Introducing the INPACT Assessment Process

1. The Change Equation How to manage complex change projects – and succeed! Introducing the INPACT Assessment Process Peter Duschinsky Managing Director, The Imaginist Company

2. Who are we? • The Imaginist Company is a change management consultancy • We specialise in helping private, public and non-profit sector clients identify and overcome barriers to change and performance improvement • Imaginist undertakes projects and programmes which require: • ‘Quantum’ thinking and the creation of new approaches • Research, diagnostic assessment, analysis and evaluation • Development of clearly written guidelines and policy documentation • Dissemination, facilitation and mindset change • We have just published ‘The Change Equation’, a new capability / complexity assessment methodology, created to help clients improve the success of their change and transformation projects.

3. Who are we?Our Associates and Partners

4. The Change Equation ‘The Change Equation’ is based on some key contentions: • The success or failure of a change project is dependent on the complexity of the project being within the capability of the organisation • The management of change cannot be achieved within the lifecycle of the project – it has to start earlier and go on afterwards • A conventional approach to management of a complex project (i.e. control and intervention) will not achieve a successful outcome • Management typically: • underestimates the complexity of the project, • employs project teams with the wrong skillsets, and • Is unwilling to invest in change management early enough

5. The Change Equation • So the objective of running an INPACT assessment is to change mindsets • In order to do this we need to provide clear and simple top-level indicators that managers can understand quickly • We use a dashboard approach, including route-maps and RED / AMBER / GREEN traffic light indicators

6. £ The Change Equation • Today we will look at how to take two models: • the Organisational Culture Evolution spiral • the Business Process Capability ladder • …and combine them to provide a baseline:the Organisational Capability Indicator • Then see how to assess the complexity and risks of a change project (3) • By analysing and quantifying the gap between Organisational Capability and Project Complexity, you can predict the likely success or failure of a change project • We can then add other tools to enrich the gap analysis 1 2 3

7. Only 32% of change projects are successful • That’s not our opinion, it comes from accredited sources: • Standish Group annual survey 2009 confirms that: • Only 32% of projects deliver the full benefits, on time and within budget • 68% of projects are late, over budget and deliver less than the expected benefits • 24% fail completely and are abandoned before they finish!

8. Change projects often fail to deliver

9. More evidence of the same trend • The Harvard Business School tracked the impact of change efforts among the Fortune 100 and they also found that only 30% produced a positive bottom-line improvement… • A recent survey of change programmes in <400 European organisations quoted by Prof. John Oakland, Emeritus Professor, Leeds University Business School found that: • 90% of change programmes faced major implementation problems • Only 30% delivered measurable business improvements

10. 25% FAIL 50% PARTIALLY SUCCEED 25% SUCCEED More evidence of the same trend -2 • Management consultant PricewaterhouseCoopers (March 2007) claim that: • 25% of IT projects succeed • 25%fail and • 50% are late or over budget • A CIPD survey of 800 executives found that reorganisations failed to deliver real improvement in performance in 40% of cases Why do so many change projects fail to deliver?

11. Why do so many change projects fail to deliver? • Here are some of the reasons we all know about: • a focus on the technology instead of the business benefits • poor specification of the system and lack of due diligence on supplier capability • failure to gain senior management championship • inadequate resources • poor project management • lack of user involvement • But if we all know about the reasons, why are change projects still going wrong so often?

12. Some examples… Terminal 5 “The Terminal 5 debacle is a national disgrace” Daily Mail, 14 April 2008

13. Shortage of staff car parking spaces Only one employee security checkpoint operating Some staff unable to log on to the computer system Hand-held communication software running slow No managers on the ground to re-allocate work Shortage of bar-reading storage bins Baggage handling staff late in arriving 60 staff queue to get into terminal 6am: 3 planes leave without bags Bags pile up, unattended By midday 20 flights cancelled 4pm: baggage conveyor belt grinds to a halt, BA suspends all baggage check-in So what went wrong? • The result: Over 28,000 lost bags, 700 cancelled planes and more than 150,000 disrupted passengers

14. C-Nomis • 2004: HM Prison Service commissions C-NOMIS to give prison and probation officers real-time access to offenders’ records • June 2005: the approved lifetime cost of the project is quoted as £234m • March 2007: Home Secretary John Reid: “the main C-NOMIS base release, encompassing full prison and probation functionality, will be available no later than July 2008" • July 2007:[just 4 months later!] £155m has been spent, C-NOMIS is two years behind schedule; estimated lifetime project costs are now £690m. The Ministry of Justice suspends the project • How can they have let a Minister do that? Surely someone knew…?

