Building a business case

A common task in putting forward an innovative idea – and helping getting the idea selected – is developing the business case. Requirements for business cases can vary depending on how big an idea is and what the initial steps might be. They also depend on the nature of the innovation and how big a shift from the status quo or business as usual scenario is involved. There are some common aspects though:


Yellow and black striped danger backgroundThe public sector can often have a strong focus on avoiding risk. If risks are realised in the public sector they can potentially have very significant and widespread impacts. It is only natural that those being asked to approve investigation or implementation of an idea will want to have a good feel for what the risks are, and how they can be managed, mitigated or even avoided.

The Australian National Audit Office’s better practice guide Innovation in the Public Sector: Enabling Better Performance, Driving New Directions discussed this issue and recognised the role risk plays in innovation. It notes that “Risk management is a fundamental feature of the innovation process. Risk is measured in terms of a combination of the ‘consequences’ of an event and their ‘likelihood’. Risk is characterised by ‘uncertainty’, in that the ‘consequences’ and/or ‘likelihood’ may not be known. Elimination of risk is generally not a practical goal but risk can be managed and mitigated by various treatments. Good risk management is therefore fundamental to innovation.” 1

Risk was also discussed in Empowering Change: Fostering Innovation in the Australian Public Service. “It is easier to avoid criticism by not taking risks, particularly as the consequences of risk-taking in the public sector can be severe and can include political damage to the government, public criticism, possible legal consequences, diminished career prospects, and damage to personal reputation.”

Given these issues, it’s clear that risks and their potential consequences need to be adequately considered. So how can risk be adequately dealt with in a business case?

A helpful perspective can be to turn the onus around and consider ‘what are the risks of not introducing an innovation?’ What are the risks of staying with the status quo? If you have an idea it likely means you think there’s a better way to do something or there’s a problem that you are trying to solve. That would suggest that there’s a cost or risk for continuing to do things the same way.

Another approach is to look at ways that risk can be limited or contained. For instance, in every agency there will be a space that is less risky (e.g. where the consequences of the risk being realised are less). Can the idea be trialled in that context first?

Alternatively, is there an opportunity where a problem or issue is urgent and normal conventions and practices are insufficient to the task at hand? If so it may be the best time to try a new idea as the risk threshold will be higher. Or can the innovation be done in partnership with others with relevant skills or resources to help manage the risks?

A further useful step is to look at where, if anywhere, the innovation has already been attempted. Organisations can generally make a better assessment of risk if they can see that somewhere else has tried the idea before (and that the risks were contained).

Other useful guidance on this aspect can be found in the ANAO’s better practice guide.

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Identifying the skills and resources needed

Hand with magnifying glass and jigsaw puzzle piecesOne of the difficulties in implementing a new idea is that it can be hard to tell what resources will be needed for it to succeed. If the idea is sufficiently novel, previous experience with other projects will be insufficient in providing a basis for assessing what will be needed for the project to work.

Yet those approving the business case will want and need to know what the potential financial and staffing impact may be and that the estimate has some rigour - they need to know to what they are agreeing. So how can the business case deal with this question?

A starting point is to consider whether the innovation can be trialled in a small contained fashion. Such a trial can give better information on the potential costs and support needed. This is not always possible however (e.g. if it is something that you either do or don’t do and there is no in-between stage), but it might be possible to start the implementation process and then review at a set milestone to see if the innovation is meeting the cost and performance expectations before proceeding further.

Another option is to look at whether the idea has been applied elsewhere (in another agency, in another government or in a commercial or not-for-profit setting) and see whether information is available about the resource implications in that example. Or there might be proxy measures that can be used. e.g. is there information from when a similar innovation was introduced?

Alternatively, has the innovation been wargamed or simulated? This can be done at a small level (in the team) or at a large scale (across Departments) and can help identify what resources might be required and any unexpected issues that might arise.

An example of unexpected issues is that if the innovative idea is successful, it can actually increase demand on the agency. If the idea is a new or improved service and it is well received, there may be increased demand for it from the public and thus greater expense. Or if the idea tackles a particular problem that limits what can be done by an agency, the removal of that problem can mean more can be done and that will have impacts on the rest of the organisation. The business case should consider the potential impacts on the rest of the agency (or even other agencies) and how that might be managed.

You may want to consider the resources through the a prism of how critical they are. 3 concentric circles. The inner one is labelled 'core', the middle one 'primary', and the outer 'periphery'

  • Core Resources – The resources required to initiate and drive implementation of the initiative. e.g. the project team.
  • Primary Resources – The resources needed to enable proper consultation and collaboration and rolling out of the initiative. These resources are ones that will add value and flesh out the initiative. e.g. Ability to involve end-users of the initiative in the design of the initiative.
  • Peripheral Resources – The resources that may be impacted by the outcome of the initiative. e.g. The agency itself, other third parties.

