Driving Better Business Outcomes. Jason Dunn IT Project Management Office Freddie Mac September 25, 2015

Transcription

1 Driving Better Business Outcomes Jason Dunn IT Project Management Office Freddie Mac September 25,

2 A few simple questions Do you feel that it is important to know how your investments are doing? Why? Do you quantitatively know what your last five projects netted, in terms of NPV or ROI? Three? One? Don t feel bad, less than 15% of companies rigorously track benefits However, the ones that track their benefits return close 18% higher than those that don t track benefits So the question is, if we track our benefits, will they magically increase? 2

3 3 Session Objective To: Provide insight from quantitative research on the drivers of business success In a Way: That provides sufficient background and understanding of the research while linking the findings of the research to actionable recommendations So That: The attendees can leverage this knowledge to improve business outcomes

4 Two Sources of Strategic Advantage via Capital Investment 4 Doing the Right Project Benefit Delivery Business Planning and Alternative Selection Competitive Advantage Doing the Project Right Project Planning and Project Control Project Delivery

5 5 Outline Data and Research Methodology Findings Practice Application Conclusions

6 Spent 8 hours collecting data with teams Spent 3 to 4 days on each project Validated data using their own reports Created a story about each project and about each company Collect Data on Completed Projects Directly From Project Teams Research Approach Subject Areas Include: Economics Scope Teams Process Used for the Study Investigate Linkages between Inputs and Outcomes Processes/Strategies/ Approaches Prioritize Best Practices 6

7 7 Broad Database Representation Ensures A Good Comparison Basis Project Type Software Development Purchased Packages Infrastructure Industries Manufacturing Financial Technology Database N = 188 Dimensions Size ranging from $100K to $600MM Durations from 1 month to 7 years Lifecycle Covers period from early business definition to post adoption

8 Outline Data and Research Methodology Findings Practice Application Conclusions 8

9 Research Study: Benefit Realization Study launched to determine drivers of business success Dataset: 188 projects from over 36 companies in various sectors Over 1,500 pieces of data collected on each project The NPV ratio was selected as the key measure of business success NPV actual NPV forecast NPV forecast Performance range was -1.0 to +0.8 (achieving zero NPV to almost doubling the return) Predictive model derived that explained over 75% of variation in business outcomes Updated twice and validated over 10 years of use 9

10 Strong Linkage Between Key Drivers and Benefit Delivery NPV Ratio (Actual NPV-Estimated NPV/Estimated NPV) 100% 50% 0% -50% -100% Best Information Technology Projects Good Fair Poor Higher Benefits Lower Benefit Delivery Index Data from IPA, Inc. 10

11 $5 to 25M Actual / Estimate << under estimated overestimated >> 220% 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% Costs Tend to Rise, Benefits Tend to Fall from Early Estimates Estimated Project Costs Business Planning Estimated NPV Estimated Project Costs Feasibility Estimated NPV Project Phase Estimated NPV Estimated Total Costs Estimated Project Costs Execution Planning Estimated NPV +1 std. dev. Mean -1 std. dev. Actual Costs and Benefits Completion Data from IPA, Inc. 11

12 The Cost of Poor Business Planning Less than 15% of companies track ROI The average project returns approximately 88% of its planned NPV 62% of all IT initiatives return less than predicted NPV Often, one or two poorly defined projects cancel the benefits provided by a whole portfolio of projects As a side note, 59% of features delivered are not requested by businesses The research confirmed the poor use of nearly a third of all capital spent on IT Projects 12

13 13 Key Drivers of Benefit Delivery Defining the Business Opportunity Doing the Right Project Selecting the Right Scope Business Case Opportunity Analysis Risk Assessment Lifecycle Costs Improving the Business / IT Interface Sponsorship Broad Team Representation Clear Goals Effective Communication Transparent Decision Making Team Behavior and Stability Alternative Analysis Scope of Work Project Objectives Technical Risks System Plan Technical Best Practices

14 Outline Data and Research Methodology Findings Practice Application Conclusions 14

15 Defining the Business Business Opportunity Case Success Scope Interface Business Case Risk to Benefits Objective Alignment Alternative Analysis Competitive Analysis Clarity of Objectives Quantified Benefits Capability Analysis Linkage to Strategy Lifecycle Costs Change Gap Defined Priority 15

16 Be Very Clear in Your Objectives and Understand the Trade-offs Case Business Success Interface Scope I want it cheap Costs 7% less than average Takes 6% longer I want it on budget Comes in within +/- 11% budget Costs 15% more than average I want it fast Takes 14% less time than average Costs 22% more than average I want it on schedule Comes in within +/- 17% schedule Takes 11% longer than average I want people happy Customer satisfaction increases by 26% Takes 26% longer than average Unfortunately, over 1/3 of projects do not have a clear understanding of their dominant driver 16

17 Considerable Value is Built from Good Business Planning Practices Base Project Have Process for Business Case Development Apply Formal Prioritization Process Employ Independent Review Train on Benefit Development Explicitly Quantify Risks Encourage Killing Projects 0% 5% 10% 15% 20% 25% Improvement to NPV Delivered 17

18 Implementing Business Planning Best Practices Case Business Success Interface Scope Review business case assumptions prior to entry into the portfolio of projects Have gatekeepers review and business sponsors approve business cases at Gates 1, 2, and 3 Gatekeepers must be supported by other key stakeholders, who will be conducting the review of business case elements and assumptions Clearly identify those projects where a full business case and business review is required Use the concept of Consequentiality and apply this process consistently Select a sample of projects to conduct look-backs on business performance 18

