7 Steps to Building a Board Level

Business Case

A Point of View
By Tom Tiede
 7 Steps to Building a Board Level Business Case

Introduction:
Every distribution-intensive business has the fundamental need to continually improve their ability to get the
Right Product to the Right Place at the Right Time and at the Right Cost with the imperative to
Increase Speed and Improve Service to Beat the Competition and Sustain Growth. Often this
requires a significant investment in distribution. Those that make the best decisions where to invest prevail!
As a prime example, Amazon has proven the business case for strategic investments in distribution and have
tilted the competitive landscape in their favor by offering an unprecedented level of convenience at
competitive costs to consumers based on their:
 Product Selection (nearly 600 million products in the U.S. - most of which are through Amazon’s
third-party seller relationships);
 Warehousing Efficiency (vast investments in robotic technologies to reduce the cost of labor);
 Delivery Speed (a distribution facility within a single day’s delivery to approx. 50% of the entire
U.S. population and within 20 miles to more than 50% of all households earning more than
$50,000/year.); and
 Delivery Cost (over 100 million U.S. Prime Members are eligible for free shipping).
The resulting “Amazon Effect” has raised the table stakes across the boardrooms of businesses exposed by
Amazon’s rapid growth.
Amazon has dramatically changed the level of competition and customer expectations for convenience. And,
history has proven that businesses that fail to adapt and invest as competition and customer expectations
change in their industry either go away or become a shell of what they once were. So, whether exposed by
the Amazon Effect or not, every distribution-intensive business should continually evaluate the business case
for investments in distribution that their board can get behind.
Although every business situation and opportunity are unique, the process for building a business case for
investment in distribution that your board can get behind is relatively straight-forward. Here are seven basic
steps for doing so.
1. Identify the Burning Platform
2. Identify Alternative Solutions
3. Identify the Decision Criteria
4. Conduct the Trade-off Analysis
5. Develop a Plan to Manage Risk
6. Conduct the Meetings before THE Meeting
7. Develop and Present a Board Level Business Case

Step 1: Identify the Burning Platform

Strategic investments in distribution should be driven by the most compelling needs of the business.
Typically, these are attributed to the need to address speed, cost, capacity, and risk across the
distribution network. Examples of “Burning Platforms” in the face of competition are the need to:
 Support new or growing distribution channels (e.g. direct to consumer; order online - ship to store;
ship from store, etc.)
 Reduce “order to receipt” cycle times
 Reduce inventory investment and exposure
 Reduce dependence on labor due to rising costs or risk of availability
 Support entry into new geographic region(s)

A Point of View 1 By Tom Tiede

 7 Steps to Building a Board Level Business Case

 Integrate a new business acquisition

What is the Burning Platform in your business?

Step 2: Identify Alternative Solutions

Alternative solutions and investments may need to address opportunities or concerns across the landscape
of distribution, including decisions regarding products, services, placement, people, processes, systems,
equipment, or building. Example alternative considerations:
 Products – low cost vs. high value; basic vs. configurable; stable vs. seasonal turnover;
 Services – no frills vs. value add; same day vs. next day; consolidated delivery vs. store friendly
receipts;
 Placement – central vs. regional facilities; distributed vs. consolidate slow moving inventory; on
hand at store vs. ship from DC;
 People – insource vs. outsource; balance of permanent vs. temporary staffing; minimize labor
through automation vs. maximize flexibility;
 Processes – manual vs. automated; self-directed vs. system-directed; batch and sort vs. direct or
cluster; person to goods vs. goods to person; multi-stop vs. pool distribution; 3 rd party vs. own fleet;
 Systems – legacy application vs. best of breed; WMS integrated with WCS vs. single WES; insource
vs. outsource support;
 Equipment – low tech vs. high tech; tried and tested vs. “bleeding edge;” carton and pallet flow vs.
rack and shelving; belted vs. accumulation conveyor; loop sorter vs. goods to person;
 Building – expand vs. new; lease vs. own; flow through vs. u-shaped; operate vs. outsource.
What alternatives should you consider to address your Burning Platform?

Step 3: Identify the Decision Criteria

The right investment in the right solution must find the right balance across multiple criteria important to
decision makers at the Board level. The Return on Investment (ROI) is often a critical factor, but the
final decision must also address criteria personally important to decision makers such as the impact on:
 People, Processes, and Systems;
 Building and Equipment;
 Time, Risk and Flexibility;
 Key Business Metrics;
 Personal Incentives.
Typically, the ROI must meet a minimum threshold to be considered, then the final decision will be made
based on more qualitative factors individually important to decision makers.
What is the decision process in your business; who are the decision makers; what criteria will drive the
decision; and what criteria is being impacted by your Burning Platform?

Step 4: Conduct the Trade-off Analysis

The objective of the trade-off analysis is to evaluate the quantitative and qualitative impact of each
alternative investment and identify the solution providing the most value relative to the
investment required.

