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Jack Bergstrand
CEO
Brand Velocity, Inc.

Editor's note: Each month, we ask a Directors & Boards reader to comment on critical issues facing directors today. If you'd like to participate in this section in the future, please email Scott Chase.

What is the failure rate of large Enterprise technology projects?

Most organizations consider their Enterprise project launches unsuccessful according to the Robbins-Gioia survey of 232 public and private organizations. Consider the following:

•    7 in 10 technology projects are considered failures (OASIG study)
•    88% of projects exceed deadlines, budget or both (Standish Group)
•    40% of projects fail to achieve their business case within a year of go-live (The Conference Board)
•    Half of projects cost nearly 3X their original estimates (Chaos Report survey by Standish Group)
•    Only 3% of projects with labor costs over $10 million succeed (Standish Group)
•    Nearly one in five projects will be canceled entirely (Standish Group)

Who are the major players involved in a company’s technology project?

The five most important players in large Enterprise technology projects are the CEO and his/her key executives, the board, the program director, the systems integrator, and the software licensor.

The systems integrator—the consulting firm that helps the client implement the software—is the largest cost driver. The program director relies mainly on them for project management. The company’s board typically oversees, in conjunction with the CEO and his/her team, budgetary approvals and key milestones.

Unfortunately, the traditional approach with these players—used for more than 20 years—has proven to fail about 70% of the time.

Why do large technology projects go wrong so often?

The main reason for the high failure rate is that the traditional project management approach is inherently unproductive with large Enterprise projects. Disconnects within and between the five major players above commonly produce time delays, which always generate cost overruns. With large technology projects these overruns often cost several hundred thousand dollars per day.

A confounding factor in large technology projects is that problems and solutions are often counter-intuitive. For example, being under budget early on can often mean that the project is headed for serious trouble because key work isn’t getting done. Another problem is that when companies have large cost overruns the money goes to the systems integrator, the player most entrusted for project management. A third disconnect is that companies typically try to get too much bottom-up input, which often creates bad designs and implementations that take too long, cost too much, and don’t work well when they are rolled out. For the right reasons they do the wrong things.

By the time project problems are significant enough to get the board’s and CEO’s attention, the project is already in trouble. When projects get into trouble the conventional approach is to have the systems integrator audit their own project. This doesn’t make sense when you think about it. Another common response is to freeze the budget. Doing this can often make matters even worse.

How can board members and CEOs recognize early warning signs that a large technology project will go or is going off track?

To keep your fingers on the pulse of large technology projects it is useful to back up the conventional model—due to its failure rate—and use an advisor who is independent, puts senior experience on the ground, and has an accelerated approach. In addition, there are five important questions to keep asking:

1. Is there a clearly understood master project plan? It’s common to lose site of the forest for the trees in large technology projects. If there isn’t a clearly understood master plan you can be sure that you won’t have an effective Enterprise project.

2. Is the governance and change leadership process over-engineered? It’s common to have too many moving parts in the governance process. Less is more – and the people involved need to know those who have the power to make tradeoff decisions.

3. Does the company’s program director have enough independent support? It’s too common for program directors to fail. They need independent and experienced support.

4. Do decision makers welcome bad news? Bad news is good news when it’s early. Solving problems early paves the way for better, faster, and less expensive implementations later.

5. Does the client use contingency planning as a project management tool? Managing purely by a budget is dangerous because decisions can be made that reduce short term expenses while causing large long term overruns.

What should the Audit Committee or Board do to steer the technology project back on course?

When there is a problem, what not to do is often just as important as what to do. The stress of an Enterprise project is high – especially when problems develop. Because there are five different players involved in these projects, solving them requires a holistic approach and a steady hand. The common practices of asking the systems integrator to audit their own project, or freezing the project itself, can often make matters worse.

The first step should be to focus on the questions above. It also makes good sense to work with someone who is independent, has been directly accountable for difficult projects before, and who has an accelerated approach.

On the front end of projects, early, deliberate and sustained oversight can help to avert wrenching interventions later. As much as the board and CEO need to review and approve funding for major technology projects, they also should have a clear mechanism to assess and manage key project contingencies throughout the process.

What is your experience with large Enterprise technology projects?

I am CEO of Brand Velocity, the project acceleration company. Our firm specializes in helping boards, executives, and program directors improve and accelerate large Enterprise projects.

Prior to forming Brand Velocity, I led The Coca-Cola Company’s global technology function, personally led a $1 billion global Enterprise technology project, and served on the board of Coca-Cola Nordic Beverages when they implemented their Enterprise system across Denmark, Finland, Sweden and Norway.

Having worked on Enterprise projects and on project and company turnarounds for the past two decades, it’s very clear that the conventional model doesn’t work well enough. Enterprise projects can be improved and accelerated using a different approach.

Jack Bergstrand is CEO of Brand Velocity, Inc. and leads the firm’s thought leadership on knowledge work productivity. He has more than 25 years experience in corporate change leadership and crossfunctional management. Prior to joining Brand Velocity he was vice president of business systems for The Coca-Cola Company, where he led and restructured the corporation’s largest function, including global information technology operations, data standards operations and enterprise-wide global systems initiatives.

Bergstrand was also senior vice president and chief financial officer of Coca-Cola Beverages Ltd., the publicly traded bottler of Coca-Cola soft drink products in Canada. He also served there as vice president of manufacturing and logistics, guiding the company’s national supply chain and change leadership strategy.

The first 10 years of his career focused on sales and marketing, where he was vice president and division manager and vice president of marketing for The Coca-Cola Bottling Company of New England.

Bergstrand earned his master of science degree in management from Stanford University, a master of arts degree in advertising from Michigan State University, and is a doctoral candidate in the Executive Leadership Program at The George Washington University.

He can be reached at jb@brandvelocity.com.