Lessons in transformation -- telcos can learn from other industries' mistakes

Large IT projects in the telecom industry are the stuff of midnight pizzas in the office, nightmares and weary conversations in bars. The only comfort is that the telecom industry is not alone.

Harvard Business Review (HBR) has published a report on their study of over 1,400 large IT projects, across several sectors which found that one in six turn out to be money pits, with cost overruns of 200% and schedule overruns of 70%.

Their data suggests that at least one established company will fail in the next few years because of an out of control IT project.

If that sounds like doom mongering the publication points to examples – Kmart, for instance, once a household name, now no more; Hershey’s, almost a decade ago, unable to deliver $100 million worth of candy just before Halloween; Levi Strauss forced to take a charge against earnings of $192.5 million in 2008 and all because of IT projects going off the rails. Many failed projects cost the jobs of senior managers, some cost entire economies many hundreds of millions of dollars.

HBR’s main focus is on ‘black swans’ – projects that go seriously off the rails due to an unfortunate convergence of circumstances or simple bad management and admits that they are rare.

That is the problem – because they are rare they are hidden by industry averages. Many managers will look at averages to assess the risk, which will tell them that the average overrun is 27%. In a critical project that would be acceptable if factored in at the beginning.

The figures look very different if you look specifically at the black swans – one in six of the projects studied overran by 200% on costs and 70% on schedule.

Although the article makes gloomy reading but obviously resonated with its readers there are some bright spots.

Here is one that could very easily apply to a telco:

Imagine starting a large project to revamp a mission critical system, after 12 months of planning. The objectives are to go live as soon as possible and avoid mission creep. Now imagine that in the early stages of the project the company merges with another company, doubling the size of the project overnight – so the project must work for both companies, be ready in 18 months and be rolled out on the ‘big bang’ basis across all customer channels.

Scared yet?

At the end of the story the costs had overrun by just 18% and they were behind schedule by only 7%. The reasons for this ‘success’ are that the project leaders resisted changes to the schedule and scope even after the merger; broke the project into discreet modules; made sure they had the right team, both internal and external and worked to keep them; measured every part of the project against a ‘readiness to go live’ metric and most importantly made the project a business endeavor not a technical one.

Factors that are common amongst successful IT projects in telecom include board level sponsorship, crisp internal communication, testing - then testing, testing and testing again. A common mistake is managers not killing IT projects when they start going bad.

The question is – can a company mitigate against the risk of a black swan? According to HBR a stress test to carry out before starting the biggest IT projects is to ask whether the company can absorb cost overruns of 400% on a project that only delivers 25-50% of the benefits. Secondly, can the company absorb the impact if 15% of its medium sized IT projects overrun by 200%.

These figures may seem to be overblown but HBR’s investigation suggests that they are entirely sensible questions to ask.