Read related articles by A. Shenhar, D. Dvir and others:
- Beyond Six Sigma: Why CEOs Need to Pay Attention to Project Management, by A. Shenhar
- The Limitation of Efficiency: Why Project Management will Become the Next Competitive Asset, by A. Shenhar
- Program Leadership: The Weak Link for Aerospace and Defense, by A. Shenhar
- Unleashing the Power of Project Management, by A. Shenhar
- Mapping the Dimensions of Project Success, by A. Shenhar, O. Levi and D. Dvir
- In search of project classification: a non-universal approach to
project success factors, by
D. Dvir, S. Lipovetsky, A. Shenhar, and A. Tishler
- Refining the search for project success factors: a multivariate, typological approach, by A. Shenhar, A. Tishler, D. Dvir, S. Lipovetsky, and T. Lechler
- Towards a NASA-Specific Project Management Framework, by A. Shenhar, D. Dvir, D. Milosevic, J. Mulenburg. P. Patanakul, R. Reilly, M. Ryan, A. Sage, B. Sauser, S. Srivannaboon, J. Stefanovic, H. Thamhain
Beyond Six Sigma: Why CEOs Need to Pay Attention to Project Management
By Aaron J. Shenhar
Many companies have focused in recent years on extensive cost-cutting programs--most popular among them are Six Sigma initiatives. Based on GE’s well-known example, executives believed that they need to follow the trend and push Six Sigma to every corner of the company. Yet even the leaders of efficiency such as Wal-Mart, Dell, or Southwest Airlines are starting to realize that there is a limit to how much you can improve: With time, additional cost-cutting efforts can no longer guarantee a substantial source of competitive advantage or new growth. At best, they can help you keep doing what you are already doing without falling behind.
The real sources for future growth are a company’s new initiatives, such as innovation, and change. However, all initiatives are carried out through projects. Projects are the engines that drive innovation from idea to commercialization and they are the drivers that make organizations better, stronger, and more competitive. In fact, the only way organizations can change, innovate, invest in infrastructure, or gain competitive advantage is through projects.
Ironically, project management has hardly been on the radar screen of chief executives. They often assumed that if they will come up with the right strategy, their project teams will get it done and will implement the strategy as prescribed. Yet the reality is different: As the data shows, many projects today fail to meet their expectations: they either do not meet time and budget goals, do not deliver their business objectives, or both. Just consider Airbus’ loss of Billions in cancelled orders when it recently froze the development of its A380F freighter aircraft to focus on solving the problems of the passenger version. Furthermore, failure, is often found even in well-managed projects, and faced with little interest from top executives; many teams are left on their own, at times unaware why their projects have failed.
The truth is that the current approach used by companies to manage projects together with the standard tools and processes in the project management discipline are insufficient to address the needs of today’s dynamic and uncertain projects. Traditional project management is based on an outdated model of stability, which assumes that all projects are similar, certain, linear, and unchanging. Once the project is launched, it must continue to its end to meet time, budget, and requirements goals. Rarely do projects focus on business results and on building the company’s competitive advantage, and seldom are project practices being challenged by top management. As a result, many teams are simply trying to keep their projects on track in order to fulfill unrealistic expectations of stability, instead of adapting their efforts to the dynamic changes in the environment and business needs.
This situation presents a tremendous opportunity for companies for increased competitiveness and growth. It is time for top executives to realize that there is an enormous potential for improvement in updating their project management practices, where possible gains may be great. If CEOs will start allocating as much time, energy, and attention to project management as they did to Six Sigma, their rewards may be huge.
