1. Introduction to Business Cases
June 21st, 2017

2. Overview Introductions What is a Business Case?
How to Write a Business Case
Real Life Example
Application Exercise
Wrap Up & Conclusion
Congratulate the students

3. Eno Center for Transportation
Howard Permut
Senior Advisor
Richard Petty
Senior Advisor

4. What is a Business Case?

5. Definition & Purpose
Document containing information necessary to evaluate proposed project or initiative including a recommended course of action
Reasoning behind recommendation
Why, what, how, who
Level of detail is a function of initiative being evaluated

6. When Is It Needed? To promote an idea or opportunity
When you are assigned a task, project or idea to evaluate
When you must evaluate someone else’s task or project
When a decision must be made

7. Examples Modifying rail or bus service Building a new line
Creating a new maintenance system
Purchasing a new piece of equipment
Reorganizing a department

8. Senior Management Purpose
To provide information:
Necessary to make sound decisions
Needed to explain decision to CEO
Needed for CEO to explain a decision to the Board or an external party

9. Writing a Business Case

10. Considerations Know the audience Gather accurate information
Provide sufficient supporting data
Include all elements of the business case
Consider how you will gain support
Identify risks of no action

11. Document Sections Executive Summary Evaluation of Options
Opportunity Statement
Situational Analysis
Solution Options
Evaluation of Options
Recommendations

12. Executive Summary Concise, high level Explains problem
Explains desired outcome
Major factors
Required resources
Predicted ROI
Proposed timeline
Usually written after document is complete

13. Opportunity Statement
Clear statement of problem or opportunity being addressed
Identifies key issues to be addressed

14. Situational Analysis
Detailed information consistent with opportunity statement and alternatives
Background and history
Perception of current state
Projections from current state
Work that may have already been done

15. Solution Options
Identify all potential solution options with sufficient detail
Identify critical assumptions

16. Evaluation of Options
Largest part of the document answering most of the what, why, and how questions of the project
Complete definition of options
Key decision criteria
Benefits/costs
Operational and customer impacts
Required resources
Organizational capability

17. Evaluation of Options (Cont.)
Key interdependencies
Completion of other projects
Availability of key personnel
Risks associated with failure of interdependencies
Identifies areas impacted
Own department
Other internal departments
External entities

18. Financial Analysis Key component of evaluation
Costs/benefits for each option including no-action
Consider every associated cost
Ensure affordability
Project ROI
Identify predicted budget and cash flow implications
Degree of confidence in estimates

19. Recommendations Summarize your preferred recommendation
Reasoning supporting recommendation
Identify next steps
Who is responsible for project implementation
Major schedule milestones
Possible project staging

20. Perspectives

21. Real Life Example

22. Opportunity Statement
Metro North RR is faced with the need to increase its ridership and fare revenues. Competitive publicly funded bus services operating out of train stations are being started by the State of New York
Politicians are criticizing the size of Metro North’s operating subsidy and questioning the continuation of service at its current levels.

23. Situational Analysis
Over the past 10 years, ridership has declined by about 15% and absent some action this trend is expected to continue in the future
Ridership is falling in all markets (peak, off-peak) and all lines
Population in the service area has increased by about 5% over the past 10 years but has been constant in the past year
The primary cause for this ridership decline is poor service.

24. Situational Analysis (Cont.)
The primary problems are late trains, dirty trains, surly train crews, and inadequate schedules
These are a result of very poor infra-structure (primarily track and signals and power systems), cars and locomotives beyond their useful life and lack of front-line staff training
These in turn have been caused by a lack of funding for the past decades
On the positive side, there is an opportunity to increase ridership and revenue by expanding market share.
Previous market studies have shown that this is especially true for the off-peak markets

25. Solution Options
Do-nothing and let the political environment resolve the problems
Raise fares focusing on the least elastic market (peak commutation fares) and reduce service
Request additional monies to bring the system into a state of good repair
Request further additional monies to expand service

26. Evaluation of Options Do-Nothing
Lose control of organization and its future
Likely to have unfavorable outcome
Raise Fares and reduce service
Continued ridership decline
Raise $20,000,000
Negative customer reaction
Alienate key political leaders

27. Evaluation of Options (Cont.)
Request Additional Monies for State of Good Repair
Likelihood of success is unknown
Crisis environment may help
Lack of repairs may jeopardize future safe operation of the railroad
Pre-requisite for railroad to improve service and grow
Will need major organizational expansion to plan and implement program
Does not provide immediate solution

28. Evaluation of Options (Cont.)
Request Further Additional Monies for Service Expansion
Similar pros and cons as above
Will need further expansion of organizational capabilities
Service expansion may impede progress to bring system into a state of good repair
Few people may ride as service will remain of a poor quality
Political risk if ridership does not increase and subsidies increase

29. Recommended Option
Recommend option 3 while suggesting option 4 for the future
operational safety
necessary for organizational future
phased approach which is easier for political leaders and customers to accept
does not over promise nor jeopardize monies for state of good repair work
suggest that MNR President get approval from MTA Chairman and then have Government Affairs department develop a detailed plan for requesting the funding

30. Application Exercise

31. Exercise Instructions
You will write a team business case with only the major elements on the handout
Assume it will be presented to CEO/Senior Staff in 30 days as part of budget development process
You will have 40 minutes to write the business case

32. Opportunity Statement
As part of the development of the upcoming fiscal year budget, there is a projected 5% surplus (difference between projected revenues and projected expenses). The agency is soliciting staff recommendations as to how best spend these monies.

33. Exercise Debrief What was the easiest section to create?
What was the most difficult section to write?
What were your key takeaways from the exercise?
Was there anything that surprised you about writing a business case?

34. Summary Know your audience and what is needed to make a good decision
Clear, well organized, impactful with supporting data
Proposed project scope influences size and detail of document
Executive summary includes essential points in same order as full document