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It takes a large number of people and a great deal of money to make a movie. Yet, scores of films are produced each year that bomb at the box office, fail with the critics or go straight to video. No one sets out to make a bad movie. They all begin with what seems like a good idea. Often the basic premise is wrong. The decision-makers simply didn't understand the audience or the idea. Just consider Ishtar or Waterworld.

So, how do people get involved in major enterprises that, in retrospect, were doomed to fail?

This question is especially pertinent in the technology-driven business that the insurance industry has become. Why do so many major systems-development projects fail, totally or in part?

According to the Standish Group of West Yarmouth, Mass., in 2000, almost one quarter of all U.S. commercial software projects were cancelled. The cancelled projects cost firms $67 billion, and overruns added another $21 billion, equaling $88 billion in lost productivity on projects that were supposed to reduce costs, increase revenue or improve operations.

Is it a failure to understand the idea or the audience? Many times, yes. Frequently, there is no clear understanding of the business need to be addressed. In a surprising number of instances, systems developers have little understanding of the real business problem that should be tackled. Superficial analysis or poor communication can often lead to development efforts that do little to address the true needs of the user audience. Often this takes the form of overkill -- complex system projects with the latest, coolest technology rather than simple add-on products or enhancements to existing systems.

Is it a problem of execution? Quite often, yes. The problem or benefit may be fairly well defined but the system development effort may be under-funded or otherwise handicapped. Project managers sometimes do not understand the complexity of the newer technologies that may be employed. As a result, resources may not be allocated properly, and the best-laid plans will fall apart.

The following tips describe some of the specific steps that should take place early in the development process to help make smart choices and good plans.

* Challenge business requirements. What is the real user need? Do the requested changes or improvements truly address the underlying business processes? Often requested enhancements are only band-aids to address minor symptoms of much larger problems.

* Pit vendors against each other. It is a fair question to ask, "Who is your competition?" Let each vendor tout their product and critique their rivals. It all provides more information for the client to evaluate.

* Talk to existing customers. Unless you consciously choose to be on the "bleeding edge" of technology, let other companies take the risks and then learn from their experience. Review their selection process. What did they like or dislike about the different vendors they reviewed? Do you have common issues? What success or problems did they have with implementation? Are they achieving the projected operational benefits?

* Perform a rigorous cost / benefit analysis. The analysis of development and operating costs and potential benefits cannot be too detailed. A thorough, detailed understanding of the facts provides the confidence needed to make complicated decisions. A thorough understanding of the projected costs and expected benefits is key to determining project priorities. It enables the project to be managed at a high level through the budget process.

* Analyze available development resources. Does existing development staff have the skills and time to undertake a major project? Will extensive training be required? Many times organizations rationalize that training will be reusable and provide value for future projects without validating that premise. What will be the impact on other projects? Too often, companies are forced to rely on the same key developers for all significant projects but development staff should not be stretched too thin.

* Concentrate on business deliverables. What will the business organization and process look like during each stage of development and after complete implementation? Is the business prepared to make the necessary changes? If the organization is not truly committed to making major changes, significant benefits will not be achieved. This lack of commitment should bring into question the validity of many complex projects.

Bringing a movie to your local megaplex is a major enterprise. And ranking alongside this, in terms of complexity and opportunity for failure, is major system development for an insurance company. Only a deep and thorough knowledge of the audience and its needs, combined with a detailed planning and evaluation process, can ensure success.

Eugene Reagan is a senior consultant with Dallas-based R.E. Nolan Company.