\/2019\/04\/Business-case-components-300x225.jpg 300w, https:\/\/lindagorchels.com\/blogs\/wp-content\/uploads\/2019\/04\/Business-case-components-768x576.jpg 768w, https:\/\/lindagorchels.com\/blogs\/wp-content\/uploads\/2019\/04\/Business-case-components-400x300.jpg 400w\" sizes=\"auto, (max-width: 960px) 100vw, 960px\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Framing\nand selling the business case<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Assuming\nyou truly believe in the proposed product concept, the business case should\npersuade management to pursue it. In other words, the information should be\npresented in a way that informs and encourages an affirmative \u201cvote.\u201d <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The\nproduct manager may need to make a formal presentation of the idea to management.&nbsp; In that case, it\u2019s important to identify the\n\u201chot buttons\u201d of each person prior to the meeting and come prepared to address\nthem. Top management will be interested in the return (expressed by NPV or IRR)\nand payback. Sales executives will want to know the strengths of the product as\ncompared with the competition. Operations executives will be concerned about\ndesign complexity and manufacturability. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Consequently,\nthe product manager has to be prepared to address specific functional concerns\nin addition to providing a general overview. The most important factor in\ndisarming adversaries is to get their involvement and buy-in prior to the final\nreview. Marty Schmidt suggests specific approaches to these problems in his\nblog post, <a href=\"file:\/\/www.business-case-analysis.com\/blog\/business-case-critic-de-claw-cat\/\">Your Business Case Critic: How to De-Claw the\nCat<\/a>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Further information<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Perhaps the most comprehensive source of information on\nbuilding business cases is Marty Schmidt\u2019s <a href=\"https:\/\/www.business-case-analysis.com\/\">Business Case Analysis<\/a>\nwebsite. It provides a useful blog, along with links to <a href=\"https:\/\/www.business-case-analysis.com\/business-case-essentials.html\">Business\nCase Essentials<\/a> (2018), <a href=\"https:\/\/www.business-case-analysis.com\/business-case-templates.html\">Business\nCase Templates<\/a> (2019), and <a href=\"https:\/\/www.business-case-analysis.com\/business-case-guide.html\">The\nBusiness Case Guide<\/a> (2018).<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Developing and defending a new product business case can be an intimidating task for many product managers. &nbsp;Let\u2019s start with two common myths. Myth One:&nbsp; The more a precise business case is, the more accurate it is. Ironically, this is&hellip; <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_exactmetrics_skip_tracking":false,"_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[10],"tags":[],"class_list":["post-396","post","type-post","status-publish","format-standard","hentry","category-product-management"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Developing the Business Case for New Products - Linda Gorchels blogs<\/title>\n<meta name=\"description\" content=\"Product managers need to become skilled at both developing business cases, and presenting them in a persuasive way to top management. 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