Effective prioritization depends on reliable data – as Bob Cooper says, “The best project-selection system in the world is worthless unless the data are sound.” And yet, too often initiative forecasts are far from ‘sound’ predictors of future performance:
- Cost estimates: According to the APM[1], “Projects across industries and geographies struggle to meet the most basic targets. Five out of 10 technology projects, six out of 10 energy projects, seven out of 10 dams, nine out of 10 transport projects and 10 out 10 Olympic Games do not meet their cost targets. This trend has been constant.”
- Time estimates: Cardoso[2] found that around 80% of projects are delayed. Hofstadter’s Law therefore appears to be all too prevalent in project delivery – “It always takes longer than you expect, even when you take into account Hofstadter’s Law”
- Benefit estimates: The Boston Consulting Group[3] concludes that, “depending on complexity, 50–75% of major change efforts fail to realize intended results” and according to the Harvard Business Review[4], “Of the $1.3T spent on digital transformation in 2018 in the US, $900B went to waste”.
One solution is robust and independent challenge and scrutiny of project business cases by portfolio managers and analysts. I posed the following question in my first book - Is realizing benefits a fool’s errand? My conclusion was yes, but not in the sense that it can’t be done, but rather in the sense that you need a ‘fool’ to challenge the assumptions underpinning investment proposals. But this ‘fool’ is no idiot; rather they should be, as Shakespeare describes Feste in Twelfth Night, ‘wise enough to play the fool’.
But what questions should you ask? Well at the most basic I’d suggest starting with the following five key questions:
1. Have the benefits been agreed with benefit owners and ‘booked’ in budgets, headcount plans, KPIs, targets, operational plans etc?
2. Is it clear that the initiative represents value for money? i.e.
- Initiatives with a financial investment objective: is there a positive return on investment that justifies the risk inherent in the initiative?
- Initiatives with a non-financial investment objective: is it clear that the benefits cannot be achieved more cost-effectively by an alternative solution; and that there are no other more pressing calls on available funding or no alternative investments with a greater strategic contribution that would be delayed by proceeding with this particular initiative?
3. What’s the track record of the sponsor and project manager in successfully delivering initiatives of equivalent complexity?
4. Is the initiative set up for success i.e. is it designed to deliver a defined strategic contribution; has development been front-end loaded; and is it designed around modular/incremental releases of output/capability wherever feasible?
5. Has sufficient resourcing (financial and otherwise) been allocated to the initiative, including contingency; and is it clear how the scope can be adjusted should costs escalate beyond the agreed contingency (so that the portfolio is not expected to fund any cost escalation)?
And just in case you are wondering whether this degree of challenge is really necessary – well follow the advice of a Nobel-prize winning academic and a visionary business leader. Daniel Kahneman advocates “adversarial collaboration” whilst Andy Grove of Intel-fame and ‘only the paranoid survive’ recommends “constructive confrontation”. The PfMO therefore has a crucial ‘critical friend’ role in appraising initiative proposals – so long as it’s willing and able to ‘play’ the fool.
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