In my post Black Swans and Complex System Failure, I talked about the architectural implications of some recent disasters, including the Gulf of Mexico oil spillage in 2010 and the partial melt-down in Japanese nuclear reactors following the tsunami in 2011. Both of these disasters involved something that isn't supposed to happen: the simultaneous failure of multiple fail-safe mechanisms.
A new study by Oxford University and McKinsey finds a similar phenomenon in technology investment, where large IT projects may experience spiralling costs as a result of multiple problems occurring simultaneously. According to the researchers, this is up to twenty times more frequent than traditional risk modelling techniques would expect, with one in six large IT projects going over budget by an average of over 200%. Researchers refer to the tendency to disregard rare but high-impact problems/risks as black swan blindness.
As an example, Professor Bent Flyvbjerg cites the collapse of Auto Windscreens, which went into administration in February following a disastrous attempt to implement a new IT system. "Black swans often start as purely software issues. But then several things can happen at the same time - economic downturn, financial difficulties - which compound the risk," he explained.
Professor Flyvbjerg has coined the term Black Swan Management, which currently merits its own Wikipedia page. Simon Moore (author of Strategic Project Portfolio Management) questions whether it is appropriate to use the term "black swan" for something that occurs with a one in six probability, but supports Flyvbjerg's conclusion that when projects go wrong they can go extremely wrong.
Flyvbjerg makes five fairly bland recommendations for avoiding IT project failure, including recruiting a "master builder". Some people may interpret this as an endorsement of the large IT service firms, but these firms have been responsible for some of the most extravagent failures. Is there any evidence that master builders are any more immune from "black swan blindness" than anyone else? Indeed, as a Scandinavian, Flyvbjerg will hardly need reminding of Ibsen's portrayal of madness in the play of the same name.
'Black swans' busting IT budgets (BBC News, 26 August 2011)
Bent Flyvbjerg and Alexander Budzier, Why Your IT Project May Be Riskier than You Think (Harvard Business Review, September 2011, pp. 601-603)
Natasha Lomas, Five ways to stop your IT projects spiralling out of control and overbudget (Silicon.com, 22 August 2011) (pdf)
Brenda Michelson, Complexity, Outliers and the Truth on IT Project Failure (HP Input-Output, 31 Aug 2011)
Simon Moore, Black Swans In Project Management (August 25, 2011)