Project Failure – Edinburgh Tram Project

Edinburgh Castle

The Edinburgh Tram Project exceeded budget by 52% and is the subject of an enquiry.  The issues with the project appeared to occur for two major reasons.

Optimism Bias

The project was born out of the political desire for Edinburgh to have a light rail system. However, reviewing past project it is quite normal for these sort of projects to come in over budget and extremely rare for them to come in under budget. Furthermore, increases over budget can be very large, often up to 80% over budget, whereas any cost savings are likely to be 10% or less. Seen in this light, the cost overruns on the Edinburgh Tram Project were not that unusual.

One way to avoid optimism bias is to first perform and estimate and then look at cost overruns on similar projects. For example, if you estimate a cost at 10 million, but past similar projects have seen cost overruns of 50%, then a better estimate for your project might be 15 million. This is becoming more normal practise in well-managed construction projects, but still, there’s a temptation to skew the set of other projects that you look at for comparison. This can reduce the uplift to costs, but may create a less accurate picture of how things will turn out.

Poor Governance

It appears that the management of project communications may have been poor. Stakeholders did not receive timely and accurate information and different agencies had different levels of commitment to the project. These frictions hurt the project. Once it was off course, then that information was not broadly shared, which then made problems hard to correct. In addition, different stakeholders working at different purposes did not help the project. It appears Edinburgh politicians were strongly in favour of the project, whereas national politicians were not.

Conclusion

In the grand scheme of things, the cost overruns of the Edinburgh Tram Project should not be viewed as a disaster, the outcome is similar to many other trophy projects run by governments and some cost overruns are likely with these projects based on history. However, problems in communication and lack of stakeholder alignment were an obvious issue that should have been relatively easy to correct.

Modelling Change Management

For such a complex process, change management can be modeled mathematically using basic and remarkably simple assumptions, or rules.  The Nobel prize winner, Thomas Schelling as done so.

The sequence below shows segregation occurring where each red and blue dot is a “person” and they each want to live next to at least 2 neighboring dots of the same color out of their 4 total neighbors, the result of the simple and apparently moderate rule is total segregation after a period of time. What’s fascinating is that an apparently minor rule or constraint leads to this level of change.

Number of neighbors that need to be of the same color:

• 1 neighbor – no segregation
• 2 neighbors – complete segregation
• 3 neighbors – complete segregation
• 4 neighbor – complete segregation

Fine. So what does this mean for change management? The lesson is that very small changes in people’s behaviors and preferences can drive enormous differences in outcome.

You can see the animated sequence here (note: if it doesn’t work you need to have Quicktime installed.)

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See the full article from Atlantic Magazine here.

Book Review – The Dead Hand

The Dead Hand is a wonderful historical narrative of the weapons of the Cold War and the negotiations to limit them. The term Dead Hand comes from the Soviet system to potentially automatically launch nuclear weapons in the event of attack. The book covers biological, nuclear and chemical weapons and is most interesting aspect is peeling back the layers of the Cold War negotiations, especially between Reagan and Gorbachev, demonstrating each sides’ perception of the other and what the reality was. The result is very interesting, showing how hard it is to read a negotiating partner accurately and how your own side’s actions and perspectives inevitably color your judgment. Recommended for anyone with an interest in recent history, though learning more about these weapons will likely result in you feeling worse rather than better about them.

The Best Research On Project Management

Some really insightful data backed research on project management comes from Bent Flyvbjerg. He’s originally from Denmark, but now at Oxford University’s business school. You can see a good summary of his research here, and he has a name that’s pretty easy to find on Google.

His recent article in Harvard Business review explains why projects can be subject to the black swan problem.

And a number of his publications discuss the problems of inaccurate cost estimates, especially in public projects, but here is a good summary of reference class forecasting.

Project management is often a fairly practical subject, and so it’s interesting to see the level of deep, theoretical rigor that Flyvbjerg brings to the topic.

