Following entry is a record in the “Catalogue of Catastrophe” – a list of failed and troubled projects from around the world.
Loblaws – Canada
Project type : Business intelligence system
Date : Jul 2019
Cost : Unknown
Synopsis :
Although it is a bit unfair to call this one a catastrophe, I’ve decided to list the following story because it touches on an aspect of Project Management that gets little air time; the art of post-project benefits realization.
Projects are investments organizations make in an effort to achieve ‘beneficial outcomes’. Sometimes things go to plan and the target benefits are indeed achieved. Other-times projects can have unintended side-effects that have broader implications than the project team initially understood. The following story from Loblaws (a large national level grocery and pharmacy in Canada) illustrates the need to carefully manage post project ‘benefits realization’ activities to ensure unanticipated side-effects are understood and managed.
The project in question developed a new ‘business intelligence system’ that was intended to help Loblaws make better ‘pricing and promotions’ decisions. Pricing in a grocery store is a sensitive issue. Get it right and customers will be drawn in. If you’re off (sometimes even by just a few pennies) fickle customers will soon start going to the competitor.
The ‘Business Intelligence’ system introduced by Loblaws was intended to help the organization set prices while optimizing profit margins. Once ready Loblaws took the smart moving of deploying on a pilot basis. A pilot rollout makes sense: Rather than committing the entire organization you start small, prove the system and only once you’re sure it works correctly do you rollout to the organization as a whole.
The initial steps in the pilot rollout at Loblaws reportedly did achieve the desired results. Profits margins increased and management’s confidence in the systems started to grow. As a result the organization continued the rollout to other product lines and sectors of the business.
What was perhaps less apparent was that while profit margin was increasing the number of products being put on promotion (and hence appearing in the weekly advertising flyer) started to drop. That in turn was reducing the number of shoppers visiting the store which resulted in lower overall sales. As such the full impact of the system went beyond just profit margins on individual products and impacted business performance as a whole.
In their quarterly performance meeting, Loblaws’ president noted that same-store sales (a key metric of business performance in retail) were disappointing. Placing the blame on the rollout of the new system the president noted that: “in the excitement of seeing margin improvements in certain categories as we started to implement some of the algorithms, people were overzealous” … as a result … “you end up with fewer items on promotion in your flyer,” which in turn acted as a drag sales.
Contributing factors as reported in the press:
Failure to manage post project ‘benefits realization’ activities effectively. Monitoring a narrow range of factors (margins on individual products) rather than looking for unintended ripple effects that might impact overall business performance.
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