Venture Capital Project Management Model

Projects fail. Big projects, arguably, fail more often and with bigger consequences. The more projects in the hopper, the more failures you will see, in absolute if not percentage terms. Government, by its very nature, has thousands of projects underway at once. Back in the 2000s when I worked on mission critical projects with the good folks at Number 10 and (Sir) Peter Gershon, I think we had 120 or so in the first list we came up with. I would be surprised if the count is any smaller now.

Venture capital (VC) investments fail. Perhaps big investments fail more often. The important differentiator is that VC investments are usually made little and often – projects receive small amounts early on (usually from Angel investors which precede VCs) and then more money is gradually invested at higher valuations, as the company/idea grows and reaches various proof points. The last few years have seen this model strained as huge investments can be put into late stage companies (think WeWork … or maybe not).

This is quite different from how most projects are run. Projects go through lengthy due diligence phases up front, sometimes lasting a year or more (longer still when the project concerns physical infrastructure – railways, bridges, nuclear power plants etc). The output of that DD is a business case – and then the go button is pressed. Procurement is carried out, suppliers are selected, contracts are signed and govenrnment is on the hook, for 5, 10 or even more years.

Agile projects can be different in that contracts are shorter, but the business case generally supposes success (hence “optimism bias” as a key metric – if it goes wrong, then it just needs more money). But they can still carry a momentum with them which means that they carry on long after failure was inevitable.

VC companies are more ruthless. They know, after years of meaurement across the industry, that only one or two of their investments in any given period will count for the vast bulk of their returns. They call this “the hit rate” (Fred Wilson writes brilliantly about this, and many other things). Poor performers are culled early on – they don’t get additional funding. Sometimes the investment is in the team, and they are able to change their business idea (that is, “pivot”) and get to continue, buf often the company is shuttered and the team scatter and move on to new ideas.

This brings a tendency to look for huge winners (or the potential for them) – the VC knows that they need to win big, so they look for ideas and teams who will produce those big returns. If they strike out, well, perhaps 8 out of 10 were going to break even or lose money anyway.

  • Data from Correlation Ventures suggests about half of investments made by VCs fail, and about 4% generate a return of 10x or greater

Is there, then, a case for treating government projects the same way. Perhaps we could back multiple, competing projects in the same space, and fund the ones that were proving the most successful? We would have to change the contracting model and include break clauses (not termination clauses as that, in the current vernacular, implies failure – we know that projects are going to fail, we just don’t know which ones).

Sure, we would “waste” some money doing it this way. But we already do – we think we are wasting it right near the end when the project has consumed all of its budget and has nowhere left to go, but, in reality, we’ve been pouring money into something that wasn’t going to success for months or years beforehand.

We could also copy the way some VCs back teams – that is, find teams who have successfully delivered and work to keep them together, moving them onto the next idea, because it may just be that success breeds success. Teams who have proven capable at £10m of project spend should get to play with £50m. or £100m and £200m. We could rotate new team members in to give them exposure to what success looks like, before splitting successful teams and giving them more to run.

The current model, even with all the agile changes in the last decade, isn’t working as well as it could. There’s a reason that VC companies manage a portfolio – they know that they have to spread their capital quite wisely. Our project management approach feels more like passive investment in an index, rather than active management of a portfolio. We need to make some changes.

I’m WORN out

We’ve gone through a lot of acronyms for storage – ROM, RAM, EEPROM, CD-ROM, WORM etc.

How did we, then, manage to get to a place where the lessons learned in delivering, and failing to deliver, projects are in the WORN format?

Write Once, Read Never.

Wading Through Treacle

Long ago, a wise and experienced civil servant cautioned me upon my arrival at the Inland Revenue that my job would often feel like “wading through treacle.” He wasn’t wrong, though he posessed the supreme skill of somehow skating over that treacle and so got things done.

