A poor estimate is often cited as the root cause for an IT-enabled digital transformation failure. The estimate itself is obviously not the cause for failure. Rather, it is the behaviors and actions that are driven by the poor estimate which ultimately deem the project a failure. Failure to develop an accurate estimate with the appropriate contingencies can lead to:
- Attempts to lower costs by assigning less capable talent than was assumed by the estimator resulting in flawed designs/execution.
- Reductions in scope to meet budget targets resulting in the inability to achieve the established business case.
- Flawed participation plans put in place leading to the inability to apply talent on time. Result – cascading of additional overspend.
- Questioning of management’s competencies by senior leadership. This can result in a dysfunctional governance model as the delegation of decision-making becomes inhibited.
How is it that so many IT-enabled digital transformation programs start with a low estimate?
We will start by setting aside those estimates that were put forth with the knowledge that they were low. These low-ball estimates are sometimes provided by consultants working to get their foot in the door, or by executive sponsors working to gain approval for their programs. Excluding low-ball estimates, the primary cause of poor estimates tends to be a lack of experience and background of the leader.