(These different layers may overlap.) On a cautionary note, a risk in developing a business case for the resources required is to underestimate what is needed. There is a natural temptation to do this – the fewer the resources identified as being needed, the more likely the business case will be approved. It can also be difficult to capture all of the unexpected contingencies that might arise and the resulting resource demands. However, this can later jeopardise the success of the innovation if the resources required have been underestimated and the gap between what’s needed and what is available is not covered.

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What success (or failure) will look like

Paper Fortune Teller, concept of business decisionWhen the idea is implemented, how will you know whether it has worked (and so whether its implementation should continue)? What are the key performance indicators or the outcome measures?

It may be helpful to consider the business case for the proposal as testing an experimental hypothesis – what is it you are trying to test and how will you measure the results of the experiment? What problem will this idea address and how will you know it has worked?

For some innovations, it will be quite clear what success will look like. There may be a clear problem and the proposed action/initiative will either fix the problem or it won’t. Even better, that assessment may be easily done in a specific (and short) time frame. If it fails, another approach can be tried.

But other problems will be more complicated and there will not be a clear relationship between the idea and the outcomes. Some of the difficult questions that can arise include:

  • The innovation may have a number of parts and be happening at the same time as other developments (if a problem is big enough, there are often many things tried at the same time). How will you be able to tell whether it was this particular innovation that made the difference? (One way to address this may be to conduct a randomised policy trial where a random assignment of participants to control and treatment groups provides a counterfactual of whether the intervention worked or not, as is often done in medical trials.)
  • Is there agreement/consensus from relevant stakeholders about what a positive outcome will be or look like? Is it possible the results of the experiment could be interpreted in a different way? If yes, work may need to be done on that before you proceed with the idea.
  • Many innovations will have poor results when first tried as they are new and different. It will likely take time and investment to get better at the innovation, rather than being implemented perfectly straight away (e.g. see discussion of the S-Curve). Has this been factored into the consideration of the idea? What if the outcomes are at first worse than what is currently in place – how will you know if the initiative will get better, and how can that be communicated to stakeholders?

Another point is that you may not know what success will really look like. The idea may be very experimental and it may not be possible to predict how it will fix the problem, even though there may be good reasons to suspect that it will contribute to beneficial outcomes. In these instances it may be helpful to think about the following:

  • What are the reasons for thinking that the experiment is worth trying?
  • How can the idea be implemented in a controlled or limited fashion (you may not want the experiment to be too big)?
  • What will failure look like? If you cannot be sure what success will look like, can you be certain what failure will be? How will you know the experiment has not worked?

The Australian National Audit Office provides some tips on evaluation for innovative ideas as well. In Innovation in the Public Sector: Enabling Better Performance, Driving New Directions it notes “Performance information and its availability to agency managers, politicians and Australian citizens, contribute to learning, innovation and improvement. An appropriately tailored evaluation strategy includes the collection and analysis of performance information that provides:

  • an early indication of policy/delivery effectiveness; and
  • longer-term evaluation of outcomes.

Early indicators can be used to detect any significant problems and enable corrective action to be taken. Longer-term evaluation can be used to better understand the details of the impact of policy, service delivery and regulatory changes.” 2

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Business plan checklist

ChecklistIn completing your business plan you may want to ensure you have considered the following issues:


  • Is it clear what the problem to be solved is? Does the business plan explain what the innovation is attempting to solve?


  • Have the risks of adopting the innovation been identified?
  • Does each consequent risk have a risk management strategy?
  • Has consideration been given to whether the innovation can be trialled in a limited or reduced fashion?
  • Does the risk assessment consider the consequences of not proceeding with the innovation?
  • Have the opportunities for sharing risks with other organisations been identified?

Skills and resources

  • Have the skills needed to implement the innovation been identified?
  • Have these skill needs been matched to currently available resources?
  • Does the plan identify opportunities to draw on the skills and resources of other organisations and individuals?
  • Is it clear what resources are critical for the introduction of the innovation, and what resources would be desirable or helpful?


  • Will it be apparent if the innovation succeeds? If so, does the plan say why? If not, have proxy or substitute measures been identified?
  • If success will be difficult to assess, is it clear what will make the innovation a failure?
  • Have milestones been identified at which point the progress of the innovation can be assessed?

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[1] This quote is not covered by the Creative Commons licence. From Australian National Audit Office (2009) Innovation in the Public Sector: Enabling Better Performance, Driving New Directions accessed at

[2] This quote is not covered by the Creative Commons licence. From Australian National Audit Office (2009) Innovation in the Public Sector: Enabling Better Performance, Driving New Directions accessed at] The better practice guide goes on to provide some advice on these steps that you may want to consider in your business case for your idea.