Executives must realize that most project problems today are not technical but managerial. When technical errors cause projects to fail, it is usually management that failed to put the right system in place so that these errors will be detected in time. Managers must learn how to ask the right questions and foresee danger before they make a commitment to a project and before it is too late. Such approach would have saved Billions on the A380 project. On one hand, managers must understand that different kinds of innovations need different kinds of projects and that project teams need better guidance from business leaders about the company’s expectations from their projects. They must teach their teams how to better adapt to the dynamics of the environment and how to focus their projects on the creation of competitive advantage and not just on meeting time and budget goals. On the other hand, they must realize that many projects are facing high levels of uncertainty and it is often unrealistic to predict exactly how a project will end or even how much it will cost. Instead of committing their organizations to extensive project efforts, they should invest in small-scale pilot programs to remove some unknowns before making a commitment to a full scale effort.
Yet, while turning their attention to projects, should executives stop investing in programs for improved efficiency? Absolutely not; they must learn to do both. Although continuous improvement of efficiency and quality may not keep providing a significant source of competitiveness as it did in the past, it is a must in order to stay in business. Once you let go, your efficiency and quality may deteriorate. Investing in efficiency, however, should be limited to ongoing operations, manufacturing, and services, and not be pushed to every corner of the company. As innovative companies such as 3M have recently learned, Six Sigma may stifle innovation and reduce the extent of radical change and new products. The R&D or the IT functions don’t need Six Sigma. These parts of the company need a much greater support from top executives for improving their project activity. Such support will create a well designed process that guarantees a continuous stream of new ideas, and a flawless methodology of flexible and adaptive project execution that helps project teams complete their projects on time and guarantees that these projects will meet the company’s business needs. It is time to unleash the unutilized potential that exists in better project management. Executives should focus on a new goal of turning project management into their next competitive asset.
Aaron J. Shenhar is a Professor of management at Stevens Institute of Technology and co- author of the book Reinventing Project Management: The Diamond Approach to Successful Growth and Innovation, Harvard Business School Press, 2007.
The Limitation of Efficiency: Why Project Management will Become the Next Competitive Asset
By Aaron J. Shenhar
Several realities are striking major corporations in the US. On one side of the scale, after years of cost-cutting and company-wide efforts to improve efficiency - most notably among them are six sigma initiatives - even the best companies find out that the rate of improvement is declining. Wal-Mart, the leader of low prices is finding it harder to keep growing and is facing intensified competition from also-runners such as Target or K-mart; and Southwest Airlines, the pioneer of low airfares reports that only a small portion of its earnings come from profits on running commercial flights, and the rest from its smart fuel management program. On the other side of the spectrum, well known innovative firms such as 3M, that tried to join the six sigma trends, find out to their horror that increased efficiency has its cost: stifled innovation and reduction in radical change and new products. So what is going on? Can companies do both six sigma as well as innovation, and do both well? Can they keep competing on both sides of the spectrum?
The truth is that efficiency improvements have their limitation. Initial efforts are always rewarding at first; but how much can you squeeze your operations? After years of cost-cutting, improvements become less and less notable. As experts in manufacturing know, learning curves, which are based on improved performance by repetition, level-off eventually. The cost of any produced product, no matter how many of it you make, will never go down to zero. Thus continuous cost cutting will not provide an unending source of competitive advantage. To illustrate the point think about quality. In the 1980s, high quality was considered an important element of competitive advantage. Not anymore; customers now take quality for granted, rather than view it as a unique advantage. High quality is today a must, and essentially a license to do business. A similar case can be made for organizational efficiency. Eventually, most companies may reach a similar level of efficiency. The current leaders of efficiency are seeing that horizon already, but it will not take long before most companies will catch up, and high efficiency will less and less be a source of competitiveness.
Furthermore, even the best programs for cost cutting, improved efficiency and better quality typically do not create growth. At best they may help you do what you are already doing better and cheaper. The only source for future growth, are new initiatives. Many suggest that innovation is the solution, but not every initiative involves innovation. Perhaps a simple way to see it is to divide the organizational activity into two parts, operations and projects. Operations involve repetitive ongoing activities such as manufacturing, service, and production; whereas projects involve one-time initiatives such as new or improved products, new businesses, in new markets and new places, but also investments in company infrastructures and internal improvements. Projects are the engines that drive innovation from idea to commercialization. But projects are also the drivers that make organizations better stronger, and more competitive.
