10 Reasons Why IT Projects Fail

This is the second part of a series on IT Project Failures that destroy shareholder value, stall or kill careers. Part 1: “Is IT Project Success an Oxymoron” is here. It is based on experience, personal observations and those of industry peers, and study. Most of the reasons relate to the frailties of human psychology and a lack of organisation, not technology.

1. Not Knowing What’s Good for You

The first golden rule of negotiation is to know your own interests.

Seneca said, “If the man doesn’t know which harbour he is making for, then no wind is the right wind.”

Most companies do not spend enough time uncovering their own interests. Result: Your strategy is subsumed by your vendor’s roadmap or you will pay for your integrator’s learning curve – repeatedly. That’s next.

2. Not knowing what’s Good for Them that’s Bad for You

The second golden rule is to know the interests of your competitors. Who is a competitor? Answer – anyone who can lower your price and increase your cost. So customers and suppliers are “competitors,” too, though we also have to cooperate with them. Hence  the term, co-opetitor – but that just sounds awkward. It’s better to redefine competition. Michael Porter of Harvard even wrote a book on it.’ If you look at his famous Five Forces Diagram, you’ll see that it shapes industry profitability and, by consequence, your ability to make profits. Technology selection must stem from a crystal clear understanding of your desired outcomes, and how technology outputs can be mapped to it.

Source: http://www.marketingteacher.com/lesson-store/lesson-five-forces.html

You’ve heard of vendor lock-in. And so you do your level best to avoid it. But be careful to avoid the trap of integrator lock-in. Both are forms of supplier bargaining power.

To avoid vendor lock-in, many companies substitute an off-the-shelf solution with a less mature (or home-brew) solution, that they can customise, often with the help of 3rd party integrators. Often this is done with the mistaken notion that they are creating technology that differentiates their services or products. It can end up costing more, taking longer to get to market, introducing more risk, and is less efficient than an off-the-shelf solution. Differentiation isn’t about being different. It’s being different in a way that’s profitable.

Since a customised solution implies a market of one, you are the only one serving it. And once the system integrator has the bulk of the knowledge to operate it, they’ve got you. And when dealing with brand new solutions, chances are you are just paying your SI to train their staff.

Also beware of SIs that are affiliated with particular products. Whatever your problem, their solution will be to apply what they already have. “When all you’ve got is a hammer, everything looks like a nail.”

So when it comes to vendor vs. integrator-lock in, this is a choice between picking something more efficient, albeit generic, and which keeps you in the slipstream of vendor investments, and working out how else to differentiate – your processes, alliances, customer relationships. OR developing something customised that is specialised and that does actually differentiate you.

3. Not adapting/enforcing the contract

Circumstances change. But contracts are often so hard to set up in the first place, that they do not adapt. Contracts should be flexible and provide incentives. They should also be enforced. Agreeing on the contract is just the first step. Often, that’s where vendor management stops.  Measuring reality against what was contracted is important.

4. Not measuring reality

Not many projects meaningfully measure progress during and after the implementation phase. There is a distinct lack of knowledge amidst all the information. And there’s a lot of fudging, too.

How many projects were called a success when they were really abysmal failures? Were they too big to fail?

If you borrow a million bucks from the bank, and can’t pay it bank, you’ve got a problem. But as the GFC has shown, when you borrow a billion bucks and can’t pay it back, the bank’s got a problem. Often, a project is such an  emotional and financial sponge that no one can call it a failure. That’s where independent sagely people, with no interests in the status quo, can point out the blindingly obvious.

5. Key People Risks

This happens particularly in smaller and mid-size companies but also large ones where documentation is non-existent, and people are incentivised to protect their turf.  The result is that key people control and know how to operate the lynchpins. If and when they leave, you’re in trouble.

HR practice has a role to play here. Respect your people and ensure the link between meaningful effort and performance and reward is always strong.

6. Stakeholder resistance

Projects need powerful sponsors and coalitions otherwise every hurdle will loom large, cause delays or derail it. The higher in the organisation the sponsor, the better. Stalemates need to be addressed – and sometimes only a strong senior executives with authority power can do it.  So start making some friends.

7. The wrong incentives

People respond to incentives. That’s the lesson from economics and psychology. As Vishnugupta Chanakya, the star professor in the Harvard of the ancient world at Takshasila University, remarked, ‘the job of the leader is to create the right conditions, so that the right actions may follow.’ 2300 years on, and we’re still learning that lesson.

8. Wrong standards

Put your raft in the right river and you’ll be swept forward by the slipstream of others making similar investments. Those that backed GSM, for example, did well. CDMA and WiMax, on the other hand have struggled.

The cautionary tale of FedEx’s ZapMail is here.

It’s a good idea to keep an eye on what the standards bodies are doing. Varian and Shapiro discuss this at length in Information Rules, HBS Press.

9. 10-cent counter-measures

Think ahead. What can competitors do to match your investments? Can they spend a $1 where you spent $100? The price:performance equation for technology is always improving – is waiting beneficial? How could it change your cost structure?

A recent edition of IEEE Spectrum had a great article on this in the context of the technical solutions to detect improvised explosive devices (IED) in theatres of conflict, which maim or kill thousands every year. Essentially the challenge is to detect and neutralise the IED. On the one side, is a military machine that spends billions. On the other, is a ragtag bunch of insurgents that spends a pittance to counter all that technical brilliance.

The jammer program became known as CREW, for ”counter radio-controlled IED electronic warfare.” The latest jammers designed for U.S. vehicles are code-named Jukebox and CVRJ and are manufactured by EDO Corp. and other companies. They cost upwards of $80 000 apiece. All told, the U.S. military spent about $2 billion on jammers in 2007.

The insurgents’ response to the first jammers, in late 2003, was swift. It established a Spy vs. Spy –like competition between counter-IED specialists and the bomb makers, in which sometimes a measure was followed by a counter­measure within days.

…

Inevitably, there has been a countermeasure, and a cheap one at that. ”These are billion-dollar solutions with ten-cent countermeasures,” says Daniel B. Widdis, an instructor at the Naval Postgraduate School, in Monterey, Calif., who did a tour as an electronic countermeasures specialist in Iraq. [ Editor’s note: IEEE Spectrum agreed not to disclose the countermeasure.]

10. Economic due-diligence

Procurement departments are good at this, but ocassionally, you get a firm clearly without the capacity to deliver or invest in its roadmap. Fortunately, this is rare, and testament to the improved rigour that procurement departments have.

What other reasons for failure have you come across? Your contributions are appreciated.