IT Project Failure: How Did We End Up Here?

McKinsey’s report last week, drawn from an analysis of 5,400 IT projects, deserves reflection. It makes sober reading:

“Our research, conducted in collaboration with the University of Oxford, suggests that half of all large IT projects massively blow their budgets. On average, large IT projects run 45 percent over budget and 7 percent over time, while delivering 56 percent less value than predicted. Software projects run the highest risk of cost and schedule overruns.”

Conspiracy theorists and crime fiction fans will likely read it and claim skullduggery amongst the SI consulting firms invariably associated with large IT projects.  Resisting the inner detective, let’s just stay analytical and ask: how did we end up here?

At the heart of McKinsey’s prescription for delivering IT success is “helping IT and the business to join forces” – the need for effective collaboration.

Successful IT project teams, says McKinsey, continually engage with stakeholders – at all levels, internally and externally – within a rigorous governance framework for managing change.

IT program teams use email, Sharepoint, shared desktops, conference calls and social media.  They typically have budgets to allow substantial groups to convene for months of workshops in airport hotels. And the people involved, by and large, want to do a good job and to be associated with a successful project.

So, with all these resources: If effective collaboration is the key to success, and the costs of failure are so enormous, why do large IT projects so often fail?

In my experience, the two biggest barriers to effective collaboration between IT and the business are that:

#1 They don’t speak the same language. Theoretically, their lingua franca is ‘business process’.  But, most often, the IT program team adopts a technical language and systems mindset. So the business is forced to adopt swimlanes and other IT constructs. Without the business properly engaged in discussions of the current operational reality and the target operating model, the project is immediately vulnerable to what McKinsey identifies as a common pitfall: ‘teams focus disproportionately on technology issues and targets’.

#2 Holistic perspectives are lost or ignored. Most often, the IT systems mindset comes to dominate: if it’s not automated, it’s secondary. And so the business stakeholders come to focus only on the process fragments linked to system transactions, which limits creative thinking about transformation possibilities and hampers change management.  Far too few of those involved, if any, can see the whole. What starts out as a business transformation project enabled by IT slowly degrades to become an IT project with business consequences.

Which is how, most often, business stakeholders find themselves forced to approve enormous documents (400 pages is the biggest I’ve seen, others claim to have seen 600+ page documents), with each process fragment annotated with technical flowchart diagrams and multi-column tables of requirements extending over many pages. It might as well be in Egyptian hieroglyphs. Even worse, that document becomes simply a project milestone, the end of a requirements capture stage. It totally undermines the idea of the rich ongoing collaboration between IT and the business that defines successful projects.

That document is the smoking gun at the heart of IT project failure.

Related Posts

26 Oct 2012    Avoiding IT Failure (and Bankruptcy)

28 Aug 2012    The ROI on Process Visualization

© Text Michael Gammage 2012

Avoiding IT Failure (And Bankruptcy)

News from a colleague yesterday of another SAP project using Nimbus: unforeseen delays, a shredded budget and a bewildered client. Another huge success in fact.

This European manufacturer was told by a leading analyst firm to expect to take at least 8-12 months for its Finance transformation and SAP consolidation project across 8 countries and 7 lines of business.

Opting to use Nimbus, the program team worked with stakeholders from across the European business units to agree common business processes – in blueprints that included KPI’s, policies, local variants and all the detailed requirements necessary to implement a single SAP instance.

Their results were completed, presented and approved by all the country CFOs and other CxO stakeholders in just 4 months.

Which leaves the program team with an unforeseen delay while the rest of the business scrambles to catch up (it was widely assumed that the program team would take at least 12 months to complete the blueprinting phase).

And the client’s budget is shredded.  The program timescale has been dramatically shortened, significantly reducing the consulting days required (as well as the equally expensive number of days required from internal resources).

