Monday, May 13, 2019

How value creep is killing your project

How value creep is killing your project
As a project sponsor or steering committee member you are probably familiar with scope creep. Sometimes known as “requirement creep” or even “feature creep,” the term refers to how a project’s requirements tend to increase over the project lifecycle. For example, what once started out as a single deliverable becomes five, or a product that began with three essential features now must have ten.

Scope creep is typically caused by key project stakeholders (like yourselves) changing requirements, or sometimes from internal miscommunication and disagreements. But while scope creep is a problem for many projects, it is nothing compared to the far more devastating value creep.

Value creep is when the benefits of a project progressively go down while the costs increase. The result is a net reduction in project value, often resulting in a move from positive to negative returns.

And it’s pervasive. In fact, most projects are beset by scope changes, unforeseen events, and time and cost overruns that represent this value creep.

I have sat in numerous steering committee meetings and listened as decisions are made, usually on the recommendation of the project manager, that progressively reduce the value of the project.

For example, one project sponsor stated that one of his main goals was to ensure the new system was based on a platform that is industry standard, and much used in other industries as well. The reason behind this was to prevent having trouble finding skilled employees, as had been the case with the system it needed to replace.

He then went into his steering committee meeting and immediately acceded to his project manager’s statement that the new system should be based on a platform that was already in use in the organization. It was even harder to find skilled employees for this platform than for the system it needed to replace, but somehow this was ignored.

Not surprisingly, the project costs exploded, and it failed to deliver the benefits expected. The project manager didn’t mind; he had brought the project in on time and to (his) specification. The organization then had to put up with an ill-fitting solution for years.

As a sponsor or steering committee member you need to always be conscious of value creep. These decisions—often made piece-meal over time—cumulatively increase the cost and decrease the value.

The graph below (click to enlarge) visualizes a 10-month project that is fictional but is similar to real live projects I have witnessed. The project starts with a clear value proposition: $9M benefits and $4M costs.

For the first two months, everybody is convinced it will stay like this, and then a part is descoped to save costs and keep the project within budget. This reduces the benefits by $2M. Meanwhile, the costs start to go up (as it is with most technology projects). After five months it becomes clear that the system cannot automate a number of things that had been assumed/promised without putting in an additional two months of work. The sponsor and steering committee want to keep the timeline, so they decide against the extra work. Boom, another $2M reduction in benefits. And from this point on, the project has an actual negative value.

Loss of benefits is usually a far greater long-term loss than a (reasonable) cost overrun. One way of fighting value creep is to constantly focus on protecting the value, refusing to compromise or harm the project’s value proposition.

To do this you need to understand which parts of your project deliver the value; otherwise, you won’t know what value dimensions you are dealing with when you have to make decisions.

A good to ask yourself is: Do you know how each major element of promised business value is going to be delivered on your current project? If not, you’ve got some work to do.

Once you know the answer to this question, you’re one step ahead in eliminating value creep. While delivery costs on a project may rise, if you keep your focus on maintaining your project’s value, you will deliver business value in the end.

In a nutshell: Value creep is the number one killer of business value.
Posted on Monday, May 13, 2019 by Henrico Dolfing