Benefits Management Key to Success

Posted by Kevin Brady on Fri 2nd January 2009 at 10:06 PM, Filed in Programme ManagementBenefits Realisation Management


Whilst preparing for a presentation titled the same name as this post, I came across a number of surprising statistics which I thought I would share.
The first was the discovery that in the UK we apparently invest something in the region of £100 billion per/annum on change related projects /programmes of work, but the returns earned by industry on the back of such a huge levels of investment are in fact negative.
That’s right industry as a whole loses on change related investments!
The exact figures concerning these negative returns run as follows:-

“Based on GDP the yield is about -6% “
“Based on Shareholder Value over 10 years the return – 4%”

These figures are quite astonishing.

It would appear that industry makes investments in change with less chance of realising a positive return on capital employed than winning a game of Black Jack.

Casino Odds grin

Horrified by these figures I decided to make a trip to the British Library and see if I could find any studies which might corroborate the above findings. The first study which I came across was compiled by Professor Clegg from the University of Sheffield. Clegg collected data from some 14,000 UK Companies investing in IT & Communications Technologies and he came up with the following dismal results:-

• 10 – 20% of these investments were judged to have achieved their objectives and were a total success
• 40% of these investments were a total failure and not value for money
• 40% of these investments were judged to be a partial investment success by achieving some but not all of the investment objectives

This study and the CHAOS Survey (often mentioned in my earliest posts) go long way to corroborate my earlier conclusion - that investment in change doesn’t pay.

So why does industry invest in change for negative returns?

Well undoubtedly one reason is the fact that many investors are unaware of the above facts when making investment decisions, and for others perhaps it is an irrelevance with change being seen as a key to survival and so not an option.

As Toffler put it:-

“Change is not merely necessary to life – it is life”

So, with change being the key to survival for many organisations why do so many change related investments fail to achieve their objectives? Well if you look at the CHAOS survey in full, and others like it, the list of reasons are enough to fill a lengthy book (the best I have read on this subject is “CRASH”. However, for the purposes of this post and the series of articles I am now writing on Benefits Realisation Management, one of the biggest reasons change projects /programmes fail is an unequal attention / focus given to the two kinds of change undertaken by organisations :-

Enabling Change – “Something that can be developed /built /acquired normally from outside an organisation which will be embedded and benefits realised”
Business Change – “Change which occurs to an organisations operational processes leading to new ways of working and a new business state often utilising an enabler to deliver and embed these changes”

Often the focus of organisations is on delivering Enabling Change followed by an often total lack of focus /interest and investment in the delivery of embedded Business Change. When one realises that the successful delivery of Enabling Change is often dependent on the successful delivery of Business Change and visa versa it becomes easier to understand why any imbalance could cause a project /programme to failure. This “blood brother” relationship can be illustrated by the opening of a new cinema (an enabling change) which cannot deliver its expected benefits unless fully trained staff are engaged to run the new cinema (business change) and provide the service.

So why does this imbalance occur?

Well one explanation is that enablers which are often things like systems, technology and buildings and are seen by many organisations as having intrinsic value in their own right before they are effectively “switch on” through embedded business change. For example a new e-commerce website for a supermarket is of no value or benefit if there are no people to deliver the goods or business processes to support the technology. This incorrect perception is made worse by the increasing use of “Earned Value”. Earned Value is commonly used in projects to evidence the value of a delivered enabler during a project lifecycle and is a very useful project performance monitoring and control tool. However, taken too literally it would mean that if are Cinema mentioned earlier was expected to cost £10 million and is only 25% complete then its earned value would be £2.5 million. This technique assumes that a 25% complete cinema is worth £2.5 million which is obviously incorrect, as a 25% complete cinema has little or no utility for its owner or a potential buyer.  This belief in the intrinsic value of enablers allows business cases to be formulated and funds raised on a Rate of Return on Investment Basis (ROI) which is often impossible to do for business change projects /programmes where many of the benefits are often difficult to measure and slow to achieve. Therefore the perception of the intrinsic value of enablers; and their relative quick delivery and ability to be justified through ROI analysis compared to the delivery of business change, means that this imbalance is likely to persist in industry at large unless things change.
 
I firmly believe that change is coming through the adoption of Benefits Realisation Management. Benefits Realisation Management can seriously increase the odds of project /programmes chance of success as it has at its core the concept of measuring potential returns on investment in terms of benefits rather than pure ROI, whether they are financial or otherwise. A level playing field in terms of the way Business and Enabling change projects /programmes are funded is on its way and I am expecting to see improvements in project /programme failure rates in coming years.

Fingers crossed grin

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