This client’s savings are not at the expense of quality. The reverse in fact. As it happened, the client’s chosen SI implementation partner had no Nimbus expertise. So the client decided that they would not be required for the blueprinting phase. It was a gamble that paid off handsomely.  When the SI was recently re-introduced back into the project, at the completion of the blueprinting, its verdict was that this is “the best SAP blueprint we have ever seen”.

It’s another example of the power of Nimbus as a platform for effective collaboration across complex and dynamic environments (yawn…). But it’s extraordinarily relevant in a week when McKinsey has published results from a survey of 5,400 IT projects (with a combined cost over-run of $66bn).

As McKinsey notes, the keys to IT project success are not rocket science: good stakeholder management, effective teamwork and avoiding ‘the common pitfall of focussing disproportionately on technology issues’.

So a platform that provides visualization of end-to-end processes – intuitive, in their complete business context, and in the language of the business – and wrapped within a robust governance framework won’t just cut costs.  It’s the best possible insurance against a ‘black swan’ – the 17 percent of IT projects which McKinsey reckon go so bad that they can threaten the very existence of the company.

Related Posts

28 Aug 2012    The ROI On Process Visualization

24 Aug 2011    The Root Cause of IT Failures

© Text Michael Gammage 2012

Enabling The Global-Local Enterprise

McKinsey - Going For GoldIn Winning the $30 Trillion Decathlon, a McKinsey team sets out why emerging markets hold the key to the future for most large multinational firms – and proposes ten essential disciplines for success.

The transformation of the global economy in our times compares, says McKinsey, with the impact of the Industrial Revolution in Britain from the mid 18th century:

“By many measures, the significance of [the Industrial Revolution] pales in comparison with the defining megatrend of our age: the advent of a new consuming class in emerging countries long relegated to the periphery of the global economy… The two leading emerging economies [China and India] are experiencing roughly ten times the economic acceleration of the Industrial Revolution, on 100 times the scale—resulting in an economic force that is over 1,000 times as big.”

Underlying the ten essential disciplines for organizations that want to win in this new world, one theme stands out: the capability to be both global and local.

Being Local drives innovation and responsiveness.  McKinsey quotes, for instance, the case of South Korea’s LG Electronics, which set up in India and realised that many Indians used their TVs to listen to music. So LG swapped out flat-panel displays for less costly conventional cathode tubes to introduce new models with better speakers at the right price point. LG went on to become market leaders.

But being Global can deliver enormous benefits as well, in standardization and procurement, for example.

There’s no right global-local mix.  It will vary by region, by product, by route to market, by market maturity – by a hundred and one factors.

So the real challenge is to blend Global and Local, and to be able to continually re-optimize the blend at every level.

Yet around 40% of global companies don’t even have the most basic means to effectively manage these global-local trade-offs, according to McKinsey research published last year.

In a world forging a second Industrial Revolution, and so creating a $30tn opportunity, it’s difficult to see how any multinational can optimise its global-local mix without an enterprise platform for process management. It’s essential infrastructure, the collaborative framework that best enables global-local optimization.

Related Posts

20 Jun 2012  Process: The Emerging Global Business Language

10 Jul 2011    Managing The Downside of Global Processes

Process – The Emerging Global Business Language

iStock_000014424853SmallAnyone working on business transformation in a global organization will recognize McKinsey’s assessment in research published this week:

“The structures, processes, and communications approaches of many far-flung businesses have been stretched to breaking point.”

In Organizing for an emerging world, the McKinsey authors set out survey results – from 300 executives in 17 major global companies – together with their ideas for coping with ‘the cumulative degrees of complexity’ that globalization entails.

Process, in one guise or another, is a recurrent theme. It’s further evidence that a business process management platform is coming to be seen as the essential infrastructure to enable effective and enterprise-wide collaboration on innovation and continuous improvement.

The McKinsey authors dismiss, quite rightly, the view that it’s as simple as global standardization. Benchmarks, standards and industry models are invaluable guides but, at the end of the day, it’s often a complex calculus. Every organization is on its own journey: “No company’s restructuring should be viewed as a blueprint for that of another.”