It is time that companies realize that the only way they can change, implement a strategy, innovate, or gain competitive advantage is through projects. Ironically, however, many projects today still fail to achieve their expectations; they either do not meet their time and budget goals, do not deliver their business objectives, or both. While companies were busy focusing on improving operations, many of them ignored their project activity. They assumed that if management comes up with the right strategy, their project teams will get it done. Yet as the evidence shows, in projects there is still a significant gap in performance and much room for improvement.
So should companies keep investing in six sigma or other programs for improved operational efficiency? The answer is, absolutely yes. Can they afford to ignore their projects? Clearly not; companies must learn to do both; but each effort should focus on a different part of the company. On one hand, continuous improvement of operations and quality must go on. It may not continue to provide a significant source for competitiveness as it has in the past, but it is a must in order to stay in business. Once you let go, your efficiency and quality may deteriorate. On the other hand, top executives must start paying more attention to their project activity. In projects the improvement potential is high and the opportunity is great. And since more and more people in the organization are involved in projects, it seems that project management should become everybody’s business. The R&D or the IT function in the organization does not need six sigma or statistical process control. It needs good processes, better systems, and higher management involvement. Most project problems today are not technical but managerial. When technical errors cause projects to fail, it is usually management that failed to put the right system in place so that these errors will be detected in time. Executives must learn to ask the right questions and foresee danger before they make a commitment to a project and before it is too late; they must understand that different kinds of innovation need different project management styles; and they must implement company-wide initiatives to turn project management into their next competitive asset. It may not be easy, but the rewards will be great. It is time to unleash the underutilized potential that exists in better project management.
Aaron J. Shenhar is a Professor of management at Stevens Institute of Technology and co- author of the upcoming book Reinventing Project Management: The Diamond Approach to Successful Growth and Innovation.
Program Leadership: The Weak Link for Aerospace and Defense, by A. Shenhar
An Article for Industrial Management. Based on the Book: Reinventing Project Management: The Diamond Approach to Successful Growth and Innovation. By Aaron J. Shenhar and Dov Dvir, Harvard Business School Press, 2007.
Unleashing the Power of Project Management
By Aaron J. Shenhar
Projects are the engines that drive innovation and change. Yet they have been ignored for a long time by top managers. Thus many projects today do not meet their objectives. In order to unleash the hidden potential that exists in projects companies must learn how to manage project in a highly adaptive and flexible way. Once the new frameworks are adopted projects have the potential of becoming one of the most powerful competitive assets of modern corporations.
Why We Need to Deal with Projects
When you look at the Pyramids, the Great Wall of China, the Greek Pantheon and even Stonehenge, you realize that throughout history almost all societies have figured out ways to organize the efforts of large masses of people to build monumental creations, which have excited later generations for hundreds or thousands of years. Today we call these efforts projects. Yet not until modern times when companies began organizing work around projects; and when tools, techniques, and methods became standard across industries, a new discipline--project management—emerged.
As a formal discipline, project management as we know it was born in the middle of the 20th Century. The Manhattan Project, which built the first atomic bomb during World War II, displayed the principles of organization, planning, and direction that influenced the development of standard practices for managing projects. During the Cold War, additional large and complex projects demanded new approaches. Programs such as the US Air Force Inter-Continental Ballistic Missile (ICBM) and the Navy Polaris were used to develop the management control procedure called Program Evaluation and Review Technique (PERT). They evolved simultaneously with the Critical Path Method (CPM), which was invented by Dupont for construction projects. These methods led to network scheduling charts, which became standard planning and controlling tools of project management.
Although projects have been around for thousands of years and project management as a discipline about fifty years, there are two reasons why projects and project management are becoming more and more important today to almost all organizations and businesses. First, let’s look at any organization’s activity as consisting of two parts – operations and projects. Operations mean repetitive, on-going activities that are being done over and over again, such as manufacturing or services; and projects mean one-time, non-repetitive initiatives or one-of-a-kind efforts. With this perspective you may realize that the share of operations in most organizations is on the decline, while the share of projects is rising.
