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.