A Structured Approach to Developing a Business Case for New Enterprise Information Systems

A Structured Approach to Developing a Business Case for New Enterprise Information Systems

Francisco Chia Cua (Otago Polytechnic, New Zealand) and Tony C. Garrett (Korea University, Republic of Korea)
DOI: 10.4018/978-1-60566-026-4.ch574
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Abstract

The term business case is used to describe both a process and a document. A business case exploits an initiative. Exploiting the initiative from awareness to implementation encompasses a process, referred to in the diffusion of innovation parlance, as the innovation-decision process. The development of a business case concerns this innovation-decision process. The individuals or the decision-making units pass through the innovation-decision process, gaining knowledge of a new idea, forming an attitude toward it, and deciding whether to adopt or reject it (Rogers, 2003, p 20). Gaining the knowledge triggers the awareness or enforces it. Then, it leads to setting the agenda. After the agenda-setting stage is the examination of the available options. Attributes of competing options are matched together, enabling attitude formation in favour or against a particular option. This results in the creation of a shortlist of two or three options. A decision is generally reached at this point. The decision is, therefore, part of the matching stage. However, this is not always true in an organisational setting. There is a third stage after the matching stage. It is the decision (aka, business case) stage. Organisations generally demand rigour in making the decision. A business case document embodies the rigour in the business case development. Consequently, the decision stage culminates with a completed business case document and the decision that results from it: to adopt or reject the innovation. The three stages, agenda setting, matching, and decision stages, compose the initiation phase. If the decision favours adoption, then the implementation phase proceeds. In the context of implementing the new enterprise information systems, the stages in the implementation phase consists of pre-production, production, post-production (that is, maintenance), and confirmation stages. In summary, the business case development is a means, and its end is a business case document.
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Introduction

The term business case is used to describe both a process and a document. A business case exploits an initiative. Exploiting the initiative from awareness to implementation encompasses a process, referred to in the diffusion of innovation parlance, as the innovation-decision process. The development of a business case concerns this innovation-decision process. The individuals or the decision-making units pass through the innovation-decision process, gaining knowledge of a new idea, forming an attitude toward it, and deciding whether to adopt or reject it (Rogers, 2003, p 20). Gaining the knowledge triggers the awareness or enforces it. Then, it leads to setting the agenda. After the agenda-setting stage is the examination of the available options. Attributes of competing options are matched together, enabling attitude formation in favour or against a particular option. This results in the creation of a shortlist of two or three options. A decision is generally reached at this point. The decision is, therefore, part of the matching stage. However, this is not always true in an organisational setting. There is a third stage after the matching stage. It is the decision (aka, business case) stage. Organisations generally demand rigour in making the decision. A business case document embodies the rigour in the business case development. Consequently, the decision stage culminates with a completed business case document and the decision that results from it: to adopt or reject the innovation. The three stages, agenda setting, matching, and decision stages, compose the initiation phase. If the decision favours adoption, then the implementation phase proceeds. In the context of implementing the new enterprise information systems, the stages in the implementation phase consists of pre-production, production, post-production (that is, maintenance), and confirmation stages. In summary, the business case development is a means, and its end is a business case document.

A complete business case is a formal written argument and a detailed “point by point” analysis (Cannon, 2006, p 4; Carruth, 2001). It purports to justify the adoption or rejection of investing and thereby, implementing the new enterprise information systems. The analysis takes into consideration the stakeholders (Ministry of Health, March 2005), especially the decision-makers and the end-users. Consequently, a business case document is formal, detailed, and complex.

Using the parlance of “diffusion of innovations” (DOI) theory (Rogers, 1962, 2003), a business case document is a communication tool used to diffuse the new enterprise information systems, and to justify their adoption and implementation. Diffusion refers to the process by which the executive sponsor, who owns the innovation-decision process of the new enterprise information systems, communicates to the upper managers to get their approval of the project and funding.

Diffusion via a business case document for a technological product, such as an enterprise information system, must be directed at a single target audience to be effective. The upper managers represent a chasm that needs to be bridged (Moore, 1991). A completed business case document, containing relevant information for the managers, can serve as that bridge.

In addition to its relevance, a business case must also be responsible and credible. Therefore, the business case must bring relevance, reputation, and responsibility (the 3 Rs) into a number of issues and challenges during its development.

This chapter proposes a business case structure, with the 3Rs underlying it. It continues from the big picture of business case development in the article, The Role of Business Case Development in the Diffusion of Innovations Theory for EISs (hereinafter referred to as The Role of Business Case Development...). The structure, suggested in Table 2, delineates the context to the new enterprise information systems. However, prior to that, certain issues must be addressed:

Key Terms in this Chapter

Implementation Phase: Proceeding after the initiation phase, the implementation phase of enterprise information systems consists of pre-production, production, and post-production (also known as upgrade and maintenance). Refer to innovation-decision process.

Innovation: Represents a product, a service, or an idea that is perceived, or should be perceived by the audience or the market in which this innovation is intended to be new and of value.

Total Cost of Ownership: Also known as TCO, is a rigorous and holistic methodology. It helps to estimate how much an investment will cost to operate over its lifetime. It takes into account all direct and indirect costs. The indirect costs are generally insignificant individually. However, they become very substantial when accumulated over time.

Completed Business Case Document: A formal written document that argues a course of action. It contains a point-by-point analysis to making a decision for a set of alternative courses of action to accomplish a specific goal.

Diffusion of Innovations: Theory concerns the how, why, and at what rate the new idea (commonly referred to as innovation) diffuses.

Initiation Phase: Consists of awareness stage, matching stage, and lastly, the decision stage. It is the first phase of the innovation-decision process. The second phase is the implementation phase. Refer to innovation-decision process.

Business Case Development: Walks through the initiation phase of the innovation-decision process and talks about the project plans that concern the implementation phase.

Diffusion: Essentially communicating a new idea (aka, the innovation) within a social system (such as an organisation) with the intention that the audience of that communication adopts or use the innovation.

Innovation-Decision Process: Starts with an initiation phase through which the individuals or decision-making units move from knowing (understanding/identifying) the new idea (the innovation), to forming of an attitude toward the innovation, and subsequently, to deciding whether to adopt or reject the implementation and use of the new idea. The awareness stage is the agenda setting stage. The attitude formation stage is the matching stage. In addition, the decision stage to adopt or reject the innovation terminates the initiation phase. An adoption decision continues the process toward the implementation phase , which consists of the pre-production, production, post-production, and confirmation stages.

Business Case: Completed business case document. Business case process.

Risk: Connotes a possible negative impact to something of value. It symbolises the probability of a loss.

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