Unlocking the value of your program investments

In 1995 a well-known pharmaceutical wholesale products company decided to implement a new ERP system to smoothen its operations. What transpired over the next 18 months is a tragic case in study.

The company had to file for bankruptcy and it was not because of the external factors that caused the downfall but rather, a series of internal collapses that led to its failure. An over ambitious project, an untested technology, a shortage of skilled staff, and an undecided management led to an avoidable disaster and the need for greater awareness of quality project supervision.

Does this sound familiar to you? In spite of advancements in project execution methods and automation, projects continue to fail and perform below par. Especially, in today’s fast-paced and dynamic business environment, efficient project management continues to be the Achilles heel in executing complex projects. In finding the elusive formula for successful project implementation EY estimates approximately USD682 billion – wasted annually on underperforming projects across the globe. The overhead of unmanaged project costs, frustration of team burnouts and unrealized benefits of a well-organized project can be the deciding factors in a firm’s market competitiveness in our day.

So, what is a successful project?

Project success has always been defined vaguely and this has plagued the approach companies have taken towards project management. A successful project is one which can position a companies’ business to thrive in the future alongside building the confidence of the organization’s customers. In defining project success holistically, it is important examine the impact of project success beyond just the short-term focus of costs, schedules and immediate benefits.

And, how do you get there?

Gestalt psychology says that the whole is greater than the sum of its parts. In line with that approach, a step by step methodology is a must in ensuring to meet the desired results. The key common factor to low project performance or failure is the underestimation of the complexity, its relationship to risk and how to properly adapt both the approach and execution.

Whether scanning across an entire portfolio or doing deep dives of the most important projects, the complexity and risk of any project can be predicted and addressed today, enabling the proper decisions that eliminate surprises in performance tomorrow. The journey to unlocking your program investment and this new way of thinking begins with asking a set of five basic, but important questions.  It will be interesting to see the 1995 story in light of these basic questions.

  1. Are you are doing the right projects? – Quickly capturing project ideas with greatest total economic value and linking projects to business strategy will help determine which projects to invest and which to retire.

[1995 story] – The ERP was originally designed for manufacturing companies and not for wholesalers. It lacked what was required to meet their end goals. The technology was unable to handle the large number of orders.  A careful assessment in the beginning would have clearly identified that it was not a ‘right-fit’ solution.

  1. Are you ready to run a major project? – Determining the ability of the organization to execute against a measured project’s complexity and inherent risk before starting with increase the ability to influence outcomes.

[1995 story] – Management did not consider the complexity and desired skills. The company did not have the necessary skills in-house; many of the consultants were inexperienced and lacked the necessary skillsets. Early identification of complexity and inherent risks could not allow the management to establish right competencies necessary for implementation.

  1. Is your project set up for success? – Proactively making informed decisions and understanding the forward looking risks prior to embarking on the journey allow you to  take actions timely – such that the risks do not materialize.

[1995 story] – Management failed to understand the complexity and risks in the process and agreed to have 90 days early implementation. Management also did not appropriately map requirements with the ability of the ERP to meet these requirements. As a result, system could only process 10,000 orders daily as against the requirement of 500,000 orders per day. Initially, the management were supportive and committed to the project. However, once the implementation started, management was reluctant to acknowledge the system problems. Management failed to recognize the timelines and resources required in the implementation process.  A clear understanding of potential forward looking risks and favourable factors could have allowed the management to intervene and take necessary corrective measures.

  1. How well are your current projects doing? – Improving insight on true project performance and hidden risks enables quick decision-making for the greatest positive project impact.

[1995 story] – Periodic reporting of status and project risks was not adequate. Accurate pictures of the problems at the execution were not reported to the board for timely intervention and there was no clear picture of how the project was going on at the company. There was lack of contingency plan was developed in case of system failures and to deal with the changes in business operations.  An independent and accurate status reporting could have allow management to unearth hidden problems and take immediate remedial measures.

  1. Are your people aligned towards success? – Improving alignment of executives and project teams allows for timely and effective operational trade-off decisions consistent with project objectives.

The project team members and information system staff were unfamiliar with the ERP hardware, systems software and application software. The project scope was enlarged with simultaneous implementation of a USD 18 million computerized warehouse project. Management and project team expectations were not aligned, leading to additional spend, losses and finally bankruptcy.

Answers to these five basic questions are not easy, however a systematic approach of applying risk yardstick to any project will allow management to investment in projects that matter and increase the probability of success.

This is first in the series of articles on program risk management. In the subsequent articles we will look at each of these questions in greater detail.

Sneha Gandhi, Senior Manager, Advisory Services has also contributed to this article.

For more on Program Risk Management, click here. You can also follow us @EY_India

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