Smart Cos Will Embrace Project Failure In Their Quest For Agility: Gartner

Accepting higher project failure rates can help organisations become more efficient more quickly, according to Gartner, Inc. Gartner said project and portfolio management (PPM) leaders who take a “fail-forward-fast” approach that accepts project failure rates of 20 to 28 percent as the norm will help their organisations become more agile by embracing experimentation and enabling the declaration of success or failure earlier in a project’s life.

“Current common practices in PPM simply don’t meet the needs of the day,” said Audrey Apfel, Managing Vice President at Gartner. “Continued cost pressures on most IT organisations will force IT and PPM leaders to rethink how they deal with increasing demands on an already overburdened workforce. Steady rates of project failure will lead PPM leaders and their peers and customers to accept a certain level of failure.”

Apfel said that, through 2016, the accepted norm will be a 20 to 28 percent project failure rate as organisations are forced to accept increased risk to achieve desired returns. Given the continued market turbulence and proliferation of IT, Gartner expects these failure rates to persist. Furthermore, given the increased focus on cost management, this dynamic is likely to be accepted — if not embraced — in the longer term, to limit the financial magnitude of project failures.

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“Organisations need to hunt for value in uncertain conditions. Risk is increased from external business and market factors that cannot all be mitigated, and therefore must be assumed and accepted in many projects that need to be undertaken,” said Apfel. “By having the courage to accept failure and move on — a fail-forward-fast mindset — you are more likely to minimise your losses, learn from your mistakes, and make the organisation more efficient, more quickly.”

Historically, the crux of PPM improvement efforts has been the improvement of processes, aided by the use of tools to standardise and optimise processes. While this makes things better around 80 percent of the time, it provides a false sense of security for the other 20 percent. Indiscriminately applying such PPM principles, developed for simpler times, can result in projects that have lost their relevance over the course of execution continuing to soak up resources. The conventional determination of a project failure involves comparing actual costs and deliverables to those originally planned for — but in high-risk and complex environments this leads to project failures that are late and expensive.

From a portfolio management perspective, by adopting a fail-forward-fast mentality organisations will have to get better at developing business cases and project plans. The introduction of mechanisms to support a fail-forward-fast mentality, such as early warning systems, stage or phase gates, and frequent reviews by unbiased persons, will become common practice and facilitate early exits from projects that are failing.

Naturally, adopting a fail-forward-fast approach will have implications for how budgets are allocated and managed. Professional services providers will fulfill many of the requirements of this shift, but Gartner predicts that demand for their services will outstrip supply as the benefits of embracing failure become more apparent.

“PPM leaders, in conjunction with the portfolio governance committee, must determine an acceptable percentage of exploratory projects that are subject to, or assumed to be subject to, fast failure in order to ensure that the real failure rate is less than or equal to the historical baseline of around 20 percent,” said Apfel. “We also recommend that portfolio managers develop and institute ‘stop-loss’ criteria to determine when to accept failure and bring a project to an end.”