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Building Your Business Case

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ABC MedTech Case

ABC MedTech Case 1

While every company handles business case reviews differently—and you’ll want to follow your organization’s process—the following example will show you one well-wrought case in Word.

Once you’ve reviewed this example, go to the Word Business Case Template to begin crafting a case customized with your information.

If your company requires a slide deck presentation, see the XYZ Energy Case for an example rendered in PowerPoint.

This example is for a medical device upgrade project, but the format and flow of information may be applicable to a business case for any type of project. Your case may follow this format closely, or you may decide to modify, add, or delete sections.

Upgrading a medical device is, of course, a complex project, but you’ll see that this case does not go into great technical detail. This is true of most strong business cases—while they may cover complicated issues and solutions, the cases themselves are straightforward and easy to understand.

With each section, you’ll find specific directions and references to the HBR Guide to Building Your Business Case.

How to Use This Document

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TABLE OF CONTENTS

ABC MedTech Case

ABC MEDTECH CASE

Originator: Alan Adams April 20, 2012

TABLE OF CONTENTS 1.1 Executive Summary

2.1 Business Need—Opportunity Statement

2.2 Business Need—Fit with Strategy

3.1 Project Overview

4.1 Schedule

4.2 Team

4.3 Other Resources

5.1 Impact

6.1 Risks

7.1 Financials

8.1 Signature Approval to Initiate

1.1 Executive Summary We’re facing tough competitors in one of our key markets: cardio ultrasound equipment. The ABC MedTech platform, originally launched in 2001, enjoyed nearly 100 percent market share for a decade. For the past three years, our share has fallen. This year it hit its lowest point—52 percent— and we anticipate that it will continue to fall unless we upgrade the platform. This case proposes a complete redesign of our platform, integrating the most up-to-date technology, so that it can compete on speed, accuracy, and test type with platforms offered by our primary competitors, Millennia Tech and Eon Health.

The new ABC MedTech Ultrasound platform will be the most powerful cardio ultrasound equipment on the market. We project $750,000 in gross profit from sales in 2013 and just over $1 million for each of the following three years, 2014–2016. Over six years, the NPV will be just over $2 million.

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HBR Guide to Building Your Business Case

Table of Contents Tell your audience what to expect from your document.

• List each section of your presentation.

Chapter 13: Prepare Your Document or Slides Section: Make a Structured Argument

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EXECUTIVE SUMMARY

ABC MedTech Case

ABC MEDTECH CASE

Originator: Alan Adams April 20, 2012

TABLE OF CONTENTS 1.1 Executive Summary

2.1 Business Need—Opportunity Statement

2.2 Business Need—Fit with Strategy

3.1 Project Overview

4.1 Schedule

4.2 Team

4.3 Other Resources

5.1 Impact

6.1 Risks

7.1 Financials

8.1 Signature Approval to Initiate

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HBR Guide to Building Your Business Case

Chapter 10: Calculate ROI Chart: Four Ways to Calculate ROI

Chapter 13: Prepare Your Document or Slides Section: Telling Your Story in the Executive Summary

• Briefly state the problem or opportunity.

• Describe how you plan to address it. This case presents only one option—the platform upgrade—but sometimes you might include two or three options, depending on your stakeholders’ preferences.

• Preview the benefits—why the solution makes sense.

• State the return on investment (ROI)—it’s the satisfying end to your story. In this example, it’s the net present value (NPV), but use whichever ROI calculation your stakeholders will care most about—NPV, internal rate of return (IRR), breakeven, or payback.

• If you’re not sure which calculation to use, see the ROI Worksheet Template included with this product, or Chapter 10: Calculate ROI, in the HBR Guide to Building Your Business Case.

Executive Summary Grab your audience’s attention by telling the story of your business case.

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ABC MedTech Case

2.1 Business Need—Opportunity Statement There is increasing demand in the U.S. for noninvasive diagnostic health-care equipment because of the aging of the population and the high cost of surgery. As the incidence of heart disease continues to rise, the market for cardio ultrasound equipment is expanding. Our primary product in this area, the ABC MedTech platform, was introduced in 2001 and quickly dominated the market, commanding virtually 100 percent of the market share. However, Millennia Tech and Eon Health entered the market in 2008 and 2009 with enhanced products using state-of-the-art technology that surpassed our product’s capabilities. The current system’s market share is at 52 percent and falling. We stand to lose significant revenue as customers continue to defect to Millennia and Eon.