I often think back to that quote. It’s not unfair to say that the civil service is heavily driven (some would say constrained) by bureaucratic and cumbersome processes that, if anything, are designed to contain change rather than enable it. “Governance” is the thing – slow down the ability to do things and certainly the ability to spend money and thus keep everything on an even keel. Of course, all of that governance and process designed to slow the spending of money has not prevented eye watering project failures and associated write-offs.

More recently the move to more agile methods has resulted, in some places and in some ways, those processes being thrown away. More lightweight processes have replaced them with the aim of giving product owners and developers more freedom to get things done.

The trouble is, the new and old processes usually come together at key points – most obviously at the business case sign off stage. There, it’s more like two strips of velcro coming together and interlocking so perfectly that nothing moves – forwards, backwards or sideways.

I recently wrote a standard “5 case” business case for an iterative and highly experimental project (at a relatively low spend – certainly one of the smallest projects I’ve ever worked on, in public or private sector). It’s tough to write such a thing when you’re not sure what the final outcome will be – on the basis you’re running an experiment and will certainly have to change course during the project, and probably several times. It’s also tough to evaluate competing options in such an environment. And yet such documents are part of the rite of passage for a project.

“We must demontrate Value for Money” is the mantra. Technically, you can only do that in the past tense – show what value you have delivered, not show what value you will deliver.

Business cases for such projects can’t be done of course, at least not in the expected supposedly gold standard 5 case way. Efforts have been made to update the templates, but they are still far from adequate where spend certainty increases with the time spent on the project (subject to good management) but scope certainty can remain high throughout.

I fear whilst this is a process that is ripe for, ahem, transformation, it’s not likely to be on the list of processes successfully transformed any time soon.

Projects as Films

Today’s Financial Times notes

2% make it to the cinema and perhaps 1/3rd of those are profitable. Those are long odds.

There are likely 3 rules of cinema

1) Make something you, or someone else has already done (hence why we see so many remakes and sequels … Toy Story 4, endless Marvel movies)

2) Produce a film with people you’ve worked with before (which is why proven directors and actors get repeat work)

3) if you’re going to do something completely new, start small and don’t risk a lot (hence low budget independent films)

Projects, which have perhaps the same, or maybe even a worse, success rates, have the same rules

1) Do what someone else has already done and stick as closely to the script as possible (cloud technologies and configurable apps versus custom projects)

2) Keep the same team around you, as long as they have been successful, because you know how they work and they know how you work; trust the team to solve the problems they know how to solve … bring in new people to keep things fresh but don’t go for wholesale swaps

3) If you really want to do something novel and different, start small and don’t spend a lot of money … especially if you’re working with people you’ve never worked with before

Those 3 rules, a version of which I wrote on this blog many years ago, could massively boost your project success rate.

Delivery and Performance Down Under

An interesting read, via @paulshetler, today, covers the setting up of a new piece of governance in New South Wales. the “Delivery and Performance Committee” (DaPCo).

The best quote from the release, by Victor Dominello, NSW Customer Minister, is easily:

This reform – is cultural and it is whole-of-government – it is the hard stuff, the messy and complex innards of government that nobody likes to talk about. It’s not shiny but it’s one of the biggest enablers for digital transformation and service delivery – which is why we’re committed to getting it right.

The committee plans to ask the hard questions on delivery, drive adoption of a Netflix-like approach (“test and tweak services in short delivery cycles based on customer feedback”), improve the “tell us once” functionality.

Importantly, they say that the model will be replicated at the Federal level, with “Services Australia”, previously known was the Department of Human Service.

and then this

With our counterparts in the federal government, we’re making big advances in designing services around complex life events – we’ve already launched a prototype to help people through the end–to–end journey at pivotal moments in life, like what to do when somebody dies, so you don’t have to go to 10 different government departments

For a moment I thought it was 2001 all again and UKonline had moved down under.

