Hit the Accelerator

Michael R. Wood is a Business Process Improvement & IT Strategist Independent Consultant. He is creator of the business process-improvement methodology called HELIX and founder of The Natural Intelligence Group, a strategy, process improvement and technology consulting company. He is also a CPA, has served as an Adjunct Professor in Pepperdine's Management MBA program, an Associate Professor at California Lutheran University, and on the boards of numerous professional organizations. Mr. Wood is a sought after presenter of HELIX workshops and seminars in both the U.S. and Europe.

 

They say (whoever "they" are) that reducing a project's delivery time table in half doubles the cost. Therefore a project with a budget of $1 million scheduled for completion is 12 months would cost $2 million to complete in six months and $4 million to complete in three months. Assuming that throwing money at a project can accelerate delivery dates is a slippery slope indeed. Even slipperier is the notion that there is a formula that ties budget to value.

Every project has a cost and a value related to achieving its intended outcome. What is amazing is that rarely do projects have budgets tied to the value to be delivered. They are more likely based on poorly derived estimates of labor and other expenses that may have no bearing on the value of the outcome to the enterprise. For example, assume a new project--when completed--will position a company to expand into new markets and allow it to double its operating profit within three years, from $13 million to $26 million.

What is this project worth to the enterprise? Is it worth $1 million, $3 million...more? Assume now that IT estimates that the project can be done for $1.5 million and completed in two years. Is that a good thing? What would be the value to the company if the project was completed in one year? What is the value of being able to achieve a $13 million …

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