Managing the Portfolio,
Realising the Benefits


BPUG Congress, 10th February 2009


Stephen Jenner

Stephen.jenner@cjit.g...
Framing statement




“I love money.


I love money more than the things it can buy.


There’s only one thing I love more ...
Framing statement




“OTHER PEOPLE’S MONEY”



        Danny DeVito as ‘Larry the Liquidator’
                     1991, ...
Change programmes - the rationale




“The fundamental reason for beginning a programme is to
realise the benefits through...
But the track record is not good…


“Implementation of IT systems has resulted in
delay, confusion and inconvenience to th...
And ‘horror’ stories abound…


                      Cost overruns

• Concorde (1100%)
• Channel Tunnel (80% for construct...
And empirical research concludes…




“There is a demonstrated, systemic tendency for project
appraisers to be overly opti...
Four explanations…



1. The technical explanation - our tools are
   inadequate.

2. The psychological explanation – Opti...
Delusion or Deception?



“the planned, systematic, deliberate misstatement of
costs and benefits to get projects approved...
The Result - Business Cases contain
‘assumptions masquerading as facts’
The Solutions


1.   Be clear about the benefits you are buying.

2.   Spend more time doing your homework.

3.   Triangul...
The Solutions:
    1. Be clear about the benefits you are buying




Beware staff time savings – they
are vouchers, they o...
The Solutions:
     1. Be clear about the benefits you are buying




Beware ‘Strategic alignment’ as
an investment justif...
The Solutions: 1. Strategic Contribution Analysis
        Be clear about the benefits you are buying


 Service Transforma...
The Solutions:
 2. Spend more time doing your homework




 “It’s the Business Case,
           stupid”



Failing project...
The Solutions:
             3. Triangulate and Validate



Use more than one appraisal method, or ‘value
lens’:

   • Comb...
The Solutions:
4. Appraise ‘Attractiveness’ in the context of ‘Achievability’
The Solutions:
               5. ‘Gates with teeth’


• Regularly requiring project teams and
business sponsors to ‘sing f...
The Solutions:
            6. Independent review




“humans   not only are prone to make
biased predictions, we’re also
d...
The Solutions:
               6. Independent review

Ayers suggests an, “’Advocatus Diaboli’…
whose job it is to poke hole...
Case Study Delivering Major Public Sector Change Managing The Portfolio Realising The Benefits 2 Stephen Jenner Version 2
Case Study Delivering Major Public Sector Change Managing The Portfolio Realising The Benefits 2 Stephen Jenner Version 2
Case Study Delivering Major Public Sector Change Managing The Portfolio Realising The Benefits 2 Stephen Jenner Version 2
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Case Study Delivering Major Public Sector Change Managing The Portfolio Realising The Benefits 2 Stephen Jenner Version 2

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Research shows that many organisations struggle to manage their projects effectively, prioritize investment funds appropriately, and demonstrate a return on investment, in terms of strategic contribution or financial return. What’s the answer? Project Portfolio Management (PPM) is being touted as the next big thing, but the benefits are not automatic.
Stephen Jenner designed, implemented and operated the Criminal Justice System IT approach to Portfolio & Benefits Management in the UK. In this presentation he outlined the key issues to address if we are to maximize our chances of success, illustrated by examples from practical experience and research.

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  • Great presentation and oh so true! Is there a way to get usable versions of the templates shown in slide 21? I am building a portfolio function within my business and am meeting resistance from key sponsors/stakeholders. Basically, they don't want any 'teeth' near their train set. These tools would greatly help me build the processes and understanding. Thanks
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Case Study Delivering Major Public Sector Change Managing The Portfolio Realising The Benefits 2 Stephen Jenner Version 2