19 What drives the business IT interface? Case Business Success Scope Interface Team Health Team member trust Communications effectiveness Clarity of roles and responsibilities Business Engagement Business presence Sponsor involvement and stability Clarity of objectives Process Trust Clarity of the process Belief in the process Belief that objectives are achievable 19

20 Keys to Enhancing the Business IT Interface Case Business Success Scope Leadership Appropriately active sponsorship Consistency in approach Interface Objectives Clarity Priority Decision Making Gatekeeping Trade-offs Resourcing Appropriate level Appropriate time Teams Diverse Assessing and driving health Communication Consistent Two-way 20

21 Process and Behavior Go Hand in Hand Case Business Success Scope Interface Poor 5 Team Process Index Good Team Behavior Index Poor Data from IPA, Inc. 21

22 Team Behavior Affects Many Practices and, Therefore, Cost Performance Case Business Success Scope Interface Worse 1.4 Cost Performance Index Industry Average Better Good Team Behavior Index Poor Data from IPA, Inc.

23 What can teams do to improve the Business IT interface? Case Business Success Scope Start with the business formally kicking off the project Interface A practice called Business Initiation Both the business and IT have to own and drive the process If one or both does not embrace it, it penalizes the project Check in on team health Use impartial or anonymous processes to assess Make what s important clear This clarity provides significant boost to project speed and team health Try to keep the project team stable 23

24 24 Clear set of business capabilities Clear set of project objectives Clear WBS and associated estimate Major Elements of Scope Selection and Definition Scope Technology Case Business Success Interface Known or unknown technology Defined alternative selection process Technical plan Prototyping Scope Active risk identification and management Appropriate contingency policies Active Stakeholder management Risk Management Best Practices The use of JAD / RAD prior to finalization of the business case Establishing strong cost control mechanisms

25 Although Most Open Scope Items Are Estimated to Have Relatively Small Impact... Case Business Success Scope Interface 75% Projects With Open Scope at Feasibility Gate 50% 25% 0% Less Than 10 Percent of Total Cost Estimate Greater Than 10 Percent of Total Cost Estimate Data from IPA, Inc. 25

26 Carrying Open Scope Into the Planning Phase Degrades Project Definition Quality at Authorization Case Business Success Scope Interface - Std. Dev. + Std. Dev. Scope Closed at Feasibility Gate Industry Average Scope Open at Feasibility Gate BEST GOOD FAIR POOR SCREENING Project Definition Quality at Authorization Data from IPA, Inc. 26

27 And Reduces Cost Competitiveness by 14 Percent Case Business Success Interface Scope - Std. Dev. + Std. Dev. Scope Closed at Feasbility Gate Industry Average Scope Open at Feasibility Gate Less Expensive More Expensive Cost Competitiveness Data from IPA, Inc. 27

28 How do we get scope right? Case Business Success Scope Interface Assess Understand the problem Assess capability gap Get the process right Select Be sure to look broadly but eliminate quickly Ensure that the solution matches the need Make as many scope decision as the information allows Define Take the time to create good requirements Be visual, if possible Don t hand information off 28

29 Outline Data and Research Methodology Findings Practice Application Conclusions 29

30 30 Practices Significantly Improve Return on Investment Return on Investment 1.20 Based on the following parameters: 1.10 Best - in - Class Cost: $2.1 mm Execution Time: 12 months 1.00 Estimated ROI: 25% 5 Year Useful Life Industry Average Use of Best Practices improve ROI by nearly 25%

31 What Did We Learn From Business Planning Research Business success can largely be predicted Corollary: We can greatly improve our chance of success if we follow best practices Robust development of business case is single most important factor in determining business success More important than markets or uncontrollable factors Clarity and alignment between business and technology groups is second leading factor Represents the process that we use to translate business needs into prioritized scope 31

32 Additional Insights Financial accountability for capital is weak (for many reasons) which hampers strong business case practices Quantification of business benefits and the building of business cases are not core competencies Post-project tracking of business benefits is not common, creating a learning / improvement gap Poor overall planning introduces multiple, multi-faceted changes, which modifies the original purpose of the project Customer satisfaction is driven by many of the factors that we have just discussed, which, then, drives rate of return 32

33 33 Defining the Business Opportunity Improving the Business IT Interface Selecting the Right Scope In Summary Robust business case that has well defined benefits Multi-stakeholder review Clear objectives that link to strategies, roadmaps, or defined opportunities Prioritization processes that are objectively and consistently applied Follow a defined process Focus on building team health Make sure the team has the proper resources from every area Ensure that the business participates regularly Employ a clear alternative selection process Tap into the best practices of external parties and lessons learned of internal parties Make decisions as early as intelligent, but not earlier Develop a robust risk management plan and use that plan to inform business case development and decision making

34 35 Common Sense? Fun with Numbers 38% Percent of projects that did not have clear objectives 69% 32% 42% 58% 59% Percent of projects that did not use a standardized process to build benefits Percent of projects where the team felt that the objectives were not achievable Percent of projects without a diverse, independent business case review Percent of projects without a robust alternative selection process Percent of projects without a well-defined business planning phase

35 36 Any Questions?

36 Thanks to Today s Attendees Enjoy the Rest of the Conference 37

37 Speaker Introduction Me (Jason Dunn) Working on projects or with project teams/systems for over 25 years Conducted over 30 system evaluations and 200 project assessments Created and implemented improvement roadmaps Led multiple industry studies relating to understanding the drivers of project and PMO success Most clients were Fortune 200 companies Freddie Mac is the smallest company that I have worked with Responsible for project processes and PM maturity at Freddie 38