Myth: Projects projects create value. They do not. A portfolio (or a strategy of projects) creates value. Some projects add value, some cost more than expected, others cause other problems that require new projects.
It is the net of projects that create value.
The Non-Performing Project Ratio (NPP) measure this ‘net of projects’. First raised in the Success Healthcheck for IT Projects (Wiley 2010) as a pragmatic means of measuring the performance of a project portfolio, and the likely success of a strategy of projects. The NPP drew attention at the Asian Banker Summit in Hong Kong 2011 where an assessment performed at the conference found that over $1 Billion would be written off by IT projects in Banks in Asia that year.
With benchmarks from around the world and over 20 years of track record, the data is sound: 27.5% of a project portfolio is wasted on average. Conservatively. This is as true for IT projects as it is for mergers and acquisitions, strategic change, ERP, CRM or any other change project.
On a $100,000 project expect a 25% variation. On a $1,000,000 project expect more. On a strategic major project, consider the impact of a 2-4x budget increase. Consider a portfolio of projects of varied sizes, goals and profiles as each has it’s own value risk project. The numbers are substantive, measurable and actionable if identified.
Executives wanting a healthy project portfolio contact our office for a confidential discussion with our executives.