  1. 1. Managing the Portfolio, Realising the Benefits BPUG Congress, 10th February 2009 Stephen Jenner Stephen.jenner@cjit.gsi.gov.uk OR stephen.jenner@cabinet- office.x.gsi.gov.uk
  2. 2. Framing statement “I love money. I love money more than the things it can buy. There’s only one thing I love more than money. You know what that is?”
  3. 3. Framing statement “OTHER PEOPLE’S MONEY” Danny DeVito as ‘Larry the Liquidator’ 1991, Warner Bros Films
  4. 4. Change programmes - the rationale “The fundamental reason for beginning a programme is to realise the benefits through change.” Office for Government Commerce (OGC), ‘Managing Successful Programmes’ “It is only possible to be sure that change has worked if we can measure the delivery of the benefits it is supposed to bring.” UK Cabinet Office, ‘Successful IT: Modernising Government in Action’
  5. 5. But the track record is not good… “Implementation of IT systems has resulted in delay, confusion and inconvenience to the citizen and, in many cases poor value for money to the taxpayer.” Public Accounts Committee, 2000 “30-40% of systems to support business change delivery no benefits whatsoever.” Office of Government Commerce, 2005 “the committee has no confidence that the amounts being assessed have any relationship to the benefits anticipated to be returned.” US Senate Appropriations Committee, 2007
  6. 6. And ‘horror’ stories abound… Cost overruns • Concorde (1100%) • Channel Tunnel (80% for construction and 140% for financing costs) • Scottish Parliament – 10 times over budget and late • Jubilee line extension costs underestimated by £1.4bn Benefits shortfalls • The Dome visitors down by 5-6 million • Eurostar passenger forecast in yr1 of full operations = 15.9m, actual = 2.9m • Bangkok skytrain – demand 2.5 times over-estimated • Humber Bridge – traffic 25% overestimated in yr1 of full operation.
  7. 7. And empirical research concludes… “There is a demonstrated, systemic tendency for project appraisers to be overly optimistic. This is a worldwide phenomenon that affects both the private and public sectors…appraisers tend to overstate benefits, and underestimate timings and costs.” HM Treasury “it is found with overwhelming statistical significance that the cost estimates used to decide whether such projects should be built are highly and systematically misleading.” Flyvbjerg “Delusional optimism: we overemphasise projects’ potential benefits and underestimate likely costs, spinning success scenarios while ignoring the possibility of mistakes.” Lovallo and Kahneman
  8. 8. Four explanations… 1. The technical explanation - our tools are inadequate. 2. The psychological explanation – Optimism bias, derived from cognitive biases. 3. The economic explanation – continuing with a project creates work for project managers, suppliers etc. 4. The political explanation – “Strategic misrepresentation”?
  9. 9. Delusion or Deception? “the planned, systematic, deliberate misstatement of costs and benefits to get projects approved.” In short, “that is lying”. And that’s because, “Lying pays off, or at least economic agents believe it does.” Flyvbjerg et al “Figures don’t lie, but liars can figure” Sharpe and Keelin 38% of respondents in one survey openly admitted to overstating benefits to get funding with the traditional investment appraisal process being, “seen as a ritual that must be overcome before any project can begin” Ward
  10. 10. The Result - Business Cases contain ‘assumptions masquerading as facts’
  11. 11. The Solutions 1. Be clear about the benefits you are buying. 2. Spend more time doing your homework. 3. Triangulate and Validate project proposals. 4. Appraise ‘Attractiveness’ in the context of ‘Achievability’. 5. ‘Gates with teeth’. 6. Independent review. 7. A ‘Clear line of Sight’ from Strategic Intent through to Benefits Realisation.
  12. 12. The Solutions: 1. Be clear about the benefits you are buying Beware staff time savings – they are vouchers, they only have a value when they are cashed or the time is re-deployed to other value adding activity.
  13. 13. The Solutions: 1. Be clear about the benefits you are buying Beware ‘Strategic alignment’ as an investment justification, “Our CEO defines ‘strategic projects’ as expensive projects without a business case.” Corporate Executive Board paper
  14. 14. The Solutions: 1. Strategic Contribution Analysis Be clear about the benefits you are buying Service Transformation Programme – High Level Strategy Map Vision Strategies Metrics Learning from citizens and businesses Government will monitor the customer – Customer Insight, Customer Journey experience through journey mapping Mapping, Customer Satisfaction and customer satisfaction tracking To change public Measurement mechanisms at the front line (STA Oct services so they 07) more often meet the Grouping services in ways that are needs of people and meaningful to the customer e.g. Tell Us Key progress measures 1 - Reduction Once, Directgov and Businesslink.gov businesses, rather in the amount of avoidable contact. To than the needs of achieve a 50% reduction by 31.3.11. Rationalising services for efficiency and (STA Oct 07). government, and by service improvement – online doing so reduce the (Directgov and Businesslink.gov), phone (contact centre accreditation); Key progress measure 2 - Building frustration and stress face to face and helplines better online services – citizen and of accessing them. business e-services content migrated to Directgov and Businesslink.gov. More The result will be Making better use of customer than 95% of websites to have migrated information public sector already holds: by 31.3.11. (STA Oct 07) services that are a. Strategic level – Home Office lead on better for the Identity mgt and MoJ on information customer, better for sharing Efficiency savings – the value in b. Tactical level – Tell Us Once recording the level of savings achieved front line staff and by departments is recognised, and the better for the CO will track these as this STA is taxpayer (Service delivered. (STA Oct 07). Linking local and central government Transformation Agreement, October Face-to-Face – The LGDC will develop 2007). a progress measure reflecting the Engaging front line staff FOSS approach for later inclusion in this Agreement. (STA Oct 07)
  15. 15. The Solutions: 2. Spend more time doing your homework “It’s the Business Case, stupid” Failing projects don’t have brilliant business cases
  16. 16. The Solutions: 3. Triangulate and Validate Use more than one appraisal method, or ‘value lens’: • Combine financial metrics with multi- criteria analysis and decision conferencing. • Validate/book the benefits with the recipients – before investment. • Establish effective accountability for delivery and benefits realisation.
  17. 17. The Solutions: 4. Appraise ‘Attractiveness’ in the context of ‘Achievability’
  18. 18. The Solutions: 5. ‘Gates with teeth’ • Regularly requiring project teams and business sponsors to ‘sing for their supper’. • Presumption – if you exceed tolerance, funding ceases. • Concludes with a formal re-commitment to benefits realisation. • Challenge and Support.
  19. 19. The Solutions: 6. Independent review “humans not only are prone to make biased predictions, we’re also damnably overconfident about our predictions and slow to change them in the face of new evidence. In fact, these problems of bias and overconfidence become more severe the more complicated the prediction.” Ayers
  20. 20. The Solutions: 6. Independent review Ayers suggests an, “’Advocatus Diaboli’… whose job it is to poke holes in pet projects. These professional “No” men could be an antidote to overconfidence bias.” Davidson Frame proposes the use of “murder boards” to pull a proposal apart to, “make sure that arguments in support of project ideas do not have built into them the seeds of their own destruction.” Steve Jenner - I suggest a ‘fool’ to ask the questions others don’t dare to ask and identify those, ‘assumptions that masquerade as facts’.
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