Around 30 years ago I was involved with two projects in software development. One was delivered on time and on budget, and so given the thumbs-up by management. We were seen to have done a good job; even though there were always doubts that the changes we’d introduced weren’t going to stick for long among users. The other software project was a different story. We’d spent a lot of additional time to make sure we understood and could meet the requirements of the client. This blew up the time we had, and the project was late: a failure in the eyes of senior management. Looking back now, I can see that it was the work on the ‘failure’ that led to the more valuable and useful systems that were still in use 15 years later.

Something evidently isn’t right in the world of project management. At the crux of the problem is the reliance on measures of success and failure that are essentially inventions. We have relied on time and budget as a means of providing the simplest, tangible measures for senior management and stakeholders who don’t want to be bogged down in grey areas, but want an easy binary picture. Rigid ideas for acceptable timing and budget are set at the beginning, when the realities of the project are most uncertain. But the whole point of a project is that it’s not part of the predictable ‘business as usual’ for an organisation –it’s about trying something new, introducing innovation, making changes –and no one knows for certain what the pathway might be like, what obstacles or alternative opportunities will be uncovered. Time and budget figures are often arbitrary, but convention has turned them into rules to be followed.

Project failures in terms of time and budget are very common and spread ripples of effects across businesses, sectors and whole societies. A 2004 PricewaterhouseCoopers study of 10,640 projects revealed that only 2.5% of companies achieve budget, scope and schedule targets on all their projects. A McKinsey-Oxford survey of more than 5,400 software projects revealed that half of all projects significantly fail on budgetary assessment, while 17% of projects actually threatened the very existence of the company, with the average project running 45% over budget while delivering 56% less functionality than predicted. IT projects in particular are now so big and their influence so wide ranging, that they pose a new kind of risk that can sink entire corporations, cities. and even nations. Their global survey of 1,471 IT change projects showed that while the average cost overrun on large initiatives was 27%, one in six projects showed a cost overrun of 200%, on average, and a schedule overrun of almost 70%. And as software is integrated into other products and systems, the concerns can become magnified.

Focusing on the convenience of time and budget means that the real nature of projects, what’s working and what’s not, as well as the wider potential impact, is oversimplified. Specific, important lessons for directors, CEOs, governments, are lost. Actual successes are ignored and not followed up. The project managers’ attention is on the rules of project management and delivering partial outputs and not the bigger picture and rationale of what needs to be achieved, and the potential transformational impacts. Time and budget are less important than delivering outcomes, how the final delivered systems interact with organisations, customers, stakeholders and related systems. It’s an issue that has been demonstrated time and again in recent years. For example, the delay in introducing the Nirs2 system into the Inland Revenue (starting in 1995) led to additional backlogs. This caused the Inland Revenue to stop sending reminders to up to a third of the UK working force warning them that they needed to top up their National Insurance contributions. It’s now estimated as a result that around 10 million people face a state pension shortfall, including some of the lowest paid workers in the country. The delayed system cost taxpayers millions of pounds, but has then been followed by more costs, estimated to be more like £15 billion. Both the costs and benefits of projects have a life of their own that spirals far beyond initial, and often overly optimistic, estimates.

Becoming connoisseurs of failure and success

I started out by collecting examples and insights related to project failures to gain a better understanding of what and why. But failure and success aren’t polar opposites, and I’ve since discovered that when it comes to shifting the practice of project management for the better we need to be thinking about differentiating between the different levels of success:

Level 1 -‘project management success’, and so is concerned with internal efficiency and performance measurement and optimisation at the project execution level through the tracking of the cost, schedule and performance parameters.

Level 2 -overall effectiveness of the project through the lens of what is actually being delivered. Success is measured through the utility and acceptability of the output that has been delivered. The achievement of the objectives is thus assessed in terms of the satisfaction of the customer and the different stakeholder groups and the satisfactory addressing of their needs.

Level 3 - centred on the business efficiency, which is assessed through the realisation of identified benefits of the project and the creation and delivery of internal value. Success equates to maximisation of financial and business efficiency measures, such as sales, profits or ROI, as well as realised benefits and delivered value.

Level 4 -forward looking and opportunistic and enhances the business horizon by projecting future gains and opening new avenues, capabilities, skills and markets. Strategic opportunities require a continuous and long-term approach that seeks not just immediate benefit but also maximise opportunities for cornering the market, creating killer applications and building the potential for self-enhancing positive feedback loops to secure future growth.

The Millennium Dome is a high-profile example of Level 1 failure but higher level success. The project to deliver a dome-shaped building for a one-year exhibition to celebrate 2000 had to be delivered ahead of the New Year. The building itself and the infrastructure enabling Londoners to experience the exhibition were just about finished on time, but only following an unexpected injection of additional funds. On the opening night many of the exhibits were not functioning and dignitaries were left to queue outside for hours. In the end the visitor numbers were around only a third of what was specified in the business case. The exhibition had to be kept open for a

further year and entry fee halved, in violation of the original strategy, to try and recoup some of the costs. Following the end of the exhibition the site was mothballed at a cost of £190,000 a year adding to the accumulated losses. However, once the sale was finally concluded, the renamed O2 Centre became the biggest and most successful sports and entertainment arena complex in Europe. Level 4 success through innovative use of the structure thus managed to make up for the earlier short term disappointments.

Ultimately, what is easy to measure is not always meaningful. Mapping success on to these four levels provides a richer and better informed way forward to overcome some major issues associated with failure. We can’t progress at the traditional Level 1, but need to address the more important and significant issues that begin to emerge as we consider the purpose, the business and the future, in order to ensure projects continue to achieve and embed the beneficial change needed to underpin progress.

Darren Dalcher is Professor in Strategic Project Management. He is the founder and Director of the National Centre for Project Management (NCPM), an interdisciplinary centre of excellence operating in collaboration with industry, government, academia, third sector organisations and the learned societies. d.dalcher@lancaster.ac.uk