Why Projects Fail to Fly
Managing complex long-term projects is difficult, and the results are often less than spectacular. How come we often can't get project management right? By Byron Kalies
When it comes to project management, Rod Vawdrey, CEO of Fujitsu Australia, says that generally the technology industry disappoints with its inability to deliver on promised outcomes. He dryly states: "Around 54 per cent of projects don't deliver on their promise - I am glad we are not in the airline industry."
A whole range of major projects around the world regularly hit the headlines for being either over budget on expenditure or seriously behind on timetables.
Everything from Olympic Games budget overruns, to Multiplex's Wembley Stadium delays, to a whole raft of delayed Australian defence force projects indicate that big projects aren't that easy to manage. Apparently the UK 2012 Olympic Project is already £1 billion ($AUD2.45 billion) over the original bid budget and counting.
This is not just a media beat-up. The KPMG Global IT Project Management Survey 2005, which combined insights and trends from more than 600 organisations internationally, reported that, generally speaking, projects are not delivering on their promises.
About 50 per cent of the survey's participants experienced at least one project failure.
In the same period only two per cent of organisations achieved targeted benefits all the time.
Eighty-six per cent of organisations lost up to 25 per cent of target benefits across their entire project portfolio.
The survey found that, to the detriment of stakeholders, organisations are making commitments, but not always delivering on outcomes; and while organisations are getting some value from their IT project investment, it clearly showed that most cannot determine exactly how much.
According to Egidio Zarrella, KPMG Global Partner in Charge, Information Risk Management, many companies do not even try to measure the value of a project, especially across the globe. He says project performance appears to be substandard.
Looking at a range of statistics there are varying estimates of projects that fail. The general estimate is that last year between 60 and 80 per cent of all projects failed to achieve their targets. A typical analysis of IT project failure appeared in The Guardian in the UK in November last year: "This year, the world's IT expenditure is projected at about $AUD2.3 billion. About one-third of projects fail completely and another third have complicated problems. Those that finish are likely to be completed several months or years late, on average 180 per cent over budget. These figures do not include hush-hush corporate projects or projects started at home."
The problem seems to be that the next project starts with a clean sheet and a renewed optimism that this time things will be different. "This time" the project will take place in that parallel universe where key staff don't change roles, project managers don't find another post in another organisation, and resources are always available when and where they should be.
Organisations from all over the world have had to deal with some spectacular failures.
Paris Euro Disney was another financial disaster. The project itself was initially costed at $AUD3 billion and finally cost about $AUD5.3 billion. Executives seemed to make a number of wrong assumptions based on a poor grasp of the cultural differences. For instance, in the United States the customers stayed longer (four days), didn't mind that there was no alcohol on sale and were willing to pay higher prices to stay at the Disney Hotels. These and other factors led to a downward spiral and excessive spending to "buy themselves" out of trouble.
So, whilst most projects may not make the list of grand failures there are lessons that can be learnt.
One key element in the sinking of projects is the internal momentum they build. At a certain point the project seems to take on a life of its own and the reason for the project existing seems to become almost secondary.
There's a three-step approach that can help organisations gain control over projects, especially for SMEs:
1. You need to establish exactly where you are. This sounds so easy and obvious that it's often ignored. The consequences of ignoring this aspect can be dramatic.
This is an area mostly neglected because assumptions rule the roost here. For instance Paris Euro Disney's cultural assumptions is a classic example. People assume they know where they are and become so excited charging after the vision that they overlook important details. After all it's far sexier, more exciting talking about your hopes and aspirations for the future rather than working out exactly where you are now. Yet this is vital. Where exactly are you in terms of skills, resources, etc? Who's in charge? What are their strengths, weaknesses, etc? What assumptions are you making?
2. The second step is to determine exactly where you're going. This is your vision. This should be inspirational. You need to take your people with you. Above all the vision must be defined clearly. People need to see the end product, what it will look like and what's in it for them. As a leader this is probably your number one job. Leaders lead by having compelling visions.
There's a tale (probably apocryphal) of John F Kennedy walking around the NASA building in 1968 asking a toilet cleaner at NASA what he was doing. "I'm helping to put a man on the moon by the end of the decade," was the famous answer the President got. Everyone involved in the Apollo project knew where they were going and what their role was. They didn't need screensavers with the mission statement. They were involved.