Cardiologists, the primary customer for cardio ultrasound equipment, are requesting better and faster analytics and are willing to pay a higher price for a platform that meets these demands. Our sales team has confirmed several target customers interested in, and willing to purchase, an upgraded platform.

2.2 Business Need—Fit with Strategy This project is aligned with our five-year strategic goals for growth and customer satisfaction:

• Provide the number one rated system in each of the markets we participate in, as assessed by independent customer satisfaction surveys.

• Grow sales across products by 10 percent year after year and profit by 12 percent year after year.

3.1 Project Overview The redesign of the ABC MedTech platform will expand the type of tests that can be conducted, the accuracy of the tests, and the speed in providing results to cardiologists. The ABC MedTech platform builds upon the technology pioneered in the old platform introduced in 2001 but adds key features:

• New sensors: Using our patented algorithm for sound isolation, these new sensors will improve noise isolation, enhancing the accuracy and speed of echocardiogram results. The improved sensors also enable the platform to spot previously undetectable conditions, including abnormal communications between left and right sides of the heart and blood leaking through the valves.

• Data processing capabilities: In the past ten years, data processing capabilities have improved by several orders of magnitude. The new platform will use the latest capability to increase data resolution by 150 percent and enhance monitors to display real-time results to cardiologists (currently this is done in a post-processing mode).

• Improved umbilical cord: The improved umbilical cord developed for the PMJ 1400 system will be adapted to this platform.

• Multiple USB data ports: Data ports will be added to the platform to facilitate data download and to improve the ability to run remote diagnostics while the system is being serviced. This will reduce complaints about system downtime and improve customer satisfaction.

The above upgrades will make this platform the most powerful cardio ultrasound equipment on the market, surpassing Eon’s and Millennia’s current offerings.

BUSINESS NEED—OPPORTUNITY STATEMENT

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Chapter 5: Clarify the Need

• Describe why you’re proposing the project—what is the business need?

• Share data that conveys urgency.

• If the case is focused on a problem (rather than an opportunity), it’s critical to articulate your understanding of the underlying issue using data and analysis. If your stakeholders don’t understand or don’t agree with your articulation of the problem, they’re going to take issue with everything else in your business case. See the XYZ Energy Case for another example of a business need analysis.

Business Need—Opportunity Statement Establish a sense of urgency for the opportunity or solution.

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ABC MedTech Case

2.2 Business Need—Fit with Strategy This project is aligned with our five-year strategic goals for growth and customer satisfaction:

• Provide the number one rated system in each of the markets we participate in, as assessed by independent customer satisfaction surveys.

• Grow sales across products by 10 percent year after year and profit by 12 percent year after year.

• Improved umbilical cord: The improved umbilical cord developed for the PMJ 1400 system will be adapted to this platform.

The above upgrades will make this platform the most powerful cardio ultrasound equipment on the market, surpassing Eon’s and Millennia’s current offerings.

BUSINESS NEED—FIT WITH STRATEGY

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Chapter 5: Clarify the Need

• Explicitly connect the need to the company’s strategic goals.

• Whenever possible, list specific goals using the company’s agreed-upon language.

Business Need—Fit with Strategy Explain how the project is connected to the company’s objectives.

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ABC MedTech Case

2.2 Business Need—Fit with Strategy This project is aligned with our five-year strategic goals for growth and customer satisfaction:

• Provide the number one rated system in each of the markets we participate in, as assessed by independent customer satisfaction surveys.

• Grow sales across products by 10 percent year after year and profit by 12 percent year after year.

• Improved umbilical cord: The improved umbilical cord developed for the PMJ 1400 system will be adapted to this platform.

The above upgrades will make this platform the most powerful cardio ultrasound equipment on the market, surpassing Eon’s and Millennia’s current offerings.

PROJECT OVERVIEW

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Chapter 7: Consider Alternatives

Chapter 13: Prepare Your Document or Slides

• Provide a high-level description of the solution(s).

• If it’s a new product or an upgrade to an existing product, like this one, lay out the general concept, and explain how it fits in with existing offerings.

• For a facility project, describe its magnitude, and name the systems affected.

