We conducted extensive, in depth research into 128 manufacturing organizations across Australia and 36 major banks across the world, and then further tested our findings in utilities, service organizations and retailers.
The research identified the 12 most common reasons why projects failed and then we grouped them into five major categories to explain where and how much value was lost from and during the project. (NB Our definition of success is the delivery of the projected business outcomes, benefits and their value.)
Scope and requirements definition could immediately destroy 15 percent or so of a project's potential value. Obviously, where these were wrong they had downstream impacts on the rest of the project delivery process.
An easy way to comprehend these values is to imagine a project with a potential value of $1 million. So, getting the scope and requirements wrong has lopped off $150,000 from the potential value before we get any further.
The business case was, surprisingly, the greatest destroyer of value in that it often did not focus on the business outcomes and missed many of the most valuable benefits. They could leave 25 percent or so of the project's potential value 'on the table'. As a result, we're now down to a maximum realizable value of $600,000 before we've even started design or delivery.
The software did not have a major impact on project success and value provided it was suitable for the task. So, spending years deciding if system 'A' or 'B' would be better is not time well spent. The net impact on the value was around 5 percent (or $50K in our value example).
The project governance team made a measurable impact on the project, good or bad. If they underperformed, they allowed value to be lost during the project (e.g. not releasing the right personnel) and on implementation (e.g. not ensuring the business was ready, willing and able to accept the change). They could destroy a further 10 percent ($100K) of value.
Poor change management, both at the time of implementation and afterwards to ensure the remaining benefits were delivered and sustained could destroy 15 percent of the project's value.
Note: These losses are often cumulative so, in a worse case, now $750,000 or 75 percent of the project's potential value has been lost, missed or destroyed. And, the worse the requirements definition, governance and change management process execution, for example, the more the projects cost — a double negative value impact.
The implementation of the system tends to involve some 'compulsory' benefits that cannot be avoided. For example, if you've combined three reporting systems into one, then the workload associated with the other two is automatically avoided and results in a saving. Compulsory and associated benefits were found to be around 25 percent of the potential value — good, but rarely enough to cover the project's cost.
The nett effect of this value failure was found to be:
- most projects lost, missed or destroyed more than 50 percent of their project's potential value (even if they realized most of the business case promised benefits because, as you can see above, by then up to 40 percent of the potential benefits can have already been lost)
- most projects struggled to break even in cost/benefits over time when you also add in the additional costs of supporting and running the systems and processes, and of making 'enhancements' and other changes to make the originally delivered system work effectively.
Now you can see why the business so often considers projects to have failed even when they've been delivered on time, on budget and to specification! It's not easy being a project manager.
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