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The cost of a failed project
is not just what you spent on the project

Here’s a typical change project business case:

  • You need to achieve efficiency savings of £200k pa by bringing in a new web-based system.
  • The software licence and web costs will be £40k and it will cost £150k to implement (including allocation of in-house project management and training resources).
  • The plan is to roll out the system across the organisation over 18 months.

So your 3-year business case looks like this:

 
Year 1
Year 2
Year 3
Total /3
Licence, web costs pa
£40,000 £40,000 £40,000  
Implementation costs
£100,000 £50,000 £0  
Total Costs
£140,000 £90,000 £40,000 £90,000
Savings
£50,000 £175,000 £200,000 £142,000
Net
£-90,000 £85,000 £160,000 £52,000

Return on investment is +57%, and you hit your full efficiency savings target levels by mid-year 2.

But what happens if the project slips by 6 months?

The 3-year ROI drops to just +2% and it takes over 2 years to reach your efficiency target but you are also 33% over budget and your implementation resources are tied up on this project, so something else isn't being done in time either.

What if the project fails completely?

What happens if you cancel the project after 2 years, because it is clear that it will never bring in the full benefits? You have wasted £280,000 and over £400,000 in lost efficiency savings, but that's not all - you probably have had to take action to limit the impact of the failed project, which may cost you several times what the project cost.

HP's project managers knew all of the things that could go wrong with their ERP centralisation programme in 2004. But they just didn't plan for so many of them to happen at once. The project eventually cost HP $160 million in order backlogs and lost revenue — more than five times the project's estimated cost.

So if you could avoid the second scenario, it would be worth £100,000 and if you could avoid the last scenario, you'd be at least £680,000 in pocket.

What do these figures look like for your project? How much would it be worth to you, to ensure a successful outcome?

We can predict the success or failure of your change project, help you to gain ownership of the risks and provide you the skills and tools to address them. Because we identify exactly where the barriers to change lie, we can apply precisely the right skills and tools needed to deliver a successful outcome.

Would it be worth your finding out about our CHANGE EQU>TION approach - before you embark on your next project?

Click here for more information