This trend began already in the early 1900s during the industrial revolution, and it is accelerating in almost every organization or industry: Not only do product lifecycles become shorter; today’s customers require greater variety and more choices, forcing companies to offer more products. In addition, market globalization is forcing businesses to respond to local markets and to low-cost competition around the world. Finally, the IT and Internet revolution is not slowing down– even in stable industries such as banking or insurance, organization are investing in new IT infrastructure to keep up with growing demand and competition. Each one of these trends intensifies the project activity in almost every organization.
The second reason why organizations need to look closely at their project management is that across the board you may find that most projects today do not meet their time and budget goals and many do not meet their business objectives. Study after study shows that only one out of three projects is really considered successful. Thus, if two thirds of the efforts going into projects do not create the expected value, there is clearly a reason for concern.
Yet is there an Opportunity
Ironically, during the last few decades many organizations focused on improving their operations, but not their projects. This trend goes back to the turn of the Century when Frederick Taylor developed his scientific management principles, which greatly influenced the evolution of mass production systems, and it continued to this date with more recent concepts such as Just In Time, Lean Manufacturing, Reengineering, Supply Chain Management, and of course, the latest one, Six Sigma.
Although operational efficiency is important, it has its limitations. With time, at least conceptually, all companies may reach a similar level of efficiency. Additional investment in efficiency may not bring the advantages that it has created in the past. At best it may help you stay in the game and not fall behind. For comparison you may look at quality, which during the last decade has become a must, rather than a source of competitiveness as in the past.
However, no business enterprise today can survive if it is only focused on improving its operations. Projects are the engines that drive innovations from idea to commercialization. But projects are also the drivers that make organizations better, stronger, and more efficient. And since most organizations today accelerate toward a project-based world, shouldn’t companies ask themselves are they doing a better job than their competitors?
This situation presents a tremendous opportunity. The time has come to unleash the untapped potential that exists in projects. We believe that if managers and organizations will pay a greater attention to their project management practices, the rewards will be significant. If top executives will spend as much time on project management as they did on Six Sigma, they will make their organizations much stronger and more competitive.
Managing Projects by the Book
Yet the answer is not so simple. It is not simply a question of more effort and better attention to project management. The reality is that the current techniques as used in the discipline of project management form the necessary basis for learning and understanding what project management is all about, but they are insufficient to guarantee a project’s success or to address the needs of today’s dynamic and uncertain projects.
We have seen projects that were managed exactly as required “by the book”--and still failed. They followed a structured process of planning and execution, which is common in the profession, and even when completed on time, they ended up in disappointment to management and clients. And we have observed other projects that did not follow any acceptable structure or process, or did not have a full plan with all its elements, and yet they turned out to be outstanding successes, bringing-in value and fame to their performing organizations and great satisfaction to their customers.
To illustrate the point let’s look now at two famous projects. The first one is the Sydney Opera House. This famous building known for its inspiring architecture was initiated in the late 1950s. The original project plan assumed six years of construction with a budget of $7M. Yet when the project was completed it took its builders sixteen years at a cost of over $100M. From a traditional project management standpoint this project would be seen as a colossal failure. However, today no one really cares how much it cost and everyone sees the Opera House as a success story – brining in fame and money to the city of Sydney when millions of tourists visit the building each year.
The second case involves the first section of the Red Line in a much larger plan of building a subway system in Los Angeles. This project ended in 1993, and it was completed on time, below budget and achieving all its scope, quality, and performance goals. It even won the Project of the Year Award from the Project Management Institute (PMI). Yet after the first section was completed, the rest of the program was abandoned. The reason was simply because too few people chose the subway as their preferred mode of transportation. Although the subway was the most modern rail in the US and it offered a reliable, quite, comfortable, and timely service, the residents of Los Angeles did not buy into the concept of leaving their cars at home and using the subway instead. So was the subway a successful project?
