PCubed Coverage of Upcoming Book (Idea Submission)

Thanks to PCubed for their in depth article on my upcoming book, focusing particularly on the idea submission stage of the portfolio process.

You can order the book here on Amazon.

If you are interested in useful books on project management and related topics, I have compiled a list on Amazon here.

Why Are Only 32% of Projects Successful?

One of the classic reports on project failure is the CHAOS Report from the Standish Group. You can read the press release from their last report (April 2009) here.

Summary:

• 24% of projects fail completely
• 44% of project fail partially (i.e. fail to meet their defined criteria on at least one of time, budget and scope)
• 32% succeed (i.e. deliver on time, on budget and on scope)

It is amazing that only 1 in 3 projects is truly successful. If project estimates were unbiased i.e. just as likely to be overly cautious as overly optimistic, then for every project that fails to deliver, one should overdeliver, and we’d see 1/3 outperform, 1/3 meet expectations and 1/3 underperform (fail). That clearly isn’t happening, as the majority (more than 2/3) of projects skew towards failure, so about twice the number of projects are failing than you would expect.

This does lead to a pretty compelling question. Why can’t we learn from this? Why can’t we get slightly better at every estimation after every failure and thereby slowly converge on effective estimates for projects? Of couse, this assumes that incorrect estimates are the only reason for failure, and, of course, there are many others such as project team coordination and stakeholder management that can easily derail a project with decent estimates.

But aren’t unreliable estimates a good place to start, since they are relatively easy to correct? If you were too low last time, increase your estimate for this time, and vice versa. Project are somewhat unique, but elements of the work in most projects has been done before and can be leveraged for effective estimates.

Further research in this area, published in 2002, and summarized here in the Seattle PI, shows that public works project costs typically exceed estimates by 28%, this is argued to be, in part, due to low-balling estimates to secure project funding. If true, this is very worrying, it’s not that we can’t estimate correctly, it’s that there is no incentive to do so. In an application of the Winner’s Curse, any project that has correct estimates will lose out to an alternative project that has purposefully low-balled its estimates and so appears cheaper, more attractive and hence will receive funding at the expense of the correctly estimated project.

There is an attempted rebuttal to these arguments around estimation  here from US Transit, though the rebuttal focuses on the problems and costs of the estimation process, as doesn’t sufficiently address the assersion by researchers such as Bent Flyvbjerg that cost estimates are far more likely to be too low than too high.

There is an interesting analysis of different types of project failure here from Michiko Dilby, drawing on the UK National Audit Office’s Perspective on Why IT Project Fail (PDF). There is also a more software development centric analysis here. There is an interesting analysis of methods to prevent IT project failure here referencing a lecture by Maurice Perks. Whilst project failure continues, there is no shortage of analysis and suggestions around the topic.

It is also interesting to note that IT and large scale engineering projects tend to receive the greatest analysis when it comes to project failure. hese are types of projects where conventional project management techniques are perhaps most applicable, however projects in other industries receive less attention.

Learn more about avoiding project failure, by reading my book on Strategic Project Portfolio Management.

Broadening the Concept of Waste

What do you think of waste within your organization? Things you don’t use? How about ideas you don’t use?

There are many insightful aspects of the Toyota Production System. One I particularly like is the idea that not using a good idea is a form of waste.

Think about that for a moment. For the majority of organizations, one of their most expensive assets are their employees. Employees create value by doing their day to day work, but as a by-product of that, they come up with ideas for change and improvement within the organization. Those ideas have the potential to drive continuous improvement within that organization.  However, often those ideas are not captured or not acted upon. From the Toyota perspective, this is a source of waste.

Are you doing enough to harness the value of the ideas that your employees generate? Toyota apparently implement one million employee ideas per year according to this source.

There is more about Toyota’s lean production system here. And the concept of Kanban is explained here. And there is a nice post on the five whys used at Toyota here.

This post is similar to ideas expressed in the first chapter of my upcoming book.

AIG And Outsourcing Portfolio Strategy

The government bailout recipient AIG recently dismissed McKinsey, management consultants who were undertaking work called ‘Project Destiny’ to layout a roadmap for the business. Some details are here. The rationale was apparently to take the work in house in order to reduce costs.

