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A Value Delivery Management Article - The Elephant in the Room

July 7, 2008 | Author: admin | Filed under: Project Management Best Practices, Project Management Musings

A Value Delivery Management Article - The Elephant in the Room
By Jed Simms

With all the euphoria surrounding technology, the latest advances and the level of investment in ‘IT’ – too little is said about the continuing lack of serious, measurable returns on many IT investments.

Executive teams and Boards continue to approve multi-million dollar investments even though they know there is only a small likelihood of realising all of the benefits promised in great detail in the business case (less than 5% of projects deliver their benefits in full according to successive research studies).

Universities still teach conventional IT approaches, as do business schools and the various professional associations, despite the compounding evidence that project performance delivery is poor and not improving.
Admittedly, academics studying project management have, in the past few years, discovered that ‘on time/on budget’ isn’t the only measure of a project success and could possibly not be the primary measure of project success! What an amazing discovery.

But why is there this continuing reluctance to recognise the elephant in the room - the consistent failure to deliver excellent returns from IT projects? The answer has many layers.

Dumbed down expectations

Executives have ‘dumbed down’ their expectations. Burnt by attempts in the 90’s to use IT to generate quantum increases in performance (delivering quantum write offs instead) – just getting a large-scale IT project in and working is seen as ‘success’.

No measurement

Business cases are rigorously enforced despite the knowledge that there is no corresponding measurement system to ensure the benefits claimed are realised.

Investment committees go through the motions of evaluating business cases and occasionally receiving post-implementation reports – knowing that they do not have a real, effective end-to-end process for tracking, delivering and measuring benefits.

As a result, individual executives sponsoring projects willingly accept ‘accountability for benefits’ knowing there is no effective mechanism for their enforcement.

Simplistic measurement

The inclusion of projected financial benefits in future budgets effectively minimizes the value of projects as executives are reluctant to promise anything other than the minimum value needed to get the project approved. So, with many benefits not targeted they are not realized so the opportunity is lost.

Accountants love this ‘future budgets’ approach without realizing it is an exercise in value destruction!

Not my problem

Project teams and IT professionals see benefits realization as ‘not my problem’. This is the world they’ve been brought up in and it allows investment in IT to continue with few strings attached.

And the consultants aid and abet the situation. As long as the benefits circle isn’t closed, they can charge excessive fees with little likelihood of the project being cancelled because the nett value has been lost.

These circumstances have allowed the consistently unsuccessful conventional project delivery approaches to be perpetuated despite their poor results.

‘Better’ project management

Now the competition for capital is even more intense ‘Excellence in Execution’ is being seen as a necessity if not a potential competitive edge in itself.

However, the initial response by business is misguided. Firms are increasingly turning to ‘project management’ as the answer (resulting in the formation of an increasing number of project management-only agencies to meet the demand).

Better project management – executing the current flawed processes, better – will not achieve the desired end. It is quite possible (and too common) for a perfectly managed project to deliver a valueless result missing most of the business benefits.

The real solution

The answer lies in a re-think of the whole project and value delivery model.

Research on where the value goes on projects and the drivers of project success (measured in terms of the delivery of business outcomes; benefits and dollars) found that much of the control of success lies in the business – but the business doesn’t have the tools to deliver.

Most project-related tools are IT or quality based. IT for years has had to ‘fill the gaps’ left by the business to get the project finished. Six Sigma-like tools don’t tightly integrate with systems allowing much of the value to fall through the cracks.

And most project-related tools don’t focus on delivering the right, measurable business outcomes. Current project thinking is that projects deliver ‘capabilities’. Organisations don’t want ‘capabilities’, they want results.

They don’t want a brick factory (a capability), they want a factory making bricks (a revenue-generating result).

This brick factory analogy illustrates the change in thinking that has to take place. Projects need to move from focussing on a successful ‘system (or project) implementation’ (on time/to budget) to focusing on the delivery of measurable business outcomes and their associated benefits — results that improve the organization’s performance.

This means the goal posts for projects have moved. Projects now must not only deliver the system but also make it operational in the business (rather than leaving the business to clear up the mess, develop the workarounds and adapt to what was actually delivered – as opposed to what was promised).

The definition and measures of success also have to change. On time/to budget are measures of project efficiency not effectiveness. ‘Success’ now needs to be defined in terms of the delivery of business outcomes, the realisation of the associated business benefits (immediately or subsequently) and the realisation of their value effectively.
This may sound obvious but is not the case is 99% of firms. Outcomes are not clearly defined, benefits are vague and not connected to project deliverables, and dollar figures are spurious and often not trackable.

And executives and Boards wonder why they can’t trace the value of their investments!

It’s time to recognise the ‘elephant in the room’ (the lack of delivered, measured benefits) and adjust the way we approach and execute projects to ensure the benefits are delivered.

Benefits management needs to stop being an objective and become the driving force behind projects!

Jed Simms is a former Regional IT strategist with The Boston Consulting Group who, for the past 15 years, has run his own consultancy. Capability Management, specializing in dramatically increasing the value generated by each and every project. The creator and author of a complete suite of value delivery management tools at www.project-sponsor.com he has published three books, several ebooks and over 100 articles.

Project-Sponsor.com is designed as a rich repository for all those involved in project delivery. It has a special focus on value delivery management — ie increasing the value realized by projects — plus a special emphasis on equipping the business to perform their role on projects so as to reap the benefits and make the project manager’s life easier.

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