93 karma · joined February 5, 2013
If you want an order of magnitude of how huge the drifts are, have a look at the construction of the EPR of Flamanville in France[1]: started in 2007 with an initial timeline of 5 years and budget of €3.3bn, it is still not completed as of today (they just announced targeting the end of 2018) and the current budget is over €10.5bn.
In the end, the complexity, criticality and sheer scale of these projects make them extremely hard to lead properly and any setback can have gigantic impacts.
[1] https://en.wikipedia.org/wiki/Flamanville_Nuclear_Power_Plan...
It is especially dangerous in times of inflated multiples like we are seeing these days, where PE valuations are kind of bubbling. The demand for M&A transactions is so much bigger than the supply that prices growth quicker than the underlying business value - making it usually harder to justify through profitability improvements.
Yet the whole PE process does bring benefits to the underlying industries is buys, especially by providing investment capacities to businesses that usually don't have enough, and also by professionalization and by introducing sophisticated management standards to the companies (eg. in terms of strategic thinking, reporting, optimization, pricing, etc.).
I'm working for a strategy consulting firm, advising large retail clients. Even though we have looked at doing this kind of advanced modelling for churn metrics, we always end-up using the same kind of very basic rules of customer not purchasing within the last x days.
The reason is twofold: (1) it’s trivially easy to implement and explain, (2) at the end of the day using the complex method is not worth the effort. Because business-wise, there are many other external factors that are much more impactful than the modelling biais – like seasonality, variation by category of product, etc.
It all depends on the decisions those metrics are used for, but most of the time it’s not worth the pain.