A number of years ago I worked for a small company at what was then the leading edge of technology.  We were developing software and hardware and doing pretty well.  We had our eyes on a top end product that was being sold by a competitor for vastly more than our product, but which we believed could be produced at a fraction of the cost, allowing us to clean up the market.  So, rather than look at an incremental development, we went straight for the top end product.

The development was started and estimates made of how long it would take to develop.  We had to develop new hardware and software, but both would be broadly based on what we had developed already.  Somewhere around 6 months was estimated to deliver the new product, on the basis of meetings with the developers.

No organised estimation phase was undertaken, no risks were assessed and reviewed, the project just got underway.   Before long the hardware development ran into difficulties and the software development was of course dependent on the availability of hardware.   Meanwhile news was seeping out to our existing customers that a new system was being developed, so sales started to fall off in anticipation of the new system.

However the development continued to have issues that might well have been anticipated earlier had a more structured approach to estimation, planning and risks been taken.  With sales falling and investment continuing to be poured into the new system, the company started to run into difficulties and was eventually sold in a poor financial state to venture capitalists.

To be fair, the venture capitalists bought the company because of the potential of the new product, but they of course started looking at ways of stemming losses, so redundancies began and eventually the company was wound down and closed.  The new product was never finished and never launched.

So why this riches to rags story?  Well, with better attention to estimation, planning, risks and project disciplines this needn’t have been the disaster it turned out to be.  In fact with a realistic view of the costs and risks in front of them, the board might well have decided not to undertake the project and a launched a less risky and less ambitious product instead.

This was a case of a single project bringing a healthy and expanding company down.  Project disciplines can be as just important as financial ones for small companies.  The words project and overrun don’t have to be synonymous if you train staff and put in place good governance and solid, repeatable Project Management processes.

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Read more advice on Project Management in Project Management for SMEs – available in print and ebook format.

Gren Gale is a consultant specialising in Project Management and Procurement and is owner of PM Results

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