I read the book that introduced this phrase a couple of years back. So was intrigued to find an article from HBR in September 2011 (by Flyvbjerg & Budzier) evoking the concept in the context of (IT) project success.
If you sell in the tech space, the findings are dynamite. If you sell elsewhere, they are readily applied to any kind of solution-orientated purchase. You’d do well to slip them in to any buyer’s checklist to set you apart.
The authors quote a study of 200 German multinationals. This found that failed projects were commonplace. Worse still, they cost an eye-popping $14.3bn.
Here are some background stats.
67% – companies that failed to terminate an unsuccessful project
61% – managers that reported major conflicts between project and line organisations
34% – companies that undertook projects that were not aligned with corporate strategy
32% – companies that performed redundant work because of unharmonised projects
Bringing this to a prospect’s attention could pinpoint a key difference you hold above a competitor. Given most projects are universally known to under-estimate risk, here’s the two killer questions they recommend:
- is the company strong enough to absorb the hit if its biggest technology project goes over budget by 400% or more, and if only 25-50% of the projected benefits are realised?
- can the company take the hit if 15% of its medium sized tech projects (not the ones that get all the executive attention but the secondary ones that are often overlooked) exceed cost estimates by 200%?
Fanciful? Don’t bank on it. Does their summary chime with any project you’ve ever sold or seen through?
“These numbers may seem comfortably improbable, but, as our research shows, they apply with uncomfortable frequency.”
Even if you pass their two-pronged stress test, you can still mitigate.
Examples they give include break projects down into smaller component-style ones, with less complexity and shorter timeframes.
And use “reference class forecasting” – apparently now rising in take-up, even mandatory for UK & Danish govt procurement – which require a validated, benchmarked assessment of how similar projects ran. Just like in selling, the closer the reference the better the analytics (ie, start searching for the same project in the same company and work outwards).
Having read this, it strikes me that adding this kind of black swan stress test to you prospect’s buying criteria (given the obvious caveat that you can shine with the answer of course) is highly likely to differentiate you towards clinching the deal.