17 March 2009

The spurious bullshit that goes into busness cases

Dave said it;
All these efficiency projects never result in less staff.  Why doesn't someone 'fess up and dmit these projects are so that we can afford to go out and buy things from this and similar corporations?

It's a cynical line, and among all the pessimism out there today about career prospects there is also some optimism that finally project sponsors and going to sit up and pay attention to what is happening on their projects. Well... maybe.

Let me ask you this; how closely does your project's goal align with the goals articulated in your business case?

Does your business case say that the new fangled IT system is going to bring in cost savings or revenues?

How are those revenues derived?  From serious market research?  From historical trends?  From competitor analysis?  A pilot?

And what about the efficiency savings?  I remember another conversation from years ago with someone who had just reviewed the last 2 years worth of business cases across the organisation.  If we had made good on our goals we would have negative staff numbers.

Obviously this is mainly just a rant, but there are also some practical actions you can take to manage these over-promises.

One is draw a diagram showing how the benefits will be realised and how they will flow into the organisation.  Tag all the assumptions and challenge the business cases' author on them.

Another is to provide a capability statement of your end product, rather than say how much money it will make or save.  Clearly delimit the task of building that capability from realising the benefits, which will fall to a senior manager in the operations world.

A third option is to adopt an iterative/incremental build up of a solution.  Then you can make smaller guesses and watch as the benefits are realised and correct as neccessary.



Picture by Daniel Gasienica CC @ Flickr

3 comments:

  1. Everyone-

    this is a great subject; and I don't only say so I know as well. I am a PhD student transferring a database to better evaluate Business Cases (cost, benefits, schedule, and scope) from the construction industry to the ICT world.

    All my research has led me to realize that there is no such knowledge in the industry and that you can not buy this knowledge from IFPUG, Standish, etc.

    The tool/survey is free to use and if anyone is interested just get in contact and we could talk about that a bit more.

    ReplyDelete
  2. sorry - forgot the e-mail to get in contact in my previous comment, just reach out to me at
    Megaproject.survey@gmail.com

    ReplyDelete
  3. Craig,

    I couldn't agree with you more. History is part of the problem. When ERP, CRM, BI, and other systems were introduced, they made such a huge difference, it made no sense to ask about the price.

    When I started working on Wall St implementing digital trading systems in the early 90s, maybe it cost $1.5M to implement and another $1M+ per year to support, but the system paid for itself in seconds.

    However, going from the first system to an upgrade or more advanced model or implementing some complimentary system will only make maybe a 5% improvement. But if you saw the change from nothing to the initial (probably very clunky) system, it was hard to argue against the project. And some of those IT guys were pretty persuasive.

    Consider that there were people who left very successful Investment Banking companies to set up IT companies. Famously Michael Bloomberg and Jeff Bezos. There were many less famous.

    You can't take what's happening today out of context from the last 15 to 20 years. IT guys had made a huge difference in running businesses and were some of the most powerful people in companies. Projects were how they made their living, is it any wonder that there were so many of them?

    And then there were all the supporting organizations that grew up around them. Think PMI, ITIL, PRINCE2, JUGS, Ziff-Davis, XXX for Dummies etc. They added value, but it didn't directly relate to the business at all. The standing joke became: "If someone tells you their CMMi Level 5, it means they'll be 5 times more costly."

    PMI spent $3M trying to show that project management added value. Of course they reached the conclusion that it did, they just couldn't support it with examples.

    No one introducing projects does ROI calculations. I quite my last corporate job for many reasons, but one of them was that they had embarked on a massive BPR project that initially was supposed to "re-earn" it's future investments to pay for itself. That was the initial case a colleague and I put forward that was approved. Admittedly we made a lot of mistakes, but it evolved to a $5M a year, 5 year project; then it mutated to a project that was supposedly going to cost $40M (but the software consultants privately admitted it would be $60M+) and the justification was that the company had to have the project.

    I couldn't believe it. There was no way that project could ever pay for itself; the company didn't have enough revenues. But the project had spun so out of control, people could no longer say what was happening in meetings.

    Anyways, I quite and started my little business. It was designed to align incentives and improve communications about information that was too politically touchy to discuss. It has evolved into a business where our revenue is based on our customers ROI. The risk and the upside are both shared. Our interests are aligned with business owners. That's who we work with.

    It's not an easy approach. Affecting accounting numbers takes time and the float is huge, but we'll see. Its working and I'm enjoying it. Of course, I have to live long enough to see if it becomes profitable.

    At the project manager level, it's very tough to change what's happening in an organization. Furthermore, the PM position really doesn't fit into the corporate structure very well. It's evolved that it falls under the CIO, but I believe that's a horrible place for it to reside.

    Let me explain. These are all gross generalizations, but it's my belief that PM usually falls under IT, but IT's star is falling and CIOs are being shifted under CFOs. Cost containment and budget decreases are the new general guiding principle. In an environment where budgets in many businesses are going to be cut 20 to 60% from 2006/2007 levels, the changes are going to be massive.

    If IT is under the CFO, PM doesn't fit into an accounting view of the world.

    In an ideal world, PM would fall under operations. My logic is that projects should improve operations. COOs and people running operations care about that. IT has no history, structures or disciplines for cost control. Maybe they can learn them, but I wouldn't ask someone whose trying to lose 100 lbs to run a doughnut store.

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