• For a productivity initiative (such as an IT project that allows customer service to handle incoming calls faster), specify which business processes it will affect and which costs it will eliminate or reduce.

• If you’re including more than one option, highlight key differences so that stakeholders can quickly compare.

Project Overview Help stakeholders understand the scope of your proposed project.

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ABC MedTech Case

4.1 Schedule Project duration: (project start through completion)

0–6 months 6–12 months 12–18 months 18–24 months > 24 months

Key Milestones:

5/30/2012 Test prototype integration

7/15/2012 Freeze design

11/20/2012 Complete qualification test

12/20/2012 Complete pilot run

1/15/2013 Launch product

4.2 Team Number of full-time employees (FTEs) required for project:

1–3 3–6 6–9 9–15 > 15

FTEs by function:

8 R&D

1 Quality

1 Manufacturing

1 Marketing

0.5 Purchasing

0.25 Finance

0.25 IT

Subject matter experts (SMEs) and competencies critical to the project:

Team leader Ben Buchanan

Acoustics SME Carl Hayes

Data Processing SME Debra Wilson

Quality SME Gloria Hermoz

SCHEDULE

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HBR Guide to Building Your Business Case

Chapter 8: Think Through the “How” at a High Level

Chapter 11: Account for Risks Section: Consider the Risks

• Explain how long the project will take, and list any key milestones or major deliverables.

• There are almost always risks to a project schedule. You can include them here and/or in your “Risks” section.

Schedule Lay out a high-level plan for implementing the project.

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ABC MedTech Case

4.1 Schedule Project duration: (project start through completion)

0–6 months 6–12 months 12–18 months 18–24 months > 24 months

Key Milestones:

5/30/2012 Test prototype integration

7/15/2012 Freeze design

11/20/2012 Complete qualification test

12/20/2012 Complete pilot run

1/15/2013 Launch product

4.2 Team Number of full-time employees (FTEs) required for project:

1–3 3–6 6–9 9–15 > 15

FTEs by function:

8 R&D

1 Quality

1 Manufacturing

1 Marketing

0.5 Purchasing

0.25 Finance

0.25 IT

Subject matter experts (SMEs) and competencies critical to the project:

Team leader Ben Buchanan

Acoustics SME Carl Hayes

Data Processing SME Debra Wilson

Quality SME Gloria Hermoz

TEAM

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Chapter 8: Think Through the “How” at a High Level

• List the total number of necessary full-time employees (FTEs) and core team members (by name or function).

• Include subject matter experts (SMEs) who will need to contribute to the project.

Team Identify the team required to make the project a success.

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ABC MedTech Case

4.3 Other Resources Special tools/equipment and resources: We will conduct a pilot run in the South Carolina operations facility during December 2012. We will set up the new production line adjacent to the existing production line. Space is available since volume has dropped.

Facilities needed (space, labs, etc.): We will need access to the South Carolina facility from September through December for production line setup, checkout, and pilot run.

5.1 Impact

When we launch the new platform in 2013, we project sales of $750,000.* This will cannibalize sales of the current ABC MedTech system, but the net will be $690,000. We estimate sales will rise to $1,050,000 by 2014 and stay at that annual rate through 2016. By 2016, we project regaining 85 percent market share.

*All projections per Anna and Steven in Sales.

6.1 Risks Key risks include:

• Competition (high): We anticipate that Millennia Tech and Eon Health will introduce upgraded products in response to the new product within two or three years. Since we own the patent on the noise reduction sensors, Millennia and Eon won’t be able to fully emulate the new platform’s detection capability, but they may cut into our anticipated market share. This poses no risk to the project cost or schedule, but it may affect the benefits—positively or negatively—depending on how long it takes Millennia and Eon to respond.

• Personnel (moderate): The redesign is highly dependent on the SMEs listed above. If any of them leave the company or are pulled into other projects, they would need to be replaced with personnel with the same level of expertise. This turnover would delay the design and development phase of the project and increase costs.

• Cost overrun (moderate): The largest risk to the cost of the project is in the testing phase. If there are unanticipated bugs, we may have to pay for several additional rounds of testing, at $100,000 per retest.

• Schedule (low): Engineering has confirmed that the upgrade will take no longer than six months. Each phase of this timeline includes an extra five days for unforeseen delays.