McKinsey’s respondents themselves identified process as one of the 3 weakest aspects of their organization (from a list of 12, so it’s serious).

McKinsey’s conclusions are sound, and, again, process is the leitmotif throughout:

Don’t standardise more than is necessary. Which makes it vital to have a platform to manage effectively the ongoing tension between global processes and local variants.

Fit technology to the process, not vice versa. Break out of thinking that automation and systems are, in themselves, the answer.  Which makes it vital to have a platform with an holistic and end-to-end perspective, capable of driving business-led global IT implementations.

Listen to all the voices involved. Worry about adoption and communication. Which makes it vital to adopt a process management platform that engages everyone – not just process owners and IT. It must connect with process stakeholders and, as well, support those who execute process and encourage their feedback.

Implement from the top. Make clear accountability and strategic direction, and don’t be afraid eventually to mandate a new process.  Which makes it vital to adopt a process management platform with a top-down implementation methodology, and a robust governance framework, capable of blending top-down command-and-control methods with bottom-up continuous improvement.

So perhaps it’s like this. Today, global businesses typically adopt a company-wide business language to ensure effective communication.

What we’re moving towards is a future where global businesses typically adopt as well a more advanced language to ensure effective collaboration. And the language that enables collaborative innovation, within a governance framework that makes clear roles and accountability, is end-to-end business process.

Nowhere is this more true, of course, than in Global Business Services, where the capability to provide end-to-end process perspectives within a complete governance framework, integrated with documents, real-time KPIs, risks and controls, is rapidly emerging as a critical success factor.

Related Posts

29 Feb 2012    Why Process Improvement Projects Fail

10 Jul 2011      Managing The Downside of Global Processes

© Text Michael Gammage 2013

Why Process Excellence Will Underpin Next Generation Pharma

Organizations across the planet are grappling with how to fundamentally re-invent themselves, and at an ever-increasing pace of change. But few industries face the challenges of Pharma, which may traditionally have been seen as conservative and slow-moving, but is set to undergo a rapid revolution driven by a stark new competitive landscape.

McKinsey Quarterly Dec 2011McKinsey, not given to hyperbole, set out the scale of transformation last month in A Wake-Up Call For Big Pharma:

“This dramatic situation requires Big Pharma executives to envision responses that go well beyond simply tinkering with the cost base or falling back on mergers and acquisitions… A bolder, more radical approach to Big Pharma’s operating model must become a realistic planning scenario.”

It’s an exciting time to be working in process management and in Life Sciences. Because whichever you look at the challenges facing Pharma, the answers most often link directly to process excellence.

It’s not just that a process management platform can enable and orchestrate all the actors involved in transformational change. It’s fundamental to success in other ways too:

Collaboration. It’s the ideal governance framework for the collaboration with third parties that will become increasingly common.

Outsourcing. It’s the ideal service management framework for a world where blends of shared services, outsourcing and multisourcing will be far more common.

Performance Improvement. It’s the ideal framework for Lean and Six Sigma initiatives, for sustainable change, and for continuous improvement.

Managing The Downside Of Global Processes

Why is is that even leading multinationals seem less healthy than successful companies that stick closer to home?

In an article just published Understanding Your Globalization Penalty, a McKinsey team set out to provide some answers.

The findings from McKinsey’s organizational health survey data (from 600k people in 500 corporations) was ‘troubling’. The weaknesses shown by even multinational leaders ‘touch on all three major areas of organizational health—alignment, execution, and renewal’. The McKinsey team was clearly surprised:

“The global leaders we studied represented the cream of the crop—they not only enjoyed strong financial performance but also had significant global scale and scope, which is why we included them in the sample. If organizations like these can’t stay healthy as they grow globally, can any company?”

To make sense of the data, they went on to interview executives at 50 global corporations. The answers highlighted the familiar challenge: how to balance the benefits of local ownership and focus against the potential benefits of global scale and coordination.