It raises some interesting questions about to what extent strategy can be outsourced, and whether the cost of this outsouring outweigh the benefits. In this case, internal politics may also be at play as the new CEO looks to impose his own agenda.

An interesting principle behind this is the cost of information. For example, if I stood to win $5 on a coin flip, and had to call heads or tails. Then the expected value of that wager to me is $2.50 ([$5 x 50%] + [$0 x 50%]). But if I had a way of knowing exactly what the outcome of the coin flip would be with certainty I would be willing to pay up to an incremental $2.49 for that information (if accurate) because I would be certain to get $5, rather than the expected value of $2.50 if I had no knowledge on whether it would be heads or tails.

This is to some extent the situation AIG is in, they have tremendous uncertainty around their business, it is not clear how the value of their assets and liabilities might change over time.  Their market cap has been fluctating in approximately $1-5B range so far this year, suggesting the market isn’t sure either. How much should AIG pay to improve their knowledge? That question is itself a large consulting project.

They have clearly decided that the incremental gain from the information McKinsey could provide is too great. In reality, cashflow issues might have impeded, what could have been an otherwise financially desirable decision.

Topics such as portfolio outsourcing as discussed in more detail in my book on Strategic Project Portfolio Management.

The Importance of Tracking

Before you want to manage something, you must first understand it. That sounds obvious, but it’s quite a challenge. This applies to projects, portfolios and even yourself.

To take the personal example, most people would like to be more effective at work, or in their personal lives. It’s hard to do that without knowing what you’re currently spending time on. This is where tracking comes in, where you think you are spending your time, may not be where you actually are spending your time. A neat application for this purpose is Rescue Time, which logs activity on your computer to produce activity reports like the one below:

Example of RescueTime reporting

By using RescueTime, or the following the broader principles it advocates, you can become better at managing your time, and hence improve your productivity. Perhaps the most compelling angle of RescueTime is data collection is automated, so you can get granular detail on how you spend your time without investing time to input a mass of data, or worrying about data accuracy. Both major problems with tracking systems.

A detailed review of electronic time tracking systems can be found here on Mashable.com, and DesignM.ag has this overview of time management principles for those who work freelance, though I think it’s broadly applicable to anyone who has some degree of autonomy at work. Finally, if your a Mac user, Minco is an interesting new time tracking app.

The Environment and Your Portfolio

It’s hard to find a good book, let alone one that is free. Without Hot Air, written by a Cambridge University professor, is both. You can download the PDF here.

I would recommend it to just about anyone, because it explains the environment in quite a simple, but immensely analytical way. For example, what is more impactful, cutting down on air travel, or switching to wind energy? This book runs the numbers to explain the impact of different decisions. If you’re running a portfolio or a project, this is a good first step to understanding the environmental impact for both you and your stakeholders. It’s a long book, but you can easily skim to get the key points, and since you can download the PDF for free, you don’t feel compelled to read every single page.

Note the free delivery of the book is very much the author’s intention, he’s keen to contribute to the environmental debate, rather than make money, and I think you’ll find his perspective is well reasoned and objective.

The New York Times has a great blog devoted to environmental topics, which you can find here

Dashboards Everywhere

Performance dashboards are being more common, and not just for businesses. On NFL.com it’s interesting to see the result of a football game summarized on a dashboard, with play by play data (with drilldown if needed) a ‘crowdsourced’ fan rating, and, of course, details on the score.

Dashboards Everywhere

Chief Portfolio Officer?

Interesting article in Forbes by the CEO of the PMI calling for the US to have a Chief Portfolio Officer. In practise though, I think we have a Chief Portfolio Officer and his name is Barack Obama, in practise the expansion of CXO positions is diminishing the credibility of the title Chief Executive Officer, Chief Financial Officer, Chief Information Officer, Chief Technology Officer, Chief Marketing Officer, Chief Sales Officer, Chief Strategy Officer, Chief Operating Officer. Too many Chiefs and not enough Indians?