Projects can fail at any scale. But Why?
The agency industry was abuzz last week with the news that Hertz, the global car rental chain, was suing Accenture for $32M over a failed web design and development project. Now, in fairness, it’s essential to understand that the project was complicated. This was a multi-million-dollar project all day long. The specification called for web plus mobile applications and countless integrations to existing systems. It’s complicated whenever you transform digital properties, but for a multinational corporation that is running a large number of daily transactions, it can be complex.
What is interesting, however, are the specific grievances listed in the filings with the court. This goes beyond a simple oversight or two, but rather a long list of shortcomings in the deliverables. Items claimed by Hertz as being incorrect included:
- Accenture was contracted to build a responsive web experience that included at least three breakpoints: phone, tablet, desktop. They ignored the tablet format, and then when pressed pushed for work orders and additional funds (into the hundreds of thousands of dollars) to produce the other format.
- Hertz was adamant about the role of extensible code in the project. Meaning, they could reuse components on future projects. Accenture delivered the product disregarding this request.
- Accenture logged over $10M in additional fees as they tried to bring the project to completion.
And that’s just a sampling of the problems detailed in the complaint.
So how can it be that a large consulting firm can blow something so public, so visible? And how can Hertz choose an agency like Accenture and allow this to happen? There are a few thoughts that come to mind that I think are worth discussing.
No one gets fired for choosing Accenture.
First – let’s face it – hiring Accenture is easy. It’s a large-scale firm with a laundry list of bona fides. Whoever makes the call to hire them will never lose their job if things go awry. I’m willing to bet that no one at Hertz is out of their employment arrangement because of this. The reason large agencies win business over smaller players is because of perceived risk. There is a level of risk associated with hiring a smaller agency, and for a company like Hertz, even an agency with hundreds of employees is a risk they simply didn’t want to bear. So, the safe choice for the end client, their procurement team and management are to hire a firm that no one is going to second guess. It’s safe, it’s reliable (usually) and getting approval is pretty much a rubber stamp.
For Accenture, this was a small deal.
I know that sounds crazy, but at last estimate, Accenture’s revenue was over 41 billion dollars. With a “B.” That puts the value of this project at .1% or less of revenue. In the grand scheme of things, it simply wasn’t an essential initiative for the firm. In fact, this week, just a few days after this suit was announced, Accenture flaunted their newly won $2B contract with the Department of Energy. So, it makes sense that while this is an epic disaster, the risk for Accenture was tiny, while the risk for the client was substantial. Now, I’m not saying that Accenture simply didn’t care, but I am saying that perhaps they didn’t throw their best teams on the project - maybe it didn’t have quality, senior oversight.
Large agencies don’t necessarily equal quality output.
This may be the most significant revelation that needs to be discussed and understood about agency procurement. The larger agencies don’t necessarily mean a level of quality in terms of output. An agency of $40B in revenue simply can’t employ enough experts. And, as I mentioned, they can’t put what experts they have on every project. There is a massive amount of junior talent, turnover, and disorganization that occurs on any project. When you are the small client of a large firm, it’s almost a given that you will be assigned junior resources. It’s the only way to do business, and it happens at agencies of every scale. The larger the agency, the larger the projects junior folks are working on. And that results in all sorts of disastrous output, as we can see in this example. This project was botched in so many ways at such an elementary level that you have to wonder who was assigned to it in the first place.
Procurement is Broken
I’m always frustrated by procurement teams at larger enterprise organizations. I feel they simply don’t get it. The things they worry about and eliminate agencies for are always the areas of least actual risk. Procurement and internal clients aren’t often aligned well enough on where the risk areas really exist. We’ve lost jobs where we bid half as much as the competitor yet lost because of factors utterly irrelevant to the scope of work, such as the location of resources or bogus certifications. I’m willing to bet that Accenture wins the business in this case not only because they are the safe choice, but also because they knew they could get through procurement quickly. Fact is, no one likes dealing with procurement, not the agency and not the internal client. Perhaps it’s time that procurement teams reassess what risk really is, as examples like this crop up more and more it’s likely that finally, we’ll bring some sanity into the process.
Money isn’t always the answer.
To the rest of us in the agency world, this is a large-scale project with a significant price tag. $32M in fees accrued for a digital transformation, web application development, and some mobile applications as well – that’s a lot of work effort and a substantial investment. But honestly, was the real market value of this work $32M? In talking with many agency principals, almost everyone is amazed at how companies can justify this level of expense. Admittedly, this was complex. Hertz has proprietary systems in place that needed to either migrate or be updated and integrated. However, from the looks of the complaint, they didn’t even make it that far. So, the question has to be – how much would they have had to spend to be successful? I think this debacle also should result in consumers questioning the business tactics at Hertz, as well. As a Gold club member, I find it hard to choose Hertz because the pricing simply isn’t in line with other companies anymore. This project’s failure could be indicative of all sorts of problems under the hood (pardon the pun) at the organization. A company that can throw so much to get so little is most likely experiencing other management issues – there simply isn’t any other way to explain why someone would throw more and more funds at a failing endeavor.
This cost Hertz a lot more than $32M
Finally, it should be pointed out that this cost Hertz much more than the damage being pursued in the suit. They are a global enterprise, and as such, they have a heavy reliance on digital properties to drive their business. The lost opportunity cost from the delays in this project must have added up to serious revenue. As I had mentioned above, as a Hertz customer I can attest that there is a low level of satisfaction with their digital platforms. The other rental firms seem to have a better grasp of how to manage an online presence. From a UI/UX perspective, their platforms are simply too difficult to manage. I can’t believe that between the fact that Hertz has become a premium brand, thus driving cost increases to consumers, and the horrible UI/UX experience, that hasn’t cost the company much more than they are willing to admit.
So, what are the key takeaways that can be applied to almost any agency/client relationship? I have a few thoughts:
- Do you matter to your agency? Regardless of scale – where do you fall with the agency in comparison to other customers? Are you their superstar client or a small engagement? Do you matter to their revenue, reputation, and survival?
- Are you working with the right team members at the agency? Are they skilled and determined to drive success in your project? As a litmus test – would you hire each individual on your team to work for you directly?
- Are you sinking massive funds into a project that is already beyond budget? In this case, $10M being sought in restitution was extra fees above and beyond the original scope of work!
- Are you choosing an agency because they are the right fit or because it’s easy to procure? As I said, no one got fired for this because they were the “safe” choice. Yet, the project failed.
This isn’t the first case of a massively failed web development project. Remember healthcare.gov? And, I assure you this isn’t the last. Without some massive rethinking of how clients approach procurement, we shall definitely see more and more of these instances in the coming years