Yesterday I was reading this Vox article, Why (almost) no one wants to host the Olympics anymore.
Here are some interesting insights:
- Since 1960, no Olympics have come under budget.
- Almost half of them went over budget by 100%.
- Most of the Olympic facilities created are too big for regular use after the games.
Does this sound familiar?
The article continues by highlighting that fewer and fewer cities are even applying to become host cities.
When I think about the issues of poor estimating, going over budget, and making scaling mistakes, these errors don’t feel specific to the Olympics.
So how can you protect yourself?
Mitigation Scale Issues
One of the most successful Olympics (in terms of profitability) was in Los Angeles. Instead of building a insanely massive stadium, LA benefits from having many different venues close enough to use in combination.
Instead of building one complete solution that does everything you want, consider a solution that combines multiple smaller solutions. This gives you the same ability to manage scale while also creating flexibility and options.
While new host cities try to make bigger splashes than the last ones, the costs are clearly part of why there have been fewer and fewer applicants.
The same thing happens on projects. The bigger the requested budget, the bigger the potential risk. And that can result in rejections.
So make small bets. Make sequential bets. Create a system of iterative bets that leverage the success of each one so that a large project can be funded not only by internal investments but also by the success of previous initiatives.
Learning Better estimating
Estimating is tough work. It also requires experience. It’s basically impossible to estimate something you’ve never done – which explains why many Olympic host cities go way over budget. They were estimating blindly.
One of my recommendations is to do a bit of centralization on estimating so that you start developing some expertise. You also ensure that you don’t have to learn the same lessons multiple times because different people are each learning them.
The other benefit of centralizing your estimating work is that they can then learn more (and faster) by asking others and doing deep dives with others who have done this kind of work before.
In short, just because these are Olympic-sized mistakes, they don’t have to be mistakes you make.