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The Measurement Inversion in PMS

In his book How to Measure Anything - Finding the Value of Intangibles in Business, Douglas Hubbard makes an astute observation regarding how companies measure the value of their IT or software projects:

The Measurement Inversion: In a business case, the economic value of measuring a variable is usually inversely proportional to how much measurement attention it usually gets.

MeasurementInversion

(Diagram reproduced from the book How to Measure Anything by Douglass Hubbard, Copyright 2007 John Wiley & Sons)

Hubbard makes this observation based on his analysis of 20 major information technology investments. Each business case having 40 to 80 key variables that were used to decide on project funding, internal resource allocation, and vendor selection.

At Tenrox, I can concur that we see this time and time again, specially for projects that fail or experience significant stress. An example of this was alluded to in my previous post. After a few more discussions by our team with the customer the conclusion seems to be the following:

The customer has now identified several key work processes in their everyday business management that were not originally scoped. As a result, even though the implementation of the original project's scope is 95% complete they still cannot derive the full benefit of the investment that has been made. So what happened?

As the Measurement Inversion finding confirms, when making IT or enterprise software type investments, companies measure initial costs, long-term costs, and cost-savings benefits the most. Why? Because they are easier to measure. However, these are the least important measurement values for the ultimate success of the project.

The more important measurements are the probability of project completion, successful navigation of the inevitable but often necessary scope changes, technology adoption rates and revenue increase. Yet, such things are hardly ever measured because they are not easy to measure. Hubbard suggests that companies should pay a lot more attention to how they measure project value, and to what they should measure, before they ever embark on such strategic investments. Of course, based on our experience with such projects, I could not agree more.

Back to our Excel story, the company in this case focused too much on initial cost, long-term costs, and cost savings. As a result, several months later, new scope changes are being discovered that put the entire project at risk.


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