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Monday, 22 August 2011

IT Turkeys act as Black Swans

Big IT projects are spiralling out of control, costing shareholders and taxpayers billions of pounds, according to new research published this week in the Harvard Business Review,

In a study of about 1,500 projects, Oxford University and McKinsey & Co, the management consultants, found that one in six grew so massively out of control that they threatened the survival of the companies that commissioned them. These so-called “black swans” were so disastrous that, on average, they ran 200 per cent over budget and 70 per cent over schedule, the researchers found

The researchers said that the average cost overrun for all the IT projects was 27 per cent, but it was there was a minority of cases with the biggest budget blowouts accounting for most of the losses however, the percentage of problem projects was 20 times higher than they expected to find. They cited the example of Auto Windscreens, in 2006, the second-largest car glass company in the UK with sales of £63 million and 1,100 employees, which changed its financial IT system. By the end of last year, it had been forced into bankruptcy by a combination of falling sales, problems managing its inventory and overspending on the IT project.

The project leader, Bent Flyvbjerg, of Oxford’s Said Business School, said: “We were shocked when the data came in. IT projects are now so big and touch so many aspects of business, government and citizens’ lives that this poses a singular new challenge for top managers".

We wonder to what extent these shocking (but not surprising) results reflect the prevailing fashion in Management to de-skill and de-humanise business operations? Substituting "process" for individual competence and responsibility appears to be widely seen as "good practice".

The resulting levels of over-elaboration and over-definition generate complexity at exponential rates. So if the same mind numbing approach is used in the IT development itself, this is a Management Culture failure as much as anything else, so it is hardly surprising that dumb gets dumber and chaos ensues.

We were not surprised by this report, we have heard too many anecdotal stories of such tragedies (many sheltering under threat of libel action if publically reported) and recall one CEO stating "We are betting the Corporation on XXXXX" when he invested nearly 30% of his business' net worth in "an IT revolution". That bet was nearly terminal for the company, and definitely for that CEO. We recall one of our clients realising that a £2 million investment in "doing the same again but with more complexity" could be massively reduced so that they could "do it very different and simple" with just 4 PC's!

We think that it is time Managers reversed this slide into mediocrity and re-learned how to allow people to manage their own jobs; that is what the exceptional organisations do (you know, like Autonomy). They are the ones with the employee satisfaction awards and the excellence awards - oh yes, and the outstanding profitability and massive Comparative Competitive Strength.

It is interesting that this news should follow so closely on our previous blog about the effects of this insidious de-braining approach on the Probation Service. If you treat people as stupid then, first, they will respond accordingly and second, what perhaps might that tell the world about you?

So, once again, we repeat that is is the attitudes, behaviours and beliefs of a business leadership and management that determines the performance of the organisation. It looks as though this research shows that if you are dumb enough to think that a monster IT investment in complex systematisation will act as a substitute for competence in leading and managing your people, you will get exactly what you deserve.

The tragedy is that your employees, suppliers and shareholders do not deserve to lose so much.

Exceeding Expectations is brought to you by Steve Goodman and Tony Ericson partners in Achievement Coaching Internationalwhere we help businesses to learn different thinking to enabledifferent actions that deliver thedifferentresults that Make a Big Difference.. It is one of our "Excellence Quartet" of blogs promoting the cause of Excellence as the key to prosperity. We publish regular articles using a recent business/financial topic to highlight different perspectives and conclusions to those obtained by conventional thinking and techniques. You can read the other three blogs at "Business Bloop Award", "You're having a laugh ... seriously?" and "Capitalism or ... Common Sense".