Why Megaprojects Only Succeed at 0.5% Rate
Yes, you read that right. Some lessons learned for Project Execution in the Mortgage industry.
Recently the Wall Street Journal and The New York Times had fascinating articles on mega project failures, describing research by Bent Flyvbjerg in his new book “How Big Things Get Done: The Surprising Factors That Determine the Fate of Every Project From Home Renovations to Space Exploration and Everything in Between.” Flyvbjerg, one of the world’s leading experts on the planning and management of megaprojects has spent years researching not only why they go wrong, but often disastrously wrong. Both reviewers highlight with different examples the principles that can lead to success when they are followed and to massive failure when not followed.
These articles made me wonder if there are any lessons, we can learn from this research in the mortgage industry about successful project execution. While there may not be a direct analogy for us in these mega project failures, there are some important lessons for us about how we successfully manage large projects. Sure, we don’t build bridges or do rocket science, but we should not underestimate the size and complexity of projects like an LOS implementation or other large-scale technology or operational change projects. In our heavily regulated business, with many (sometimes competing) stakeholders interests, detail and precision matter, both in project execution and in the processes and desired outcomes that these projects support. We need to admit the regulatory, operational, and technology complexity of these projects.
So how can we deliver our projects successfully? First, we should understand why large projects fail? The statistics cited by the reviewers (and Flyvbjerg) are staggering:
· 47.9% are delivered on budget.
· 8.5% are delivered on budget and on time.
· 0.5% are delivered on budget, on time and with the projected benefits.
According to the articles, psychology is a main problem identified by Flyvbjerg’s research. Largely, it is the natural tendency to underestimate the amount of time (and therefore money) needed to complete a future task, due in part to the reliance on overly optimistic scenarios and assumptions. This cognitive bias is known as the planning fallacy. We can always ignore or rationalize our previous experience and convince ourselves and our organizations that this time will produce different results. Because projects don’t take place in controlled environments they can be plagued by internal politics as well. Securing project funding is a good example. It’s easier to secure approval and funding if your project has an optimistic timeline that makes the effort look less costly and risky than it is.
These are the results for billion-dollar multi-year megaprojects. But do these numbers make you think about your own success rate? How would you honestly assess your actual performance against time, cost, and benefits metrics? How would you evaluate your organization’s ability to execute a key strategic project that entails large risk and where your competitors’ and vendors’ track records might document that risk?
The book includes some key guidelines for success, to keep top of mind.
Understand your odds of success. How can you increase them and mitigate risk? Have you identified the risks that are unique to your organization or project?
Plan slow, act fast. Launching fast and accelerating to the goal seems intuitive. You might think a quick launch will reduce the overall cost. After all, these projects have all been done before. While it seems logical to get to project execution as quickly as possible, time invested in planning upfront pays huge dividends when you get to the execution phase. This is particularly important with respect to testing.
Think right to left. Start with your goal, then identify the steps to get there. Keep your high-level vision in sight as your project plans are adjusted to meet changing realities. But don’t confuse this thinking with date driven right to left planning. If you are forced to do right to left, date driven planning (and honestly who in our business hasn’t regularly faced a regulatory or vendor-imposed deadline that is beyond our control) make sure you build a realistic plan to manage scope, resourcing, training, change management, and ongoing operation. Vet that plans thoroughly with all stakeholders. Create and be prepared to act on contingency plans.
The Lego analogy. Build big things from small things. Simplify and use modular, reusable, basic building blocks. This might, for example, mean using a rapid, iterative development and implementation approach rather than a big bang plan.
Build the best team. You won’t succeed without a team of your absolute best resources. Ensure that executive management is onboard and visibly engaged throughout, not just at kickoff.
Know that your biggest risk is you. Be brutally honest with yourself about what your organization does well and what it doesn’t do well. Maximize your strengths and minimize your weaknesses. Outside perspective can be valuable in this assessment.
Are you considering launching a complex strategic project like an LOS replacement? Is now the right time for an upgrade? My colleague Andrew Weiss has written here (https://www.blackfin-group.com/post/is-now-the-time-to-invest-in-a-new-mortgage-origination-platform) why it might be smart to get ahead of the next boom. We’ll have more to discuss around success factors in LOS implementations in a future blog post. If you’re evaluating a project like this, reach out to us to discuss how we can help increase your likelihood of success.
Mike McChesney, is a Principal Consultant with BlackFin Group in the Mortgage and Banking Technology Practice. Prior to BlackFin Mike served as CIO of Top Ten mortgage lenders, led many ‘first of a kind’ innovations, Executive Director of at Servicelink, CIO of Planet Home Lending, CIO of IBM’s mortgage outsourcing business and Director in KPMG’s Consumer and Mortgage Lending practice. For more information contact firstname.lastname@example.org