Why are Project Failure Rates so High?

Cobb’s Paradox
Martin Cobb: We know why projects fail, we know how to prevent their failure – so why do they still fail?

Problem – High Project Failure Rates

According to the Chaos Report by the Standish Group, only 29% of enterprise projects are successful. Even worse, only 2% of very large projects are successful (62% of small projects are successful). This high project failure rate is extremely costly in the form of unrealized project benefits and lost opportunity cost. The goal of today’s blog is to stimulate a discussion about the root cause of project failure and possible methods for improvement?

Ideal State

Organizations measure success in different ways. For example, some companies tolerate a 5% variance in schedule and budget. In these cases, if a project is 5% to 10% late or over budget then it may be assigned a “yellow” indicator on a project scorecard. A variance of more than 10% may lead to the dreaded “red” key performance indicator (“KPI”). If your organization uses these thresholds then the ideal state is to deliver the expected strategic business value within 5% of the agreed schedule and budget.

Root Cause for High Project Failure Rates

Studies list many different reasons for project failure, such as poor communications, lack of executive support and bad project management. However, the common root cause for all of these project failure modes is poor decision making.

Context

Decision making is difficult because projects are complex and information is imperfect. For large projects, multiple team members make multiple correlated decisions every day. Ensuring all of these decisions are aligned is extremely difficult especially when you cannot wait for perfect information because the project has a tight external deadline or other competitive timeline driver.

Solution for High Project Failure Rates

Many solutions have been tried but project failure rates remain stubbornly high. Such a high failure rate in any process suggests a systemic issue early in the project planning and delivery process. To improve project success, we can learn from the lean startup process. Before projects are funded, we should clearly define the vision, target customer and the value to be delivered. And also define how this value will be measured and validated. A clear vision and value statement for each project will guide decision making and help keep project team members on the same page. We can also execute projects in short iterations that facilitate quick user trials. Short release iterations will also enable early user feedback, decision making based on user input, and solution optimization based on validated user feedback. Agile, iterative and other quick release cycles will accelerate the validation or rejection of your value hypothesis. Your value hypothesis should state that if you deliver feature “X” then your organization or customer/user will accrue “Y” units of measurable benefit “Z”. This will enable you to measure and optimize the value realized and grow your ROI or to quickly pivot to find the planned value. In turn, quick value-driven project iterations will improve decision making, maximize benefits and minimize waste. Every project manager should be able to clearly articulate their project’s value hypothesis, link it to strategic objectives, and understand its impact on project priorities and decision making.

Your Feedback

Enter your comments below so we can update this post and provide better solutions for the community. Also, if you have created any project management tools or templates that you would like to contribute for communal use then please send each one, with a brief description, to PMTools@LeanProjectPlaybook.com.

Business Opportunity

A desire to improve project decision making creates an opportunity for a new system that delivers contextual information, expertise and experience on demand to help project team members make important correlated decisions. Let us know if you would like to collaborate as a part of our community to transform this opportunity into an easy-to-use solution that will dramatically improve project failure rates.

Alternatively, if your company is willing to contribute some of your time to help specify a solution to meet their specific needs then they will receive free licensing for an agreed period of time. Each business opportunity requires a project manager, an architect, a business analyst, a developer and a QA lead.

Simple Life Lesson

Every day we make decisions under uncertainty. Many of those decisions have little or no consequence. However, our bigger decisions often pit us against a sales person who is trained in negotiation techniques, whether we are buying a house, a car or a smart phone. These sales people negotiate these types of deals multiple times per day. Conversely, we may negotiate those deals once every few years. This puts us at a significant disadvantage. To level the playing field, we can collaborate with friends who have expertise and experience in the relevant transaction. Or even seek assistance from organizations that help consumers or their members. For example, I recommend working through the AAA to buy a car at pre-negotiated fleet prices. Alternatively, if your employer has a discount purchasing program, leverage it to buy cell phone service, software or other goods. For critical decisions, it is usually worth spending the time and effort to complete your due diligence rather than making an impulsive decision that you may regret.

Innovation Incubator

• Are you tired of using the same old Project Management tools and techniques and getting the same unacceptable results?
• Have you developed a project management tool or technique that has improved the performance of your projects?
• Is your organization interested in trialing innovative project management tools and techniques?

Contact us to list a project management tool that you have developed or to trial of any of the following innovations provided by the community:

6SigmaPM – A proactive project health check. It measures your project’s vital signs then recommends corrective actions to prevent a negative trend becoming an actual problem. The benefit is predictable project performance.

JoinMyOrder – A group purchasing system. You submit a purchase order, other like minded customers also make a commitment to buy, then suppliers compete for the high volume purchase order in a reverse auction. You receive the price, terms and conditions normally available only to much larger organizations.

Crowd Bootstrap – A startup ecosystem in an App that offers innovation as a service. You sponsor a startup accelerator and determine its industry focus. The accelerator invests business services from independent contractors into selected startups to help accelerate their progress. You get access to the startup’s team, knowledge, products and services. You receive the benefits of an accelerator without the usual costs. It is “innovation-as-a-service” in an App.