Pop quiz: An agricultural supply company develops a new product that is much more effective at inseminating cows than any other product on the market. They can develop the product in a year with a budget of $2 million. Market research shows they can earn $10 million of revenue on this product.
Which of the project outcomes do you think are a success?
- On-time, on-budget, on-spec, shelved with zero sales
- On-time, on-budget, on-spec, expected return
- On-time, on-budget, on-spec, only half the return
- Double the budget and delivered 6 months late, expected return
- Project ends without tracking benefits
Conventional Views of Project Management
Saying that outcome #2 is the only success is the viewpoint that a project with any flaws whatsoever is a failure. An organization with this philosophy will be resistant to change proposals, and likely forgo a formal cancellation process for a strategy of hope.
Saying that outcomes #1, 2, and 3 are all successes is the conventional view of project and lifecycle management. Those scenarios all succeed on the traditional vectors of on-time, on-budget, on-spec.
In fact, the real-life cow insemination project had the same fate as outcome #1. They developed a quality product in a timely and cost-effective manner, but got zero returns.
This is an abject failure. How can a project be a success if it doesn’t deliver any benefits? Any time, money and effort put into this project is a sunk investment.
This serves to illustrate how critical benefits realization is to project and portfolio management. The investments that go into delivering a project should be seen in relation to the benefits they ultimately deliver.
Accounting for Benefits
Saying that #2 and #4 are a success is the exact opposite view: that realizing the benefits are the only thing that matter.
If you selected Answer D, pat yourself on the back. This is the only choice that weighs the benefits against the cost.
In scenario #3, still gets a $5mm return (half of the expected $10mm) on a project that only cost them $2mm for a $3mm profit. While they did not get the full $8mm in expected benefits, the project was a net-positive for the organization.
In scenario #4, it took $4mm to get the job done (twice the budgeted $2mm) and the product hit the market 6 months behind schedule. But that apparently didn’t hurt their market share, and they still earned every penny the expected. In a scenario that may seem like an abject failure from a traditional project and lifecycle management perspective, the company earned double the profit ($6mm) than they did in scenario #3.
Portfolio Governance in Action
Now, this pure ROI-based approach isn’t the full picture. Just because an organization gets $3mm net return on a project doesn’t mean it was the best use of their time and budget. The point is that a flawed or suboptimal project is not the same as a project failure. Conversely, scenario #1 is among the worst-case scenarios for a project and is the sort of failure that can sink an organization if this was a mission-critical initiative.
With the proper portfolio governance apparatus in place, the organization can recognize when outcome #1 is likely. At that point, they can start a project cancellation process even when everything is going perfectly according to the project and product managers.
Ideally, this would happen right from the portfolio selection process in the beginning. With a rigorous business case process, the PMO may recognize that the $10mm figure is unrealistic. This could be the assumptions were faulty, they did not account for a similar product being launched by a competitor in the coming months, or that the number was invented by the marketing department, which should not be your source for these critical strategic KPI.
Even once the project is selected and running smoothly, the portfolio governance process continues to monitor any changes in the marketplace or business environment that may make the business case obsolete. For an easy example: the COVID-19 pandemic should have immediately triggered a great number of business case reconsiderations and project cancellations or restructures.
ASSESSING THE UNASSESSED
So now we turn our attention to outcome #5. Obviously, we can’t assess what is completely unknown. We had to include it because, unfortunately, it’s the most common scenario. A project is completed, and the project management and lifecycle management teams are held accountable to the budget, schedule, and scope, but the benefits aren’t tracked and the original business case didn’t outline specific benefits to begin with.
In this organization, the wrong people are held accountable to incomplete metrics.
Project management operates on this question and answer dynamic. Organizations maintain a track record of project success by asking the right questions and holding the right people accountable to the answers. Portfolio managers should constantly be asking what the benefits are, how likely they are to achieve them, and whether they’re worth the investment.
Now that you can identify what project success really looks like, the question is how to attain it across your organization. WiserWulff’s mission is to eliminate project failure, so reach out to us today to set up an appointment to discuss a strategy for your individual business needs.