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 7 Steps to Building a Board Level Business Case

Value can be generated in many ways such as through increases in capacity, revenue, quality, service,
flexibility, and personal appeal to decision makers and by reducing time, cost, working capital, taxes, risk to
the business, and personal risk to decision makers.
Investment may come in many forms, and the ROI analysis will require it to be segmented into:
 Capital Expenses - tangible assets with a lifespan of more than a year and depreciated over that
lifespan, which directly impacts the balance sheet;
 Non-Capital Expenses – ancillary, non-depreciable expenses invested to effectively use the asset,
which directly impacts the income statement.
So, the individual components of value and investment need to be put in monetary, accounting terms to
identify the ROI of each alternative based on a variety of metrics such as Payback Period, Internal Rate of
Return (IRR), or Net Present Value (NPV). In doing so, a key consideration in the analysis is the anticipated
cash flow horizon. Investments in durable assets tend to have longer cash flow horizons, and, generally, the
longer the cash flow horizon the higher the return.
The ROI and the impact on other important decision criteria should then be weighted and compared to
identify the recommended investment offering the best overall balance and favorable impact to the business.
The tradeoff analysis should include a comparison to the opportunity cost of doing nothing to address the
Burning Platform. What is the opportunity cost to your business if you don’t make an investment?

Step 5: Develop a Plan to Manage Risk

All significant investments in distribution come with an element of risk, and risk needs to be identified and
managed through the lens of board level decision makers. High-risk, “bet the business” propositions rarely
get approved. Therefore, the most successful approach is to:
 Diligently investigate potential challenges and success factors associated with the investment;
 Be transparent about risks and the plan of action to mitigate those with the highest probability risks;
 Start small at first (e.g. through a pilot approach), if possible, before expanding the investment;
 Don’t assume a perfection. Challenges will occur. So, staff the implementation team with
experience and strong problem solvers.
What are the risks if you do nothing; what are your highest probability risks if you make an investment; and
how do you plan to avoid or minimize the impact of these risks?

Step 6: Conduct the Meetings before THE Meeting

It’s critically important to avoid surprises during a board level business case presentation. But, it’s inevitable
if it’s the first time the business case is being presented to the board or if misalignment within the decision
makers hasn’t been identified beforehand.
Therefore, the best approach is to conduct a series of meetings with individual stakeholders and key
influencers before the final business case presentation. This provides the opportunity to educate
stakeholders on the recommended investment, understand their points of view, address their concerns,
potentially alter the recommendation, and importantly align on the recommendation prior to THE meeting.
When done successfully, the final presentation may result in a discussion that feels much like a ceremonial
event of agreeing as a group to the recommendation everyone previously agreed to individually.
Who are the influencers and decision makers, and are they aligned with your recommendation?

Step 7: Develop and Present a Board Level Business Case

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 7 Steps to Building a Board Level Business Case

Ultimately, the business case presentation needs to be clear, concise, address the key questions of board,
and accomplish the main objective to gain agreement to move forward. Below is an example outline of the
agenda for a business case presentation.
 Meeting Objectives – to make sure everyone is aware of the intention of this meeting
 Project Scope and Objectives – to summarize the background, context, and purpose of the work
leading to this meeting
 Business Imperative/Burning Platform – to emphasize the importance of this meeting and the
imperative to do something
 Alternative Approaches & Recommendation – to briefly describe the recommendation and the
other alternatives considered
 Impact and Tradeoff Analysis - to further illustrate the tradeoff analysis across alternatives
 Financial Business Case – to summarize the financial impact of the recommended investment
 Risk Management Analysis – to ensure risks are being considered and will be managed and
controlled moving forward
 Implementation Timeline – to provide a high-level roadmap for the journey ahead
 Next Steps – to outline the immediate steps to either reach a final decision and/or launch the
project forward
Is your presentation easy to understand; does it tell a compelling story; does it lead to an obvious
conclusion; have you made it clear what you expect of the decision makers; and, are you well prepared to
get started if they say “yes?”

Summary:
Amazon has proven the business case for making significant investment in their distribution capabilities and
have changed the competitive landscape as a result. Many businesses exposed by Amazon’s growth have
failed or are failing. However, many other businesses are making significant investments in their distribution
capabilities to compete, survive, and hopefully thrive.
Of course, not all distribution-intensive businesses are directly impacted by Amazon. Nevertheless, the
Amazon Effect is a valuable lesson learned in both the value and the need to make strategic investments in
distribution to ensure you get the Right Product to the Right Place at the Right Time and at the Right
Cost with the imperative to Increase Speed and Improve Service to Beat the Competition and
Sustain Growth. Those that do it best will prevail. And, the seven steps outlined here provide a
framework for building a business case for the investments your board can get behind during your journey
ahead.

A Point of View 4 By Tom Tiede