Book Review – The Lords of Strategy

Walter Kiechel III in the Lords of Strategy writes about two topics one narrow and uninteresting the second engaging. The first topic is a history of management consulting and the people involved in it. It’s not terribly interesting. Firstly the people aren’t explored in much depth beyond their educational backgrounds and mentors and the history of McKinsey, Bain and BCG is a rather esoteric subject anyway, unless perhaps you happen to work for one of those firms. The goal is to paint consultants as pioneering thought leaders in crafting the discipline of strategy, but it feels forced and the case is hard to defend anyway, as the formative years of BCG seem the only evidence of a consultancy truly advancing academic thought around business, and in fact, later in the book those ideas are shown to be fairly simplistic, bankrupting many of the clients who used them.

Fortunately the second topic the salvages the book. It is a history of the evolution of thinking on corporate strategy and this is interesting, obejctive and well charted. Starting with the experience curve and the portfolio strategy and moving on through Porter’s models, core competencies and change management. Also, fortunately, though the focus on management consultants is overdone, the ideas they propose are analyzed objectively. Even here the premise of the book is little off – the claim is corporate strategy originated with the rise of management consultants, yet the ideas of Adam Smith (late 1700s) , Frederick Winslow Taylor (late 1800s), Peter Drucker (1940s) Alfred Chandler (1960s) are all identified as key tenets of the thinking so the claim is hard to defend even with the book’s own reasoning.

Net if you’re looking for a good summary of the history of thinking on corporate strategy, this is not a bad place to look, especially since, as the book itself argues, academic synthesis on the topic is uncommon. You do have to put up with the repeated and painful insertion of the history of McKinsey, Bain and BCG throughout which takes up space rather than contributing, but seeing the progression of thinking on corporate strategy will likely further your understanding of the overall topic.

Being Generous With The Credit

“It is amazing what you can accomplish if you do not care who gets the credit.” Harry S. Truman

What do you care more about: getting results or retaining ownership?

The Myth Of Impossibility

Innovations throughout history are sometimes viewed as literally impossible by the people who didn’t create them and have most to lose from their success:

In 1830 when the French King sent an engineering expert to observe the fast British steam train the Rocket, he declared it impossible, not understanding the developments in boiler design. (source Tony Judt’s book Memory Chalet)

According to Electronista the makers of the Blackberry thought “The iPhone “couldn’t do what [Apple was] demonstrating without an insanely power hungry processor, it must have terrible battery life,” … “Imagine their surprise [at RIM] when they disassembled an iPhone for the first time and found that the phone was battery with a tiny logic board strapped to it.”

Just as we have trouble assessing risk, we also have problems assessing what is within the realm of possibility, especially when it conflicts with our own interests.

The Importance of Timezones

As much as the world is shrinking, timezones still matter. The chart below shows what proportion of the world lives in which time zone (with 0 as GMT/London). It’s a view of the world I wasn’t able to find, so I created it.

Analysis Of Government IT Project Failure

Old, but still relevant analysis of government IT project failure here on HBR. The six themes are familiar:

• Poor governance
• Lump sum funding
• Waterfall development
• Scope creep
• Automating too early
• Doing data cleanup too late.

It’s not a bad list, although I’m surprised to see waterfall development on there. There’s nothing inherently wrong with waterfall, and I suspect the issues relate more to scope creep rather than the methodology choice.

Better Communication As a Project Manager

Listen More – As a project manager, you don’t “know” the status of the project, you merely hear it from all those working it, record and playback a snapshot. If you’re not listening you won’t understand if anything important has changed. Any opportunity to communicate, is an opportunity to listen.

Talk Less – If your status report is over a page, it’s probably too long. Your goal is to know the detail of the project, but only so that you can simply it to its key components for your audience.

Know Your Audience – Everyone’s needs are unique. If you find you’re giving the same presentation to more than one group of people, then you’re probably not tailoring it enough.