It all sounds good. Just a couple of thoughts

  1. A committee? That sounds like a challenging way to manage an agile, fleet of foot, iterative delivery cycle based on customer feedback
  2. What’s the first project or policy it will start with and is it policy focused, technology focused, solution focused, delivery methodology focused or all of the above?
  3. What’s the lever by which the work gets done once the committee pronounces? How will they tell everyone what the new guidance is so that people don’t waste time preparing the wrong solution that the committee then reject?

Interesting stuff. Would be good to compare before and after, if it can be asssessed transparently. Lots of effort has gone into making a similar switch in the UK, of course, but the translation into real improvement for transactional services is hard to see except in a few really strong cases.

Quick …

Name a successful public sector IT-led project, completed over the last 20 years, that the public will have heard of.

This was prompted by the tweet below, from Dan Hon. I narrowed the time frame a little from “any ever” to “20 years.”

My contribution was Oyster Cards – a mix of technology and physical infrastructure that is a roaring success. Others suggested congestion charging, Human Genome, healthcare.gov (the second iteration), job centre plus and the UK’s online car tax.

All successful now, but anyone anywhere near any of them will know just how difficult and how near disaster some of these projects were at various times in their life.

No project of consequence sails smoothly from the top left of the project plan to the bottom right. The trick is anticipating as many of the things that will go wrong as possible, and having a plan to deal with them. And then having a team around you who can deal with all of the things that you didn’t think of – and are capable enough to run around, hair on fire, to solve the emergencies, whilst still keeping the whole thing roughly on plan.

The list of such projects isn’t long though. Have we forgotten the other successful ones? Do our brains – or my brain particularly perhaps – think about the ones that have gone catastrophically wrong and forget the ones that didn’t grab headlines?

Now, what if the question I asked was … Quick … name a successful digital transformation project in the last decade that everyone would know about.

I’ll start you off. Netflix.

I’ll wait.

Trouble Down Under

It turns out that not only can the Aussies lose a game of cricket from a seemingly invincible position, but they also share the same struggle as everyone else. That is, delivering projects is hard. Sometimes too hard.

The folks in Sydney have been busy building a light railway, with the aim of making travelling around the city easier and, doubtless, getting some cars off the road. This is no HS2, the plan is for it to run only 12km. Maybe it’s hs0.5.

The budget was a seemingly manageable AUS$1.6bn, but, a little like Crossrail, there’s now a delay of at least a year, and costs have gone up AUS$1bn. That’s a big increase – a far bigger increase than the equivalent in Crossrail (1 year’s delay, £1bn extra cost, so far at least, but that’s roughly 10% of budget; this is more than 60%). Something went wrong with the forecasts.

As I wrote in a previous post, borrowing a quote from someone else:

“Start digging a hole and make it so big, there’s no alternative to coming up with the money to fill it in”

Projects are hard. Big projects are harder. Big construction projects may be harder still. Australia is planning to spend some AUS$300bn on infrastructure (from 2015 onwards). Let’s hope that’s really AUS$100bn with AUS$200bn of optimism bias thrown in. Some reports suggest that the investment will be AUS$75bn a year for the next 10 years. Still other reports sugegst the spend it AUS$100bn over 10 years, on roads and rail. Numbers are hard too, it turns out.

When costs go up, suppliers may be blamed. That may make them bid more for upcoming projects, to cover their risk. Or bid less, hoping to beat out competition, and hope for the best – Carillion shows that’s not a good plan of course.

With a large budget for infrastructure, Australia may find itself its own worse competition – there may not be enough capability to delive. Bidders could concentrate on the projects that they think they can make the most money on, leaving other projects alone. They may focus on lower risk projects, meaning the flagships stall. Other companies with less capability may bid, and the failure rate may go up.

Managing a large portfolio, knowing when to press the accelerator, when to hit the brakes, when to cut funding, when to provide more funding, when to recognise a risk is actually an issue and ensuring there’s enough capabilty and resource available, is a challenge every company and sector experiences.

The ambition is eye catching, but the practicailities will catch up with that ambition … delivery will be delayed, costs will be higher and some projects will fail dramatically. The hole, though, will be deep enough that it will keep getting filled.