The McKinsey team noted that many multinationals just don’t have the collaborative framework in place to make the right choices, and be able to continuously re-optimize as circumstances change:

“Complicating matters further, our interviews suggested that, for most companies, about 30 to 40 percent of existing internal networks and linkages are ineffective for managing global–local trade-offs and instead just add costs and complexity.”

This is very much at the centre of our radar at Nimbus. Our clients are looking for a collaborative framework that enables them to manage the trade-off between standard global processes and necessary local variants.

It’s easy to love global processes. To some extent, they can be imposed – in supplier payment terms, for instance. But, most often, some local variants will be essential for legal reasons, or just plain efficient in overall business terms. And it’s always fluid: what is justifiable as a local variant today may not be next year; and sound new reasons may emerge for new variants.

So every enterprise needs a collaborative framework that, on the one hand, enables a relentless convergence towards global processes, and higher levels of automation, but, on the other hand, recognises that standardization is ultimately unattainable, and is able to manage intelligently the local variants and the continual re-optimization of the balance between global and local.

It’s a capability that looks set to become ever more crucial. The McKinsey team note that many firms ‘are wrestling with the corporate center’s role in their increasingly globalized institutions’. They suggest that ‘it may be time for some companies to reimagine what the corporate center does… And since even leading multinationals appear to suffer this globalization penalty, the importance of addressing it will only grow larger in the years ahead’.

Sustainable Improvement: How To Make Cost Cuts Stick

McKinsey Quarterly - May 2010Further compelling evidence this week from McKinsey that sustainable business improvement is what really counts.

According to McKinsey: many cost-reduction programs are “illusory, short lived, and at times damaging to long-term value creation”.  Only 10% of cost reduction programs show sustained results three years later. Yes, you read that right: 90% of cost reduction programs fail.

Amongst McKinsey’s advice on best practice in cost accounting and data integrity, three things stand out for anyone looking to build a framework for sustainable performance improvement.

(1) ‘Seeing’ the Process

McKinsey reports a fundamental difference between Manufacturing costs and Sales, General and Administrative (SG&A) costs.  Manufacturing costs have fallen consistently over the past decade, whereas SG&A costs are unchanged. McKinsey suggests one reason why SG&A costs have proven so difficult to reduce: that ‘managers lack deep enough insight into their own operations’.

This diagnosis fits exactly with a case study from New Balance, which initially focussed its Lean program on manufacturing, with dramatic results in service, lead times and reduced costs.  But, away from the shop floor and looking at SG&A costs, it was far more difficult to achieve the same results with the same techniques.  It’s easy to see what’s happening on the production line and in the warehouse.  It’s far more difficult to figure what’s going on in the office. New Balance described Nimbus as allowing them ‘to see the process’ – after which their Lean program could deliver SG&A cost reductions.

(2) Local Engagement

McKinsey notes that: “Most cost innovation happens at a very small and practical level.”  Which is why any process management application must engage end users and the process stakeholders. The people who are closest to the process are best placed to see the cost reduction opportunities, and to assess the trade-offs.  Cost management must be an ongoing exercise, says McKinsey, part of the culture, not a one-off unsustainable initiative.

Some discomfort for the Six Sigma community because, for the same reason, McKinsey’s recommendation is that: “The process planners who run programs such as Six Sigma improvement efforts are generally the wrong choice to manage cost-cutting programs.”

(3) Understanding The Whole

The report stresses that cost reduction has to be seen in the round: Initiatives in one area of the business can often have unintended negative consequences elsewhere.  It quotes a global manufacturer where cost-cutting in manufacturing led to the loss of clients and market share because the the cost-cutting leaders were working in isolation from the sales and marketing teams.  They simply didn’t understand how customers used the products.

All in all, more solid evidence that sustainable performance improvement across the enterprise requires a complete, integrated and end-to-end view of the business processes, and in a language and format that enables enagement at every level.

© Text Michael Gammage 2013