Justifying an Investment, When and How?

Justifying an Investment, When and How?

For a piece of work to be initiated and continued with, it is imperative for the people involved to

justify the investment made by the sponsors in their work, be it an activity, a business operation, a

project, a programme, or even a portfolio. This is so because without a valid business justification

the sponsors may not initiate the work or continue with it. So, the team involved or the people

making the investment have to carry out an analysis of business justification.

Business justification demonstrates the reasons for undertaking a project. It answers the question

“Why is this project needed?” Business justification drives all decision making related to a project.

So, it is important to assess the viability and achievability of a project not only before committing to

significant expenditures or investment at initial stages of the project but also to verify the business

justification for continuance throughout the project’s lifecycle. A project should be terminated if it

is found to be unviable; the decision should be escalated to the relevant stakeholders and to senior

management. The business justification for a project must be assessed at the beginning of the

project, at pre-defined intervals throughout the project, and at any time when major issues or risks

that threaten the project viability arise.

Now that we understand what business justification is and also agree that an investment needs

to be justified for a piece of work to begin and continue, let’s discuss the factors that need to be

considered when justifying an investment. There are numerous factors a Product Owner must

consider to determine the business justification for a project. Some of the most important factors

are reasons for the project, business needs, project benefits, opportunity cost, major risks, project

timescales, and project costs.

Business justification is first assessed prior to a project being initiated and is continuously

verified throughout the project lifecycle. The following steps capture how business justification is

determined and assessed in a Scrum project:

• Assess and Present a Business Case

Business justification for a project is typically analyzed and confirmed by the Product Owner. It is

documented and presented in the form of a project Business Case prior to project initiation. Once

documented, the Product Owner should create a Project Vision Statement and obtain approval for it

from the key decision-makers in the organization. Generally, this consists of executives and/or some

form of a project or program management board.

• Continuous Value Justification

Once the decision makers approve the Project Vision Statement, it is baselined and forms the

business justification. The business justification is validated throughout project execution typically

at predefined intervals or milestones, such as during portfolio, program, and prioritized product

backlog review meetings and when major issues and risks that threaten project viability are

identified. Throughout the project, the Product Owner should keep the business justification in

the Project Vision Statement updated with relevant project information to enable the key decision

makers to continue making informed decisions.

• Confirm Benefits Realization

The Product Owner confirms the achievement of organizational benefits throughout the project, as

well as upon completion of the User Stories in the Prioritized Product Backlog.