Five Case Model for business cases

Introduction

The 5 Case Model is part of the best practice guidance issued by HM Treasury on behalf of the United Kingdom government. It is recommended to be used by the guidance issued in HMT Green Book (central government guidance on appraisal and evaluation)^[1].

The 5 Case Model consists of 5 key dimensions: the Strategic Case, Economic Case, Commercial Case, Financial Case, and Management Case. These dimensions work together to provide a comprehensive analysis of a business problem, making it an effective tool for decision-makers.

This article provides an overview of the 5 Case Model, its benefits, and how it can be applied in real-world business cases. To learn in detail how to use the 5 Case Model develop business cases, Better Business Cases training will teach you how to apply the Five Case Model in practice.

What is the Five Case Model?

The 5 Case Model is a crucial framework for efficiently utilising public resources and making informed decisions. It encompasses five different perspectives or “cases” that should be considered and evaluated together, rather than in isolation, to ensure a well-rounded and thorough analysis. These 5 dimensions include policy, analytical, commercial, financial, and delivery considerations.

Effective implementation of the 5 Case Model requires collaboration between different professionals within the public service, including policy, analytical, commercial, financial, and delivery specialists. By working together from the outset, these professionals can avoid siloed thinking and ensure that all relevant perspectives are considered.

The 5 Case Model provides a comprehensive and flexible thinking framework that can accommodate the unique features of any investment or spending proposal. It accounts for a wide range of considerations, including objectives to be achieved, legal, regulatory, and ethical constraints, and more. Rather than inventing a new framework for each proposal, the Five Case Model provides a universal approach that can be tailored to suit the needs of any situation.

Let’s now look at each of the 5 dimensions in a little more detail.

Strategic dimension

The strategic dimension of the 5 Case Model is crucial in determining the “business as usual” scenario, which provides a benchmark against which proposed changes can be compared. This understanding must be quantified and well-defined, even when continuing without changes is not a viable option.

SMART objectives

In the strategic dimension, external constraints and dependencies are considered, such as legal, ethical, political, and technological factors, as well as necessary infrastructure that is beyond the control of the proposal. The proposal’s expected outcome is defined by a small number of SMART objectives, which must be Specific, Measurable, Achievable, Realistic, and Time-limited. These objectives drive the rest of the model, serving as the basis for option creation and the appraisal process in the economic dimension.

Rationale

The objectives must reflect the rationale for the proposal and be expressed in terms of the expected change in service provision, expressed numerically. This helps in refining the objectives and enables them to be monitored and evaluated effectively. The programme objectives should directly align with the proposal’s objectives, providing a clear understanding of the expected outcomes.

Strategic assessment

The first step in any proposal, whether it be strategic, portfolio, program, or project-based, is the strategic assessment. This evaluation compares the current situation, also known as “business as usual” (BAU), to the desired outcome, as outlined by the SMART objectives. The difference between BAU and the SMART objectives highlights the business needs that must be addressed. A comprehensive understanding of how these business needs can be met and the SMART objectives achieved is crucial.

Policy fit

The proposal must also consider its fit with public policy and any potential impacts on other public bodies’ operations, responsibilities, or budgets. Effective and efficient delivery of public services requires consultation and collaboration between public bodies to avoid waste and inefficiencies.

Early research, consultation, and engagement with stakeholders provides a better understanding of the current situation and opportunities for improvement, as well as links to relevant policies.

Economic dimension

The economic dimension of the 5 Case Business Model plays a crucial role in analysing and evaluating proposals. It is driven by the SMART objectives and business needs identified in the strategic dimension and estimates the social value of different options. This dimension involves detailed option development and selection through appraisal, with a focus on considering the potential impact on the UK or overseas and considering any unintended consequences.

Appraisal

The longlist appraisal and selection of the shortlist options are critical steps in the process, and the preferred option is selected based on a thorough analysis using social cost-benefit analysis or social cost-effectiveness analysis. The selection considers factors such as the net social value of the option, the costs of risk and optimism bias, the whole life cost of the public resources employed, and the unquantifiable benefits of key objectives. The overall risk to the public and the public sector is also considered.

