Week in and week out projects of all shapes and sizes are commenced, run and delivered in alignment with the conventional project delivery approaches. Yet the results are poor and, often, very expensive. However, regardless, we continue to use these same approaches knowing that they fail when there are new approaches that succeed.
As an example of the difference in results lets take two banks — the Green bank and the Blue bank.
The Green bank went to market with a 3000+ list of functions and features to select a new Mortgage lending management system. After 18 months they made their selection. This was at least a year wasted, but a few people got some good overseas trips out of it. This functions and features selection was completely the wrong approach and when the selected software was later compared to their real requirements major unknown gaps in the software were found.
In this case, the Green bank’s CEO was not comfortable with the selection process and approached us. We reviewed the evaluation process and pointed out that they had not actually defined their requirements in ‘how they want to do business, compete and make money terms’ but in abstract system terms. The project was stopped and value delivery management approaches applied. The requirements were defined in process terms (in 14 weeks). As a result the project cost went up 8 percent to $7m but the value went up 700 percent to $42m. The first $7m in benefits was delivered in the first few months after the project’s implementation was approved. “This is the best project we’ve ever done” was the CEO’s reaction.
Meanwhile, the Blue bank decided to ‘automate its mortgage lending process’ — a fatal choice of words. They started with a document management system as they saw paper processing as the problem and so wanted to ‘automate it’ and then off-shore it (the Green bank eliminated it).
An original budget of $25m went up to $50m and then $72m and eventually $84m.
Now both banks were trying to address the same business issue — manage mortgages more effectively. The Blue bank was three times the size and volume of the Green bank, so if you multiply the Green bank’s project costs of $7m by, to be generous, a factor of 5, you’d still only get $35m — less than half the eventual cost.
So, the Blue bank using conventional project management techniques and approaches:
- a) paid far too much in the first place
- b) increased its cost of mortgage processing rather than reducing it
- c) used a document management system that was so expensive no one project could justify it, so it is now looking for other applications to use this system to ‘make it pay’. So some other projects are now going to have their paperwork ‘automated’ whether they should or not.
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