15. What went wrong? • National Audit Office report: • The project board accepted assurances that the project was “all going well” and nobody knew what was being delivered for the money being spent • There were insufficient resources and structures in place to deliver such a complex project • Over time policy developed and stakeholder requirements changed, but there was no cumulative view of the impact of change requests on costs and timescales • No resources were allocated to simplifying and standardising business processes across the 139 prisons and 42 probation areas, each of which had their own ways of working The Commons Public Accounts Committee report verdict: “a spectacular failure – in a class of its own”

16. More examples… • Passport Office: • In 1999 delays in processing British passport applications, following the introduction of the Passport Agency’s new system, cost £12 million • £16,000 was allegedly spent on umbrellas to shelter those queuing in the rain to collect their passports! • MOD: • In 2002 a project to replace the British Army, Royal Navy and Royal Air Force inventory systems with a single system (the Defence Stores Management Solution) was brought to a halt after £130 million had been spent • Hardware worth a little over £12 million was able to be used elsewhere but the remaining £118 million was written off as a loss.

17. More examples… • The London Ambulance Service Computer-Aided Dispatch System • October 26, 1992:the London Ambulance Service CAD system goes live – and fails • A total of 46 people didn’t get an ambulance in time and DIED!

18. What went wrong? • The sequence of the collapse was: • Poorly trained staff did not update system with location and status of units • The increasingly out-of-date database meant units were being despatched non-optimally and multiple units were being sent to the same calls • A software bug generated a large number of exception messages– and un-responded exception messages generated repeat messages… • Lists scrolled off the top of the screens and were lost • The public repeated un-responded calls, adding to the chaos

19. What went wrong? cont… • The system grinds to a halt: • One ambulance arrived to find the patient dead and taken away by undertakers • Another ambulance answered a ’stroke’ call after 11 hours, and 5 hours after the patient had made their own way to hospital • CAD system partly disabled. Part-manual system seizes up completely • Operators now using tape recordings of calls, then reverting to a totally manual system • 29 October 2002:(3 days after confidently launching the system) Chief Executive resigns • The original estimate for the work was £1.25million. • By the time the project was abandoned, £7.5million had been spent. • A total of 46 people didn’t get an ambulance in time and DIED!

20. Some conclusions • “The the small software error was the straw that broke the camel's back, but the responsibility for the LAS's CAD system failure does not lie solely on the single developer who made the error or even the developing organization to which he belonged. Rather, the attitudes of key LAS members toward the project and the unreasonable restraints they placed on the project allowed the failure to occur.” National Audit Office report

21. Projects don’t just fail in the public sector! • MFI • 2004/05: MFI’s new ERP system brought in - and crashes • Total loss of customer order data reported • 2005/06: UK retail division reports a ‘substantial loss’ following the discovery of significant issues with the system which are affecting its ability to dispatch orders • MFI said they needed to spend another £30 million on it • 26 Nov 2008 - MFI goes into administration with the loss of 1,500 jobs • Coincidence?

22. Projects don’t just fail in the public sector! • HP • In 2004, HP's project managers knew all of the things that could go wrong with their ERP centralisation programme. But they just didn't plan for so many of them to happen at once. • The project eventually cost HP $160 million in order backlogs and lost revenue—more than five times the project's estimated cost. • Gilles Bouchard, then-CIO of HP's global operations, says: "We had a series of small problems, none of which individually would have been too much to handle. But together they created the perfect storm." • There’s a clue in there, somewhere…

23. Conclusion? Complexity is EXPONENTIAL!

24. Complexity is Exponential • We’re surrounded by examples of exponential growth: • For example, compound interest: • "Scientists have developed a powerful new weapon that destroys people but leaves buildings standing – it's called the 17% interest rate.” Johnny Carson, The Tonight Show, 1980 • All that we had borrowed up to 1985 was around $5 billion, and we have paid about $16 billion; yet we are still being told that we owe about $28 billion. If you ask me what is the worst thing in the world, I will say it is compound interest. President Obasanjo of Nigeria, 2000

