Its time to stop putting our heads in the sand and telling ourselves that “There really isn’t that big a problem out there.” Yes there is. Most projects still miss, lose or destroy more value that they deliver. And to continue using the current approaches that cause this is madness!
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. Yet, we continue to use these same approaches knowing that they fail when new approaches succeed.
As an example of the difference in results lets take two banks — the Green bank and the Blue bank. The Blue bank went to market with a 3000+ list of functions and features to select a new Mortgage lending system. After 18 months they made their selection. This was at least a year wasted, but a few people got some good trips out of it. It was completely the wrong approach and when the selected software was 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 (14 weeks) and project cost went up 8% to $7m and the value went up 700% 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 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:
- paid far too much in the first place
- increased its cost of mortgage processing rather than reducing it
- 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 be ‘automated’ whether they should be or not.
All this madness was done under the guidance of a Project Sponsor, a Steering Committee, a Program Director, a Project Director, four Project Managers and a team of 100+ using PMBOK-based approaches.
Some other relevant points.
- This was the Blue bank’s third attempt at this project. When the second one failed they stopped the project, appointed a Project Director who had no project or mortgage experience (and who didn’t want the job) and started it off again. Madness?
- Meanwhile the Blue bank was adopting Six Sigma and decided to apply it to the mortgage processes. The trouble was, as Six Sigma can only do small parts of the end-to-end process at one time, the time to do the whole process was 14 months (as opposed to the Green bank’s 14 weeks). By the time the Six Sigma teams had defined the new processes end-to-end, the system was only weeks away from implementation. Madness?
- This project went back again and again to the investment committee for more funds. One executive did try to question the cost and the wisdom of continued funding, but was soundly ‘bounced’ by his colleagues and told to shut up. Madness?
The point is that this Blue bank example is not unusual it is the norm. I could write case study after case study illustrating the same points.
What has got to happen to enable us to learn …CURRENT APPROACHES TO PROJECT DELIVERY DON’T DELIVER VALUE?
They too often, inadvertently, increase workload, increase cost and cull value.
Meanwhile, as the Green bank showed, Value Delivery Management reduces project workload, reduces net project cost and increases realized value. Which way should you be going?
WHAT DO YOU THINK?
© Jed Simms, Australia, 2008 — Can be reproduced with source acknowledgement