3. Imagine the implementation process is the journey. You know exactly where you are and you know exactly where you're going. So how would you plan on reaching your destination? Well, in a way you can't. You can't predict with any certainty what will happen in six months time. What you can do is plan the first few steps as accurately as you can. Then at a certain point you would reassess your position and plan your next few moves. Then reassess and replan. This is the only sensible approach. The danger of not doing this is obvious.
What happens with most projects is that "someone" expects the project to be planned out in the minutest detail for each day of the two, three or four years it takes to complete the project. This has to be carried out before the journey even begins. There will, of course, be stages built in, but each is dependent on the preceding one, which hasn't been completed yet. Usually finances and other resources are all controlled at the beginning on the best guess. These guesses at resources are inevitably going to be wrong. How can you possibly know how many people will be needed to run an IT project five years from now given the rate of change in this sector?
In other areas, people will leave, new people will arrive, and resources will not turn up, or turn up early, late, and damaged. Everyone knows this, yet we still go along with it and throw in a few "contingency plans", "risk analysis diagrams" to make us feel better.
If you have these markers in place then you are in a position to evaluate the project and make changes if they are urgent. Take, for example, the great Coca-Cola disaster of 1985. Coca-Cola was determined to beat Pepsi who had run the highly successful "Pepsi Challenge" campaign and brought Pepsi to within five per cent of Coca-Cola's share. Coca-Cola panicked, dropped the product that had kept them in business for practically a century and launched New Coke. Although most of this process was a disaster they did have the sense and ability to make a complete U-turn in just 78 days. They're still in business...
The corporate landscape is littered with the wreckage of spectacular project failures, often relating to IT. An article in The Australian in 2004 pointed out that a "rollcall of failed IT projects includes some household names".
Taking pride of place among them was National Australia Bank's announcement that it would write off $409 million in value from its key IT systems. In Melbourne , RMIT announced that it would spend $11 million reimplementing a failed enrolment system, while the Crane Group wrote down $28.8 million relating to the failed implementation of software for its Tradelink stores.
Another project that has gone into the "oh dear" annals is the Westpac C90 project of the 1980s, a rather costly example that came in at an estimated $300 million loss.
To prove that we don't necessarily learn anything from the past we can now add the Multiplex Wembley Stadium cost and time overrun disaster, the Australian Collins Class submarine project at about $3 billion over cost, the Anzac ship project at over $1 billion, and the Super Seasprite helicopter acquisition at another billion.
Although it relates to IT projects, the KPMG report probably summed it up best when it stated: "How can you make effective decisions when you do not know the project scope, key risks or key assumptions. These are missing in over one-third of organisations."
Losing the skills
The retirement of up to one-third of Australia's project managers in the next decade signals a serious skills shortage, according to Australian Institute of Project Management (AIPM) Chief Executive Officer Peter Shears.
Shears urges organisations to plan now to overcome the challenges. He outlines three solutions including a new approach to mentoring by senior project managers; new approaches to skills development to attract and retain talent; and the addition of project management skills to the core capabilities of all professionals.
Why projects fail
There are many reasons why projects fail. Gantthead (2003) lists the top 10 reasons for project failure:
- Inadequately trained and/or inexperienced project managers;
- Failure to set and manage expectations;
- Poor leadership at any and all levels;
- Failure to adequately identify, document and track requirements;
- Poor plans and planning processes;
- Poor effort estimation;
- Cultural and ethical misalignment;
- Misalignment between the project team and the business or other organisation it serves;
- Inadequate or misused methods; and
- Inadequate communication, including progress tracking and reporting.
$16 billion on the line
When it comes to big projects, the current $16 billion purchase of the Joint Strike Fighter (JSF) takes the biscuit. The Weekend Australian recently reported that the JSF had to be almost fully redesigned. A parliamentary research report questioned the wisdom of purchasing the JSF.
The Defence Department is arguing "contrary to media reporting that the Defence Science and Technology Organisation assessments showed the JSF program flawed, these findings are an example of best practice project management on identifying risk and taking steps to reduce it". Only time will tell who is right.