• Technology (low): The platform will leverage mostly proven technologies. The one new technology is the noise isolation sensors. They’ve been tested and demonstrated in the R&D lab with the old ABC MedTech system but have yet to be incorporated into a publicly available product.

OTHER RESOURCES

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HBR Guide to Building Your Business Case

Chapter 8: Think Through the “How” at a High Level

• Explain any special resources—technology, equipment, facilities, access to locations—required for the project.

• Whenever possible, include how long you’ll need the resources for (and be sure to account for any costs in your calculations).

Other Resources Identify any additional resources the project will need.

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ABC MedTech Case

Facilities needed (space, labs, etc.): We will need access to the South Carolina facility from September through December for production line setup, checkout, and pilot run.

5.1 Impact

*All projections per Anna and Steven in Sales.

6.1 Risks Key risks include:

• Schedule (low): Engineering has confirmed that the upgrade will take no longer than six months. Each phase of this timeline includes an extra five days for unforeseen delays.

IMPACT

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HBR Guide to Building Your Business Case

Chapter 9: Estimate Costs and Benefits Section: Benefits

• Describe the benefits. Benefits mainly consist of revenue and productivity savings (benefits you’ll achieve through greater efficiency). In this example, the benefits are the revenue gained by launching the upgraded product.

• In this section, you only present the benefits. You’ll address costs below. Your final ROI calculation will take both costs and benefits into account.

• Only include benefits that you can quantify. Define the impact as precisely as you can. You may mention additional intangible benefits, such as improved morale or increased customer satisfaction, but stakeholders will want to know the financial impact.

• Be clear about where these numbers come from—did you get them from colleagues in Finance, Sales and Marketing, Engineering? Stakeholders care about the sources for these assumptions and are more likely to trust your numbers if the information comes from people they trust.

Impact Highlight the benefits of the project.

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ABC MedTech Case

Facilities needed (space, labs, etc.): We will need access to the South Carolina facility from September through December for production line setup, checkout, and pilot run.

5.1 Impact

*All projections per Anna and Steven in Sales.

6.1 Risks Key risks include:

• Schedule (low): Engineering has confirmed that the upgrade will take no longer than six months. Each phase of this timeline includes an extra five days for unforeseen delays.

RISKS

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HBR Guide to Building Your Business Case

Chapter 11: Account for Risks

• Explain what might not go as planned—whether positive or negative. Most people focus on threats (e.g., What if the vendor doesn’t deliver on time? What if the cost of raw materials goes through the roof?). But you need to consider opportunities as well (How can you get a higher NPV or a faster payback? Can you complete the project sooner?).

• Identify the likelihood of the risks: high, moderate, low.

• If there are no major risks, say so. But make clear that you’ve thought through the possibilities.

• The primary risks you’ll want to consider are to costs and schedule. But you may also want to think about the following:

Personnel: What if the person running this project leaves the company? What if you don’t get all the team members you requested?

Technology: What if you encounter bugs when testing? What if employees struggle to adapt to the new system?

Scope: What if the project needs to include more (or fewer) geographic regions, employees, or customers? What if the stakeholders change requirements?

Quality/performance: What if the product doesn’t perform as you expect it to—for better or worse? What if quality suffers because of a tight schedule?

Risks Highlight the key risks to the project.

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ABC MedTech Case

7.1 Financials ROI Calculation: The NPV is $2.1 million over six years. See below for additional detail.

8.1 SIGNATURE APPROVAL TO INITIATE Originator:

ALAN ADAMS Alan Adams 4/20/2012 Print Name Signature Date

Project Review Approval:

Print Name Signature Date

Project Sponsor:

Print Name Signature Date

FINANCIALS

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Chapter 10: Calculate ROI

• Include the total costs and benefits of your project. It’s not necessary to go into detail on specific figures unless there are unusual expenses that require explanation.

• Show the results of your ROI calculation, using your company’s preferred method.

• In this example, stakeholders were most concerned with NPV, so that is what’s included.

• If your company doesn’t have a preferred ROI type, use the one most appropriate to your project—breakeven analysis, payback period, NPV, or IRR.

• See ABC MedTech ROI for the detail behind these numbers.

Financials Lay out the financials of your project, highlighting the ROI.

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