This series tells stories about frequent errors in Startups and growing companies. In case you haven’t read the previous post about the danger of beliveing in sales funnels, you can do so now.
This chapter will help you understand the threat from lighthouse projects that can raise your company to new levels. Or kill it.
Chapter III: When lighthouse projects become a nightmare
If you remember Chapter I, you might also remember Mr. Lambsmith. This guy represents heaven and hell in one person, even though I would not say that he suffers from shizophrenia.
But let us go back to the beginning of this story.
In 2012, 6 years after having started his own business as a project manager, Bill has a team of 35 people that do a good job.
Over time, Bill himself became more the company manager and in the last 2 years he has to admit that he is more involved in marketing, relationship management and sales than in projects at customers.
As Margery, Jim and Peter are great senior project managers with a proven track record and broad acceptance as well at customers as also inhouse from the younger team mates, Bill is satisfied with the development.
In May 2012, Ben decided to take two weeks off at a Robinson Club hotel on the Maldive Islands. There, he accidentially stumbled over Tom (a Mr. Lambsmith prototype) which turned out to be the CEO of a big company.
At the pool bar, Ben and Tom shared some time, discussed some topics and made holiday friends out of that.
Im October 2012, Tom invited Ben for a pitch of 20 Mio USD project. And Ben pitched well enough to get the job over hard competition.
In the retrospect, when Bill first discussed with Margery, Jim and Peter, all of them agreed to offer. Not to get the deal but to just pitch such a “lighthouse project” one time to learn how somethings like this works.
Sure, behind the scenes, all of them believed a tiny little bit that Bills relation to Tom could be an advantage. But NEVER had they thought to get the deal.
Not as “General contractor (GC)”. Not in the role of being in charge for all parties involved in that project. Not for a project with 20 times the volume of the biggest project they ever ran as GC.
The luck was on their side. Over a period of 2 years, they had the chance of 2.8 Mio USD in net return.
Ben closed the deal. Tom shook his hand. Both enjoyed the situation and agreed on a big press story about this “lighthouse project” with Ben and Tom on a foto standing together shaking hands.
The project turned out to be challenging. Challenging enough to soak the best people from Bens company out from other projects into the “lighthouse project”.
In June 2013, Bens company ran into troubles as 3 of his smaller projects ran out of control as neither Margery, Jim nor Peter had the time to look after these projects staffed with young project managers.
Bill started to manage the smaller projects himself but found out, that it took much more time and effort to understand the project situations than he could afford. And he had to admit, that the level of his project management skills were no longer on the same level than 5 years ago.
With all people running on overload, with already postponed vacations for the staff, the first customers started to stop payments.
In parallel, Tom rejected to accept Bills change requests. Bills arguments where based on the fact, that they planned 18 sub-projects had increased to a number of an overall of 24 sub-projects.
But Tom claimed that this split was just based on their lacking capabilities to control the project, not because he as customer has asked for more services.
In late November 2013, Bill desperately reported to Tom, that the project forecast shows a rise in cost of a minimum of 30% and a delay of a minimum of 14 month.
On the 4th December 2013, Tom stopped payments and told Bill that he had the chance to fix the open issues without payments for his staff until 1st March.
In January 2014, not only the lighthouse project dimmed out. Bills company did first.
Lesson 3: When big projects at lighthouse customers turn out to be bigger than expected and you are not used to deal with big fish, cost and expense turn out of balance at lightning speed. Even worse: your best staff may be bound unpaid.
If you are good in your job, this does not mean that you understand “big fish politics”. And be sure that a manager of a big company will be able to raise pressure to save himself until your company will be squeezed out like a lemon.
I recommend to not even try too big fishes until you are really prepared.
Statistically, more than 80% of all projects started do not be deliver on time, in budget and do not deliver the expected ROI.
Before starting a “lighthouse project” that can lift your company into a higher league, be sure that you are ready to deliver amongst the less than 20% of projects that perform better than inacceptable.
If you are not sure, don’t let a chance kill your company.
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