25. You are here! (6,792,142,533) Complexity is Exponential • The world population is growing at an exponential rate: • …and consumption of resources is following close behind -our energy usage is depleting the world’s natural resources exponentially

26. Complexity is Exponential • And climate change is also following an exponential runaway profile

27. Complexity is Exponential • "The greatest shortcoming of the human race is our inability to understand the exponential function. We live in a world that can change exponentially – but we have brains that are hardwired to plot things out linearly - the software in our brains compels us to think about progressions as being simple arithmetic ones So as a species, and a society, we deal poorly with uncertainty in non-linear domains.” Prof Albert Bartlett, emeritus Professor of Physics, University of Colorado • As a consequence of this, the complexity of a project is usually UNDERESTIMATED

28. Managing Exponential Complexity • Exponential complexity = exponential RISK • So we should be able to apply risk management techniques to address it • Everyone happy with that? • According to David Christiansen, most risk management approaches work something like this: • Make a list of risks • Estimate the likelihood the risk will occur (call it X) • Estimate the cost the risk will create if it occurs (call it Y) • Multiple X by Y (David Christiansen, Information Technology Dark Side, a Corporate IT Survival Guide) • So let’s draw up a table with all the risk factors and score them…

29. Managing Exponential Risk So let’s draw up a table with all the risk factors, score them and then add them all together:

30. Managing Exponential Risk There’s more…

31. Managing Exponential Risk And still more… • You think this is daunting? Have you looked at government’s Gateway Review?

32. Managing Exponential Complexity So what’s wrong with that approach?

33. Managing Exponential Complexity • Lets go back to that earlier slide – only this time, lets look at the whole quote from David Christiansen: • Most risk management approaches work something like this: • Make a list of risks • Estimate the likelihood the risk will occur (call it X) • Estimate the cost the risk will create if it occurs (call it Y) • Multiply X by Y - that is supposed to tell you something useful - it might be the amount of contingency you need for the risk, or something like that • When the risks you anticipated happen, they become issues • When the risks you didn’t anticipate happen, you become a former project manager…

34. Managing Exponential Complexity • Wouldn’t it be great if we could find a simple, high-level indicator of project complexity? • It wouldn’t obviate the need for a detailed risk analysis • But it would give us a high-level indication of whether the complexity of the project had been judged correctly when allocating budgets, skilled resources and roll-out timescales • Well, we can…

35. Managing Exponential Risk • If complexity is exponential, we actually only need 3 factors to build an exponential scale: X * Y * Z • That won’t represent all the risks, but if we select the right factors, it will give us a good indicator • So what are our 3 factors?

36. Assessing Complexity • Which 3 factors? • They must be: • Common to all projects • Quantifiable (at least to a good approximation) by stakeholders • Sufficiently powerful in combination to lead to an accurate assessment of the complexity of a project

37. Managing Exponential Risk • The INPACT Exponential Complexity Tool uses the following 3 factors: • Number of people or Stakeholders involved • More people = more complex = higher risk • Number of business activities or Processes affected • More ambitious = more complex = higher risk • Elapsed Time to implement (in months) • Longer to implement = more complex = higher risk

38. The INPACT Exponential Complexity Tool • Think about a project you are familiar with. Where do you think you are? • Now do the numbers: Stakeholders x Processes x Time (in months) • Where are you actually?

39. Premature Termination Possible Recovery Conventional Management The INPACT Exponential Complexity Tool The model can also be used to understand whether a project that is going wrong can be rescued - or needs to be stopped

40. Complexity and the Implications for Change Management • “Complexity arises through connectivity and processes of feedback and emergence”Eve Middleton-Kelly, Director, Complexity Research Programme, London School of Economics • This feedback loop is also a feature of Chaos Theory • But in Chaos Theory, new, coherent and stable patterns eventually arise through repeated cycles of iteration • In a change project, the participants are constantly evolving, so the rules of interaction are in flux, making the final outcome ultimately unknowable • “Technically complex projects are complex because of the human aspects and not the technical intricacies, which are just complicated” Thomas Docker, citi, 2008 • - Complicated = not simple, but ultimately knowable • - Complex = not simple and never fully knowable

