In this blog, Alexei Kuvshinnikov, an accredited PRINCE2® 6th edition trainer with 20+ years of international project management experience, explains why user´s responsibility for benefit realisation can be crucial for organization´s strategic growth.
In the PRINCE2® method, the responsibility for benefit realization rests with the user. This seemingly simple arrangement can make a big difference for an organization´s strategic growth.
One purpose of projects is to reduce the high level of uncertainty involved in the management of change. And change is a driver of strategic growth.
Now, in a non-PRINCE2 project environment, the responsibility for benefit realization is likely to be defined only in the vaguest of terms. As a consequence, the realization of benefits may become open to a contest among all kinds of influences.
For a start, to get the approval for funds the customer may be tempted to create exaggerated expectations, such as the utility of the product that will be the output of the project. Against this background, the user is likely to propose accordingly inflated benefits. Blurred lines of responsibility in a non-PRINCE2 project environment tend to unleash user´s fantasies!
I'm speaking out of my own experience. On several occasions in the past I worked with project managers who made some outrageously ambitious promises that they couldn´t possibly keep even in their dreams. Those were the fat times; abundant funding was available for all kinds of adventures and simply written off with a shrug when a project got hopelessly stuck. In the end, soap bubbles inevitably burst, naturally. But each time my colleagues got off the hook unscathed by spinning project customers a yarn about how the sixpence fell just a tad short of buying the moon.
Let’s just imagine a scenario here. An organization is considering to commit 1 million Euro to produce a game-changer product that would allow it to grow its market share and generate a revenue stream. One department proposes to aim for a conservative 5% increase in the market share and an annual ROI of 100,000 Euro over ten years. Another department promises an ambitious 8% growth in the market share and a 150,000 Euro ROI over the same period of time.
Since both proposals are equally based on a finger-in-air assessment and the organization is unaware of the advantages brought by the PRINCE2 method, it goes with the higher bid and bases its strategic growth plan on the annual cash flow of 150,000 Euro and recovering the investment in under seven years.
Promises, however, can’t be kept and in the first year the product only realizes an annual benefit of just 100,000 Euro. A 50% shortfall in cash flow demands an operational drawdown, leading to a second-year benefit of barely 70,000 Euro. A vicious circle sets in leading to the collapse of the strategic growth plan. The culprit department shrugs off any responsibility for their planning debacle by blaming it on, say, a sudden fall-off in consumer spending.
Now, within a PRINCE2 environment you have certain steps that might prevent this kind of a disaster from happening. As the user is responsible for benefits realization, benefits planning will be most likely underpinned by a deflated, rather than an inflated, forecast. There is no sense in promising corporate management the earth if you are responsible for delivering it. Or rather, not delivering it.
PRINCE2 organizations tend to display unspectacular but impressively stable strategic growth curves. Continuing with the above example, the user (after very careful consideration) would decide that 100,000 Euro per year is feasible. But to stay on the safe side would propose an annual benefit of only 90,000 Euro – and only from the second year onwards. The organization´s approach to strategic growth would reflect this and plan its curve accordingly. True, it might look unspectacular. But will be solid as a rock.
As the user is as good as certain to realize more benefits than were planned for year one, there would be no shortfall of revenue to fund the implementation of the strategic growth plan. Quite the contrary, realization of additional benefits will make the growth curve steeper than originally planned.
In times of crisis and uncertainty, this will be the only sensible growth strategy. But its success will be based on the adoption of the PRINCE2 method.