Every year, most major companies will reinvest a significant share of their earnings in building capabilities necessary for future success. \u00a0Often these investments take the shape of large, \u2018Big Bet\u2019 projects, which require millions of dollars, many people and multiple years to complete. \u00a0\nToo often, Big Bet projects begin with optimism, but end in disappointment or failure. \u00a0Recently for instance, Google\u2019s parent company, Alphabet, reported that it had lost $3.6 billion last year on Big Bet projects. \u00a0However, despite the bleak statistics, we\u2019re not doomed to repeat this scenario like Groundhog Day. \u00a0We just need to change our perspective. \u00a0In particular, we need to avoid being seduced by optimism and confidence into believing our desired outcome is the only one possible. \u00a0Instead we should take a risk-adjusted approach to evaluating and managing Big Bet initiatives.\nLike all significant investments, Big Bet projects are born in optimism. \u00a0The story usually plays out like this: A highly regarded member of the management team - let\u2019s call him Tom - has an idea for a new way of enabling on-line ordering of products. \u00a0If successful, this idea can improve revenue by 20 percent. \u00a0However, building the capability will require significant changes to the existing on-line systems. \u00a0Tom is a confident, well respected and demonstrative leader. \u00a0He believes strongly in the idea and espouses his vision confidently. \u00a0\nFueled by his optimism and confidence, he begins the process of selling the concept to leadership in order to secure the budget and people needed. \u00a0He develops a business case that shows the project completing by Jan. 1, 2014 at a cost of $12 million. \u00a0Over the course of the many meetings necessary for approval, Tom has the opportunity to tell the story of the project repeatedly. \u00a0With each telling, his confidence grows and his optimism matures into an expectation of success. \u00a0That optimism and confidence, along with the trust leadership already has in him, goes a long way toward persuading leadership to green-light the project. \u00a0\nOver the course of repeated renditions of the project story, an insidious transition occurs. \u00a0What started as an idea with a chance of success has hardened into an expectation of certain results. \u00a0What\u2019s lost in that curing process is an understanding of the possibility that the project may not go as planned. \u00a0By the time a project kicks off, the entire team has coalesced behind the vision of realizing $12 million in benefits. The possibility that a project might not turn out that way is swatting away like an annoying insect. \u00a0\nUnsurprisingly, Tom\u2019s project doesn\u2019t go as planned. \u00a0Despite best efforts, multiple problems arise that were not considered during the evaluation process. \u00a0Turns out that the customer data in the existing system was plagued with gaps, errors and inconsistencies - all requiring a great deal of time and manual effort to correct. \u00a0Midway through the project a key workstream leader left the company, resulting in a delay of several months \u00a0while finding a qualified replacement. \u00a0\nUser acceptance testing uncovered bugs and requirement gaps resulting in delays to allow for redesign and rework. \u00a0All of these challenges resulted in the project not completing until November 2015 at a cost of $18 million - a 50 percent budget miss. \u00a0What\u2019s worse, to get the project over the finish line, a great deal of scope was cut, resulting in only a small fraction of the increased revenue promised. \u00a0The bottom line: the project was late, cost more than expected and did not deliver the promised benefits; by most definitions, a failure.\nUnfortunately, the tale of Tom\u2019s project happens all too often. \u00a0Most Big Bet projects will not meet expectations, and the statistics are sobering: 80% will fail to meet their schedules; \u00a071 percent will exceed their budgets and 56% will not deliver promised benefits. \u00a0But that\u2019s not the worst of it.\u00a0 Fifteen percent of Big Bet projects will fail completely or exceed their budgets by 400 percent to 600 percent.\nSo what are we missing? \u00a0The idea was sound. \u00a0The advocate was talented. The executives who approved the projects were smart and savvy. \u00a0The project managers who led it were experienced. \u00a0Yet the project was considered a failure. \u00a0The problem wasn\u2019t with the talent level of the people behind the project, but with their perspective. \u00a0\nBig Bet projects require successful execution of many interdependent tasks by many groups of people, over a long period of time. \u00a0This means lots of opportunities for bad surprises. \u00a0But confidence and optimism are infectious. \u00a0They\u2019re intoxicating. \u00a0Under their influence, the project sponsor and the leadership team are all too often seduced into ignoring those project risks and focusing exclusively on the optimistic outcome. \u00a0The behavioral economists would say, we are strongly biased toward the expectation of a positive outcome.\nIf we\u2019re to avoid Tom\u2019s fare, we need to have a way of counteracting the effects of those biases and evaluating Big Bet projects with a balanced view of all of the possible outcomes, not just the optimistic. \u00a0Tom\u2019s Jan. 1, 2014 completion date was one optimistic potential outcome for the project. \u00a0But it was the only one presented to leadership. \u00a0In a balance world, Tom would have presented multiple possible outcomes, the likelihood of each occurring, the risk drivers of those outcomes and a plan on how those risks can be mitigated. \u00a0\nHere are three tools that Tom and the rest of us can be leverage to produce better outcomes on Big Bet projects.\n\nUtilize independent evaluation team: When preparing Big Bet project forecasts, use an independent group, trained in developing accurate project forecasts. \u00a0This group can be either internal to your organization or a contracted third party, so long as they are not involved with sponsoring or delivering a project. \u00a0We\u2019ve seen companies go from consistently exceeding project estimates by 25% to being under budget just by implementing this technique.\n\n\nAccount for the likelihood of bad surprises: Utilize an analytics-based technique such as Monte Carlo analysis to model the multiple possible outcomes of the project as a risk based endeavor. \u00a0Monte Carlo is a proven technique for introducing the effect of randomness into project planning as it simulates the running of a project plan thousands of times. \u00a0Instead of one possible outcome for a project, it produces \u00a0a distribution of likely outcomes, each with a unique probability. \u00a0This enables the opportunity to choose the outcome that fits the risk profile for planning purposes by \u00a0selecting the completion date based upon the desired confidence level. \u00a0\n\n\nDevelop risk mitigation plan: Done properly, Monte Carlo analysis identifies the drivers of project risk. These can be utilized to build a plan which mitigates the identified risks, creates favorable odds \u00a0and reduces reliance on luck. \u00a0Risk is inevitable, but it is far better to know just how much and what type of risks a project will encounter so you can take actions to proactively avoid them. Forewarned is forearmed. \u00a0\n\nBig Bet projects have many possible outcomes, each with a different probability of success. If Tom and the project approval team had used this approach, instead of saying the project will be done on Jan. 1, 2014, they would have \u00a0known that the project had only a 35 percent chance of finishing by that date. \u00a0If they had wanted to be 90 percent confident, the expected completion date would have been Oct. 1, 2015. \u00a0If a Jan. 1, 2014 completion date was critical, they would have had a mitigation plan that would enable them to change the odds in their favor and make that date a real possibility. \u00a0Either way, their perspective would be changed and they would not be explaining the project failure to a badly surprised leadership team.