There are three numbers that should be indelibly burned on every Sponsor, Steering Committee member, Investment Committee member and Project Manager’s mind when approaching projects.
These three numbers are: 15%, 35% and 5%.
These numbers have remained constant for the past 25 years, since the first such analysis was done by AD Little in 1991. Indeed, we confirmed these figures again in Australia last year.
Let’s explain these three numbers.
15% of projects fail
They may not finish, they may vaporize, they may be cancelled, in some cases they may actually be implemented and found to either not work or not be used — by whichever of these measures the project fails, the money spent is wasted and no value is delivered. Worse, often in the process of these projects failing, real existing value is destroyed.
(Another way of looking at this number is that of every $1m spent on projects, $150,000 will be wasted.)
However, you don’t want a 0% failure rate — you want to invest some funds in speculative projects and ideas that you don’t know are feasible or whether they will come off. In our experience, a reasonable ‘failure’ rate of formally cancelled projects is about <5%. This enables innovation with minimum waste. Having an acceptance that some projects will and can be cancelled also prevents projects being ‘condemned to completion’ as cancelling projects is seen as acceptable.
Only 35% of projects deliver efficiently
By ‘efficiently’ we mean ‘on time, on budget and to specification’. These are often the project manager’s personal measures of success, but even so the majority of projects still fail on one or more of these three efficiency criteria.
While to be commended, projects are not commissioned to enable ‘efficient’ delivery — this is a project performance factor rather than a business goal. Projects are commissioned to deliver business outcomes, benefits and value and, as many a project successfully delivered to time and budget and specification will attest, you can meet these three measures and still not deliver value to the organization.
The key measure of project success is effectiveness — did the project enable or deliver the business outcomes and benefits expected? Did the project improve the performance of the organization? The fact that projects can be delivered ‘to specification’ but not deliver value is an indictment on both our needs specification and value delivery processes.
Only 5% of projects are delivered effectively
This is the number of projects that deliver on time, on budget, to specification AND deliver all of the expected and available outcomes, benefits and value.
This number means that 95% of projects started are not going to deliver the full value expected.
Either way you look at these numbers, they are terrible and have not changed since AD Little did their first measure of project success in 1991.
The reasons why these figures have not improved are many and include:
- Projects are not set up or run to deliver value (to increase the 5%). Instead they are set up and run to deliver outputs or ‘products’ or deliverables. The difference between these two sets of drivers can be about 80% of the value!!
- Projects are still primarily measured with the ‘on time/on budget’ metric as this is more visible and easier to measure than the harder-to-measure benefits and value measures. So we’re still using simple, even if wrong, measures that mislead the focus and attention on projects.
- Many senior management teams still focus almost exclusively on cost. Indeed, many organizations seem to be content to see their projects come in late (which usually destroys more value than going over budget) but “go ballistic” if they go over budget. With this myopic focus on cost they basically have to ‘hope’ that the value will follow. As the figures show, it doesn’t. You cannot cost-control yourself to project success!
If we’re going to change these numbers we need to change how we deliver projects and move our focus from mere project delivery to full value delivery.
The good news is, when you focus on value delivery it simplifies project delivery and makes meeting all of the project success measures more achievable.
Aim to be in the TOP 5%—Download our ebook of the same name.