Last week we talked briefly about the need to close projects.
While I am sure we will be spending more time on this topic in future sessions,
I thought it would be worthwhile to provide some of my experiences / thoughts
on this subject.
Over several years of consulting, I have observed a repeated
behavior of not following through on measuring the business case post implementation at several of my client
firms. Several projects I have been on, in fact the majority have required a
business case. The business case typically outlines the financial, tangible
benefit the project will bring. Installing an automation tool? It will bring an
xx% reduction in FTE (labor) costs associated with that process. Developing a
new CRM? Look for top line growth of xx% six months after completion. In many
cases, the business case outlines savings or growth that will provide for a
favorable return or positive NPV within the organizations target timeframe
(usually 12 to 36 months).
Yet, at the completion of these projects, many of the clients are
left scratching their heads wondering if they in fact received their money’s
worth for the project. There are a number of factors that can lead to this, but
below are two takeaways I have observed from many clients:
1. Business case estimates are not impartial, empirical or
researched – in many organizations business cases are ‘gamed’ – estimation
models are subjective and typically developed by the parties with a vested
interest in performing the project. Furthermore the estimates provided are
rarely driven by statistical fact or equation based formula, but heuristic
estimations based on perfect world scenarios. Finally, firms typically do not
research what types of returns similar projects have provided for other firms
who have attempted them. All of these areas require some additional upfront
investment, but this can be far less than completing a project that doesn’t
meet its value
2. Failure to baseline – Many times, project business cases are
based on improvements in service from the current state, a faster time to
market, or improved uptime. Failure to accurately measure and baseline the
current service will invariably leave a project open to ‘pot shots’ from stake
holders post implementation. “This was way simpler before” or
“This seems slower than what we wanted” are difficult statements to
discredit and once uttered, can cement executive perception. When projects are
relying on service improvements as a basis for investment, before any ‘shovel
hits the dirt’ the project plan should include steps to create a set of agreed
to measurements that all stakeholders feel accurately and completely measure
the service, and those measurements should be taken from the ‘in place’ system,
with improvement targets set for project success.
Other problems include lack of funding to ensure the project can
measure success after the fact, undersized PMOs (where Project Managers
immediately are sucked into the ‘next big thing’ as soon as the project is in
production) and several others. I look forward to seeing what we discuss in
class down the road.
I agree with what you are saying based on projects I have been involved in. In terms of your first point, “Business case estimates are not impartial, empirical or researched,” I have found where the company has been measured against industry standards or best-in-class numbers, but there are caveats associated with those numbers. For instance, the number may focus on best-in-class order fulfillment numbers, but those numbers are focused on one small section of a company with very specific limitations. For example, a company that may have an overall 90% fill rate may be compared to a best-in-class number of 97%, which is only focused on one product line of a company or a vendor managed inventory portion of a company. This sometimes becomes more evident as the project team works through the project and works with the consultant to apply these best practices only to find that those solutions may not fit or be applicable to the company’s specific needs. This leads to a great amount of frustration among the project team and the company as a whole as they begin to realize they may not realize the results that were expected. It can also extend the life of the project as the project team works to find alternate solutions to achieve the original expected results.
I’d like to take the discussion a different direction by launching off of your first point about business case estimates lacking any sort of empirical grounding. Something I’m beginning to observe as I enter the work force is that it’s difficult to find the right balance between researched evidence and heuristic estimation when supplying the numbers for these cases. I have worked at a firm that was so paralyzed by the need for data to support decisions that they missed out on making certain choices early enough to fully enjoy their benefit.
Money is not the only factor when discussing a new project – time is also critical. In consumer products, first mover advantage can be the biggest determinant of who owns a market and who gets left in the dust. With products that need to be updated every 9 to 12 months, there simply may not be enough time to do all the research because of engineering, production, and channel lead time requirements. The company needs to be willing to go with its instinct in some instances. Even if it means incurring an initial loss, the qualitative argument for “shooting from the hip” is that market control, brand recognition, first mover advantage, and experience learning curve benefits are all dependent on moving quickly.
Of course it’d be foolish to argue that absolutely no research is necessary. It is! It’s just worth remembering the other side of the coin – that heuristic estimations aren’t necessarily a laziness/ ineptness issue. They might instead be a sign that the company is placing a premium of shortening its rollout time. Beyond that, we haven’t even gotten into whether or not many of the numbers needed for a business case can even be measured with any sort of certainty! Thinking, Fast and Slow gets into those questions and is worth reading.
There’s a lot to talk about here from a strategy perspective and I’m interested to know what others think!
I agree people usually have to start the project and oversea what is at hand and worry about the money part. Sometimes people doing the projects like you said have poor funding and need to do with what they have eventhough they might have flaws or probelms already that would probably be addressed in footnotes. Estimeates are always not up to par sometimes you might be close ut they are just estimate of what you shoudl expect from the out come. Things dont always turn out the way they are suppose to be.
This article perfectly connects with the activity we did in class. We built the tower of spaghetti and marshmallows. In order to complete the project not only investment is important but the process and timing as well. To estimate each factor is significant, however, often times the reality does not reflect the earlier estimates. As an example, many groups did not stick with their first estimates of the use of investment nor the project itself. They had to adjust their use of investment in order to complete the project successfully.
First, I would like to say that Jesse’s article is well-written, insightful and a very sensible analysis. Developing and consistently using an objective method of measuring a project’s success or lack thereof would be invaluable to a company and its clients. Also, in response JohnD, who wrote an equally sensible response, I definitely agree that waiting too long to start a new project could hurt a company, and there are probably countless cases where companies over-think the situation beforehand and miss out because of it. However, I don’t think Jesse would disagree with this, as the article was focused on post-completion analysis rather than before it. Also, accurately knowing how previous projects fared would probably help new projects get approved and started more rapidly.
I think you hit it spot on with your assessment as to why things fall apart in writing your business cases. This was a very well-written analysis. I can relate to projects not being accurately estimated, or projected on models with a lot of subjectivity. Working with institutional investors purchasing multi-million dollar real estate assets, I frequently see purchases made on models based on speculation. These investments are then long-term projects that can span years. I think over time, priorities shift, criteria changes and by the end of a project, so much has changed that it’s difficult to assess it’s success to the level most would like. I think that one of the most important factors is when leadership shifts priorities and once the sponsorship of the project fades, so does the efforts of the team and potentially making the poject more difficult to measure.