Harvesting Project Value - Part 2 of 2
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In Part 1 of this post, I raised the issue of, and said that we would come back around to the divergence we see between the 70% failure rate (based on “project success” – looking at the steady-state outcome) and the 25% failure rate (based on “project management success”). You may want to go back and review Part 1 for orientation. To help explain this major divergence in statistics, we need to revert to the very definition of a project. Here’s what Dr. Kerzner is saying about this in his talks on “Project Management 2.0 and 3.0”. I thank Dr. Kerzner for permission to use these images which remain his intellectual property.
Do you catch that rather non-subtle mention of sustainability? Remember: we’re not talking in particular about saving snails or reducing our carbon footprint. Of course, those things are part of the concept of the “triple bottom line”, made up of social, economic, and yes, ecological outcomes, but they aren’t the only part. What Dr. Kerzner is so wisely pointing out is that a project should be concerned with ‘the beyond’ – the sustained view of the project, that is, the way in which its outcome (hopefully) starts to realize business value – in a sustained way. How can we do this? Don’t we have to change our view of the lifecycle of a project, expanding it to look past the end, even past what we normally consider the outcome, handover, and even past what we have come to call “Benefits Realization”? The short and only answer, is: yes. Yes with a capital Y. In the figure below you can see that Dr. Kerzner has mapped out timeline that adds an important new element, “VA” – Value Analysis, paired with Benefits Realization, and calls that portion of the Investment Lifecycle “Value Determination”. Note the name of the figure: Investment Lifecycle. We know from the PMBOK® Guide that prior to the Project Charter, senior management of an organization “owns” the project decisions, the choice to invest at all, and in fact, is using tools like ROI, IRR, NPV, and Payback Period to determine whether or not a project is even worth the investment. So I think it’s actually easier for project managers who have been practicing for a while to “get” these green chevrons (IG and PA in the figure). The tougher part is to switch to a mindset in which the later green chevrons (BR and VA) are considered in project decision making. If you want to test yourself on this, check my recent blog post “Paved With Good Intentions” – there’s a scenario in that post that challenges your PM thinking in this very area of Value Determination.
Dr. Kerzner takes this idea much further, providing even tools and techniques to help perform Value Analysis. I provide an example below in which he proposes a scoring system to assess the project based on its deliverables (which is where most of us as PMs are trained to STOP) and also its business value. It’s no accident that the business value (with thanks to Vilfredo Pareto) is 70% compared to the 30% for deliverables. In our Project Management World, we see that 30% as The Whole Pizza, when, as Dr. Kerzner is coaching us, it’s just a slice. A big slice, granted, and a slice without which there’s really no Pizza at all, but still – just a slice.
Also, notice the symmetry here. The very same measurements we use and acknowledge, and happy integrate without question, into the PMBOK® Guide, namely Benefit/Cost Ratio, ROI, Payback Period, are used again after the project is handed over. In effect, we are seeing if our predictions about the project – those that we made during the selection process – are coming true. We cannot validate this at the ribbon-cutting ceremony, we have to wait, and this is problematic for the mindset of the PM (and I know you, because I am one, and I have the same propensities) - you are saying, "OK, on to the next project, let me have at it!". It's also a problem from a pragmatic perspective, since we have to wait, perhaps years, to know if a project is providing (harvesting) this business value. The 70% failure rate that Dr. Kerzner is quoting uses this long-term view. That’s the difference! The 25% failure rate shown in the Standish studies – well, that’s using the ‘scope, time, cost’ view, with failure being considered if two of the three are not delivered. How do you look at your projects? Are you focusing only on the deliverables, or are you considering what your project delivers in the steady state? Importantly, how are you making decisions in your project? Are you focused on the Triple Constraint, or the Triple Bottom Line? What Dr. Kerzner is telling you (adjusted to reflect the narrative that I use) is that your focus needs to be not only on project management success, but also on project success. And that means you should be making those decisions with harvesting value from your project in mind. Happy Harvesting!
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