For too many organizations, project investment can be like filling a leaky bucket— time, money, and talent is poured in but nobody ever patches the holes. Then, they wonder where the value went.
Imagine your bucket contains the optimum net value of your strategy or project, that is:
- the maximum practical business and strategic value that can be delivered
- for the most optimal and practical cost.
At the end of your strategic initiative or project investment, how full is the bucket?
You may be surprised to hear that for many organisations, most buckets are more than half empty. That is because at least half of the available value has been wasted—seeping, dripping, or leaking away—throughout the delivery cycle and beyond.
Where does the value go?
In the early 1990s, during the second major computerisation wave, many companies moved to standard platforms - ERP and MRP systems –starting from widely varying levels of existing automation.
This period created an unrepeatable opportunity to gather data on comparable companies installing the same systems, with careful data collection enabling direct comparison of the results.
The groundbreaking global research in the early ‘90s conducted by The Boston Consulting Group, were run by Jed Simms when he was one of five worldwide IT Business strategists for BCG.
Note this research has been duplated in stidies by TOP and other in the years since.
The research collected standardised information on more than 300 projects implementing similar systems. The research looked at how much was invested, and the resulting impacts on running costs and incremental benefits. The results were standardized to make comparison easy.
The researchers expected - there would be a “right amount” to maximise the investment returns. But instead, it found a wide spectrum of returns, which then left the puzzle:
"Q. What did the out-performers do? They spent less and yet got Lower Annual Running Costs, and higher incremental benefits?
That triggered more detailed reserch into where and how vlaue is destroyed across a portfolio of prpojects. And what the research showed is some very common patterns.
Costs go up. No surprises there. The BCG research showed standardised across the projects sampled - an increase in costs over the optimum delivery cost of about 60%.
Value is destroyed. What surprises many is the scale of the value destroyed, with the project portfolio delivering less than 40% of what they could have, out of a theoretical 100% . [3]
Effectively, spending 160% of what is needs to, yet deliver only 40% of the available value. That's a very leaky bucket, indeed!
Why is the value destruction occurring?
For may organisations, the existing strategy execution and value delivery processes and practices might look ok, but they can contain gaps, cracks and holes that allow business value to be lost. These can be becuase to false beliefs, poor or missing processes, or practices that unnecessarily increase the costs of delivery or increase the ongoing costs of your operations.
How is value lost?
- Business cases that miss 25% or more of the available value—never to be delivered.
- Portfolio investment processes that approve projects that are set up to fail and continue projects that should be closed down.
- Governance teams that make decisions, espeoicaly in raltions to scope changes, that progressively destroy the project’s benefits and value.
- Change process that increase the time and costs of making the changes while reducing the effectiveness of the changes made.
- Project management processes focused on delivering "outputs" rather than a working business-environment and processes and which leave post project benefit realistion to happen as an afterthought or never, effectilvey increasing the delivery costs while reducing the delivered value.
- Automationg business processes without first simplying and improving them (aka "paving the cow paths"). Not undertaking business process simplification that can reduce operational processes by 40% or more making both the project’s delivery costs and the ongoing operational costs substantially lower.
- Not having a standardized business case validation processes to establish whether or not a project is set up for success before it is approved—saving millions in wasteful project avoidance.
- Not have a standard project investment prioritization processes that prevents ‘pet’ projects to be approved when critical business projects are rejected.
- Missing strategic contribution processes that accurately measure in detail how each project contributes to the strategy so that each project’s relative strategic relevance can be scored and assessed. Too commonly the true strategic relevance of most projects is essentially unknown.
Filling a leaky bucket?
Whatever the actual level of loss it is still unnecessary waste: a waste of time, effort, money, opportunities and value.
Yet, just as when you look at the bowl it can look whole, many of the value-wasting deficiencies are invisible. They are not seen and, therefore, are not measured, managed or avoided.
To deliver a full bowl of value you need to:
- Make visible all of the gaps, cracks and holes – the gaps and deficiencies in your delivery beliefs, processes and practices that are wasting significant time, money and opportunities. The presence of these deficiencies can be identified and and their value impacts measured.
- Take action to eliminate, avoid or manage each deficiency – and many can be eliminated or avoided completely to immediately reduce the level of waste and increase the net value retained/delivered on every project.
- So as to increase the actual business and strategic value delivered and sustained – on a consistent basis.
Why bother to repair your ‘bowl’?
Repairing your ‘bowl’
- Reduces the cost of your strategic and project investments
- Reduces the time to deliver these investments
- Reduces your ongoing operational costs (you implement simpler, lower cost to operate solutions)
- Ensures you can effectively deliver your strategy (and measure it’s delivery and results)
- Increases the business value delivered and sustained from your capital investments
- Increases your capability to respond to the market (you can execute faster)
- Increases your competitiveness (as you can deliver greater results than your competitors while spending less).
Only 30% visibility
If you were driving down a street with only 30% visibility you’d be afraid and cursing the lack of visibility. Yet, with projects, you accept only 30% visibility and then wonder where the value went.
There are 22 major causes of strategy and project delivery waste of which only 5 to 7[1] are usually visible and ‘managed’[2]. The other 15 to 17 are not visible, measured or managed. But they can and need to be made visible and managed so as to eliminate the high levels of unnecessary waste — levels of waste that would never be tolerated in business-as-usual operations.
Imagine telling management it was ‘okay’ that the business operations cost too much and delivered only a percentage of what they could deliver—and expecting that to be ‘okay’. In business operations efficiency and effectiveness is expected and measured. In projects, waste and ineffectiveness is accepted but not measured.
The difference between the top 5% of organizations, that consistently successfully deliver all of their strategies, projects and the optimum value, and the other 95% of organizations, that can consistently lose more value than they deliver, is that the top 5% make visible and actively eliminate, avoid or manage each and every delivery deficiency.
Read how they do it in our ebook:
Open to all
There is no reason why any organization in the world cannot consistently deliver full bowls, successfully delivering their strategy and confidently commissioning projects knowing they will deliver all of the available business benefits.
It just requires
- A change in perspective – to approach strategy execution and project delivery from a business strategy, value and success perspective. This may sound strange as a requirement but most organizations non-consciously approach projects from a project, cost-control and failure-avoidance perspective and this leaves many deficiencies in the bowl and leads directly to massive waste and a loss of value.
- A change in processes and practices – to incorporate the business strategy and value delivery processes that are frequently missing and to realign the project management practices to become value-delivery driven. Again this may sound strange but most project management practices are project-delivery driven and expect the business benefits to (somehow) be delivered subsequently. This approach allows 50% or more of the value to be lost. The primary measure of success of any project needs to be the full delivery of the available business outcomes, benefits and value, not just the efficient completion of the project.
- An uplift in organizational capability – what we call a ‘TOP-up’ in the organization’s capability to define, design, develop and deliver the optimum business value from each and every strategic initiative, project and program. The tools are now available it just takes the desired and will to adopt and use them.
This change has to be led from the top.
Your choice
So the questions you need to answer are:
- “Does your organisation want to optimize your strategic and project delivered value, or continue to compromise it?
- “What level of waste can you afford on an ongoing basis?” (Do you know how much value seeps away now?)
- “How value does your orgnisation want to target do you want your bowl to be?” (In most organizations across the portfolio it is more than half empty.) Is that acceptable?
They are all essentially the same question. You can choose your answer. When you are ready to choose to maximize your results and value and resultant level of success—you are ready to adopt TOP thinking and ;processes.
It really is that simple.
To thoroughly understand this choice, read our ebook of the same name:
