“But the Product Meets The Specs…” Poor Analysis, Cost Overruns and Risk

Author: · July 7, 2008 · Filed Under Estimating, General, Thoughts  - 1 Comment(s)

I recently got the clever idea to purchase a folding bicycle so I could have a decent bike when on vacation… The plan was to check the bicycle with the airlines in a standard suitcase. I spent hours researching on the web. I spoke to a couple of bike stores. Then I placed my order. A few days later a BIG box appeared on my doorstep. The bicycle was a magnificent piece of engineering. Unfolds in about 15 seconds. Only one problem. The bicycle was designed for the older airline luggage size. With the newer, more stringent standards this bicycle is high risk. If they allow it to be checked at all there is up to a $270 extra charge.

The people at the bike store didn’t tell me. Perhaps they didn’t know.  I wasn’t smart enough to catch the problem in my analysis activity.

It struck me that this is the same kind of problem that plagues product development and associated cost analysis. We have an end in mind. But that end gets lost in the details of specifications. And bad assumptions…. Parametric modeling can handle the cost, schedule, risk, etc. for product development. And it should identify risks and tie them back to the estimates. A model that can predict the overruns / inefficiencies in an estimate could potentially mitigate such problems. This is more than just Monte Carlo analysis which can show the risk within WBS elements, but cause and effect analysis. SEER approaches this by tying a risk register back to the estimate. And other, more exotic methods are floating around the labs. Our people have been showing this off in conjunction with Oracle to rave reviews.

Anyone want to buy a folding bike?

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