41. Complexity and the Implications for Change Management • In a complex project, new ways of working are created and new forms of organisation will emerge which are attuned to the culture of the organisation – and will therefore work • These need to be recognised, supported and embedded, not managed and controlled • This has important implications for Change Management

42. Complexity and the Implications for Change Management • Conventional change management interventions attempt to design and control the outcomes • This imposes changes in behaviour and over-rides the individual’s need to ‘invent their own route to the future’ • That approach blocks and constrains the naturally emergent patterns of behaviour…so people give up, fall back on ‘what’s in it for me’ and the change project fails • However, if the right enabling infrastructure is put in place to facilitate, nurture and support the new relationships and behaviours, the change project will have a good chance of succeeding • Are “nurturing” and “enabling” descriptions you would use of most project managers you know?

43. Why else do change projects fail? • So that’s complexity – we typically underestimate it, so we under-resource it and our expectations of outcomes are too optimistic • Why else do change projects fail? • Look at these quotes: • “85% of project success is dependent on factors related to people” Ohio Center for Information Based Competition • “Even amongst successful implementations, 47% of companies reported serious challenges with end-user adoption that often put projects in jeopardy” - AMR Research • “Companies that spend less than 17% of ERP implementation budgets on training put their projects at increased risk of failure” Gartner

44. Why else do change projects fail? • It turns out that success rests as much on the capability of the people in the organisation to cope with change and take advantage of new systems, as on how well the project was planned and implemented • The complexity of the project needs to be within the capability of the organisation • We’ve seen how to assess the complexity of a project • How do we assess the capability of the organisation? • By looking at its Culture and its Process Management Capability

45. Assessing an Organisation’s Culture • There is an underlying tension between the individual and the organisation • Successful change needs an integrated approach encompassing people and process in a balanced approach • ORGANISATION • ‘External’ Focus: • The organisation’s needs and direction • Systems and processes • Efficiency • THE INDIVIDUAL • ‘Internal’ Focus: • Culture • People’s perceptions, attitudes, motivations, aspirations • Effectiveness Point of balance

46. Assessing an Organisation’s Culture • Imagine thependulum swinging and rising at the same time… • ORGANISATION • ‘External’ Focus: • The organisation’s needs and direction • Systems and processes • Efficiency • THE INDIVIDUAL • ‘Internal’ Focus: • Culture • People’s perceptions, attitudes, motivations, aspirations • Effectiveness

47. 8 7 Imaginist Systemist 4 3 Dialectic Aligned 2 Structuralist 1 Pragmatist/Anarchic 5 5Pragmatist/ Aligned 6 Empiricist 9 Pragmatist/ Empowered Assessing an Organisation’s Culture • That gives us the basis for our Culture Evolution Model ORGANISATION ‘External’ Focus THE INDIVIDUAL ‘Internal’ Focus

48. 8 7 Imaginist Systemist 4 3 Dialectic Aligned 2 1 Pragmatist/Anarchic Structuralist 5Pragmatist/ Aligned 6 5 Empiricist 9 Pragmatist/ Empowered EXTERNAL INTERNAL FOCUS FOCUS (Organisation) (Individual) Assessing an Organisation’s Culture • This model allows us to identify the predominant organisational culture • Each point on the spiral represents a separate, definable culture • Each culture builds upon the earlier ones, progressing up the spiral It indicates how well the organisation will cope with change

49. Mapping your Management Culture • Which of the following descriptions most accurately describes your organisation (or your part of it)? • You might be able to identify more than one - that’s because they are not discrete styles • Each is only achievable when those below it on the spiral are in place • The chances are you will focus mainly on the negative aspects of your management culture • But each style has positive and negative elements - if not nurtured, they degrade over time

50. 4 8 Aligned 7 Systemist Imaginist 3 Dialectic 1 Pragmatist/Anarchic 2 Structuralist 5 5 Pragmatist/Aligned 6 Empiricist 9 Pragmatist/Empowered The Management Culture model: Level 1 This is where we all start In this entrepreneurial organisation, it’s results that count The boss may be micro-managing everything or leaving members of the team to do more or less what they like, as long as they achieve results Either way, success is what counts, not how you get there – ‘just do it’ There are some laid-down procedures, but people only follow them or takeup a new initiative if they see benefits for themselves in doing so