As a project sponsor or steering committee member you are probably familiar with scope creep. Sometimes known as “requirement creep” or even “feature creep,” the term refers to how a project’s requirements tend to increase over the project lifecycle.
For example, what once started out as a single deliverable becomes five, or a product that began with three essential features now must have ten.
Scope creep is typically caused by key project stakeholders (like yourselves) changing requirements, or sometimes from internal miscommunication and disagreements. But while scope creep is a problem for many projects, it is nothing compared to the far more devastating value creep.
Value = Benefits – Costs
Value creep is when the benefits of your project progressively go down while the costs go up. The result is a loss in project value, often resulting in a move from positive to negative returns.
And it’s happening all the time. Most projects are subject to the scope changes, unforeseen events, and time and cost overruns that represent this value creep.
I have sat in numerous steering committee meetings and listened as decisions are made, usually on the recommendation of the project manager, that progressively reduce the value of the project.
For example, one project sponsor stated that one of his main goals was to ensure the new system was based on a platform that is industry standard, and much used in other industries as well. The reason behind this was to prevent having trouble finding skilled employees, as had been the case with the system it needed to replace.
He then went into his steering committee meeting and immediately agreed with his project manager’s statement that the new system should be based on a platform that was already in use in the organization.
It was even harder to find skilled employees for this platform than for the system it needed to replace, but somehow this was ignored.
Not surprisingly, the project costs exploded, and it failed to deliver the expected benefits. The project manager didn’t mind; he had brought the project in on time and to (his) specification. The organization then had to put up with an ill-fitting solution for years.
As a sponsor or steering committee member you need to always be conscious of value creep. These decisions—often made gradually over time—cumulatively increase the cost and decrease the benefits.
The graph below (click to enlarge) visualizes a 10-month project that is fictional but is similar to real live projects I have witnessed. The project starts with a clear value proposition: $9M benefits and $4M costs.
For the first two months, everybody is convinced it will stay like this, and then a part is descoped to save costs and keep the project within time and budget. This reduces the benefits by $2M.
Meanwhile, the costs start to go up (as it is with most technology projects). After five months it becomes clear that the system cannot automate a number of things that had been assumed/promised without putting in an additional two months of work.
The sponsor and steering committee want to keep the timeline, so they decide against the extra work. Boom, another $2M reduction in benefits. And from this point on, the project has an actual negative value.
Loss of benefits is usually a far greater long-term loss than a (reasonable) cost overrun. One way of fighting value creep is to constantly focus on protecting the benefits, refusing to compromise or harm the project’s value proposition.
To do this you need to understand which parts of your project deliver the benefits; and how these benefits will be delivered. Otherwise, you won’t know what value tradeoffs you are dealing with when you have to make decisions.
In a nutshell: Value creep is the number one killer of business value.