It’s important to remember that all dimensions of the 5 Case Business Model are interdependent and must be considered in an integrated way, with the involvement of key stakeholders. Following the supplementary guidance on business cases is essential to ensure that the proposal is developed in a holistic and collaborative manner.

Commercial dimension

The commercial dimension of a proposal focuses on the commercial strategy and procurement of services and assets needed. It is informed by the strategic and economic dimensions, and the procurement specifications are derived from them.

As the procurement process progresses, the commercial dimension provides updated information on costs, risk management and timing, which is then incorporated back into the economic and financial aspects of the proposal.

This continuous feedback loop helps to develop the proposal into a fully-fledged business case.

Financial dimension

The financial dimension focuses on the overall cost to the public sector of implementing a proposal, considering all financial implications and benefits. It evaluates affordability and the financial impact on the public sector, while the economic dimension evaluates the social value of the proposal.

Management dimension

The management dimension of a proposal focuses on the practical implementation plans. It ensures that the chosen option can be executed effectively and covers the resources required, budget management, and responsible organisations. It outlines the timeline for reaching agreed milestones and completing the proposal.

The management dimension includes the risk register, benefit register, monitoring and evaluation plans, and any necessary data collection before implementation. The details of the management aspect are developed further as the proposal matures into a full business case, influencing the economic, commercial, and financial dimensions.

Benefits of using the Five Case Model

The 5 Case Business Model offers several benefits to organisations that use it for business case analysis. Some of the key benefits include:

1.  Improved problem-solving.The 5 Case Model provides a structured approach to problem-solving, making it easier to understand and resolve complex business problems.
2. Enhanced decision-making.The model helps decision-makers make informed decisions by providing a comprehensive analysis of a problem and its potential solutions.
3. Better communication.The 5 Case Model improves communication between stakeholders by providing a clear and consistent approach to problem-solving. This helps to reduce misunderstandings and improve collaboration.
4. Increased credibility.The model provides a thorough and well-supported analysis of business problems and solutions, increasing the credibility of the decision-making process and the recommendations that are made.
5. Repeatable approach.The 5 Case Model provides a consistent and repeatable approach to problem-solving, reducing the risk of making poor decisions and increasing the chances of success.

   The 5 Case Model offers numerous benefits to organisations that use it for business case analysis. From improved problem-solving to increased credibility, it is a valuable tool for decision-makers looking to make informed decisions and achieve their goals.

Real-world examples of the Five Case Model

The 5 Case Model has been successfully applied in a variety of industries and business situations to analyse and solve complex problems. Here are a few real-world examples:

Healthcare

In the healthcare industry, the Five Case Model has been used to analyse and resolve issues related to patient care and hospital operations. For example, it has been used to evaluate options for improving the efficiency of the discharge process and to make recommendations for reducing re-admissions.

Manufacturing

In the manufacturing industry, the Five Case Model has been used to analyse and resolve problems related to production and supply chain management. For example, it has been used to evaluate options for reducing waste and increasing efficiency in the production process.

Government

In the government sector, the Five Case Model has been used to analyse and resolve a wide range of problems, including policy issues, infrastructure planning, and resource allocation. For example, it has been used to evaluate options for improving public transportation and to make recommendations for reducing traffic congestion.

Finance

In the finance industry, the Five Case Model has been used to analyse and resolve problems related to investment and risk management. For example, it has been used to evaluate options for managing financial risk and to make recommendations for optimising investment portfolios.

The Five Case Model has been successfully applied in a variety of industries and business situations to analyse and solve complex problems. Whether it’s in healthcare, manufacturing, government, or finance, the model has proven to be a valuable tool for decision-makers looking to make informed decisions and achieve their goals.

Conclusion

In conclusion, the 5 Case Model provides a structured and effective approach to analysing and solving complex business problems. By following the 5-step process of defining the problem, identifying objectives, evaluating options, gathering evidence, and making recommendations, decision-makers can make informed decisions and achieve their goals.

The 5 Case Model has been successfully applied in a variety of industries and business situations and has proven to be a valuable tool for decision-makers looking to navigate complex challenges. Whether you’re working in healthcare, manufacturing, government, finance, or another industry, the 5 Case Model is a powerful tool for making data-driven decisions and achieving your goals.

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