How Smart Product Managers Use a Business Case

by Chad McAllister

How Smart Product Managers Use a Business Case - innovation excellenceWhen considering the development of a new product or an extension to an existing product, a business case is an indispensable tool for product managers.

In the era of Lean, MVPs, and Design Thinking, the creation of a business case almost feels old-fashioned – a documenting exercise best left to large and slow organizations. Those with such a perspective not only misunderstand how to use a business case, more importantly, they are setting themselves up for failure by ignoring the value this important tool provides. Properly used, a business case embodies the essential learning and planning derived from Lean, Design Thinking, and similar approaches to product development. It is not a documentation exercise, but a tool for collaborative learning and communicating the justification for a product concept.

To explore the proper use of a business case, I spoke with Steven Haines, an expert in the field of product management and author of The Product Manager’s Desk Reference, Managing Product Management, The Product Manager’s Survival Guide, and The New Manager’s Survival Guide.

See the link below to hear the interview.

What is a Business Case?

A business case is one of the most helpful instruments a company can have at its disposal. Essentially, it is a justification for making an investment that allows decision-makers to say yes to good investments and no to poor investments. When first considering a product concept, a simple business case is needed. This can be a one-page opportunity statement. Questions it addresses include:

  • what’s going on in the market,
  • why is the investment important, and
  • what strategic advantage does it provide the company?

Product managers should consider if it was their own money, would they invest in this product concept? Exploring these questions in the form of a one-page business case creates collaboration within the company. (A similar tool I have used in the past for this is the Lean Canvas, which was the topic of another interview with Ash Maurya.)

Fundamentally, the business case is a decision tool to decide to move forward and make additional investment in the concept or not.The complexity of a business case varies by its use and reflects what has been learned about the product concept to date, varying from 1 page to no more than 30 pages. A fully developed business case addresses:

  • Business need and/or strategic fit
  • Market analysis
  • Product description
  • Project proposal
  • Assumptions, forecasts, and financial analysis
  • Operations and implementation
  • Risk analysis and contingency plans
  • Recommendations

Steve provides examples and a business case template in The Product Manager’s Desk Reference.

What are the Potential Issues with Using a Business Case?

The most common issue is not using a business case. When Steve works with organizations he finds that more than 90% of the time a business case is not available for the products that have been developed. Too often companies assume what customers want without actually validating it with them. The proper use of a business case includes a reflection of what validation work has been done, what is known about the market, and what problem the customer has the product solves in a valuable manner. The business case also makes explicit the link between the investment in the product and how it supports the strategy of the company and helps achieve the goals of the organization. By not using a business case, the linkage is too often unclear or does not exist.

What are other Benefits to Using a Business Case?

Too often a product effort moves forward under its own weight without careful consideration if it should continue or not. A business case addresses this by providing transparency inside the organization about what is being learned about the product concept and the dynamic market environment. As a decision-making tool, it adds value to the organization by helping to decide if a product effort continues or is killed. Business cases also become important historical documents for future product managers to learn from and a source for ideas that may have not worked in the past but are needed now.

To learn more about using a business case and making it a valuable tool instead of a laborious effort… Listen to the interview with Steven Haines on The Everyday Innovator Podcast.

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Chad McAllister, PhD is a product innovation guide, innovation management educator, and recovering engineer. He leads Product Innovation Educators, which trains product managers to create products customers love. He also hosts The Everyday Innovator weekly podcast, sharing knowledge from innovation thought leaders and practitioners. Follow him on Twitter.

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