The discipline of project management is based on an outdated model that assumes that projects are successful if they meet their time and budget goals. Once the project is launched, it must continue to its end to meet time, budget and requirements goals. Rarely do projects focus on business results or on changing at mid-course to better adjust to customer needs.
The Critical Role of Top Management
Most of today’s project problems are not technical, but managerial. When technical errors cause projects to fail, it is usually management that failed to put the right system in place so that these errors will be detected in time. We also realized that the current practices of project management are insufficient to predict project problems or to solve them. And we found that even if you do everything according to the conventional well-established practices of project management, you may still fail.
Ironically, these traditional practices remain typically unchallenged by top management. As a result, many project teams are left on their own without much guidance or help from the top. They often struggle to keep their projects on track while trying to fulfill unrealistic expectations of stability; often highly detached from dynamic business needs and changes in the environment.
Our conclusion is simple. There is more to project success than following a standard set of rules. It is not the tools or applications, nor is it the lack of process. The problem lies in the mindset and the assumptions that are driving the traditional approach to project management, rather than in process or practice. The critical questions are: can we help project teams make the right assessment before presenting their project proposals to top management? Can we show executives how to ask the right questions and foresee danger before they make a commitment to a project and before it is too late? And can we guide project teams on how to adapt their project management style to the right circumstances, environment, and task? It seems that managers at all levels need a new framework and a new language to communicate with each other about projects.
Traditional Project Management Drivers
As mentioned, the current, standard, and formal approach to project management is based on a predictable, fixed, relatively simple, and certain model. It is also generally decoupled from the changes in the environment or the business needs; once you created the project plan, this plan sets out the objectives for the project, and the project manager must execute the plan, using a “management-as-planned” philosophy. After the project is launched, progress and performance are assessed against the plan and changes to the plan should be rare, and if possible avoided. Consider the following two major drivers of project management today:
• The triple constraint: Project managers see their job as successful when they are able to complete the project on time, within budget, and achieve performance (or requirements) goals. This has famously been named “the triple constraint” (or “iron triangle”) of project management and deviations from it are seen as a negative sign, which must be prevented or corrected.
• One size fits all: Many executives and managers assume that all projects are the same, thus suffering from the “project is a project is a project” syndrome. They expect to succeed by simply following a standard set of activities as outlined in the conventional project management books, which currently do not include guidelines for distinction among projects and for selecting the right approach for the right project.
In their struggle to keep projects on track, both executives and teams get frustrated when they are trying to fulfill unrealistic expectations of stability. Worse, in their effort to focus the project on the triple constraint, project teams often lose sight of the business rationale behind their projects, that they must satisfy a customer and achieve business results, and not just meet project requirements. And when they try to follow a standard set of rules for all projects, they often employ the wrong approach to their specific project.
The classical drivers of project management are no longer enough for today’s business environment. The traditional model fits only a small group of today’s projects. Most modern projects are uncertain, complex, and changing; and they are highly impacted by the dynamics in the environment. Virtually every project we studied underwent changes that were unpredictable upfront, and none of the projects was completed exactly as planned. Furthermore, as we found, projects differ in many ways, and “one size does not fit all.” In order to succeed, projects must be adjusted to the environment, task, and goal, rather than stick to one set of rules.
Toward an Adaptive Project Management Framework
Based on our research we suggest changing the paradigm of project management and accepting things as they are. In this book we developed a new framework and a new language to understand what project management is all about. The new framework is success-focused, flexible, and adaptive, and we simply call it the “Adaptive Project Management Model;” it differs from the traditional approach in several ways, as shown in Table 1
Table 1: From Traditional to Adaptive Project Management
||Traditional Project Management
||Adaptive Project Management
||Getting the job done – on time, budget, and requirements
||Getting business results – meeting multiple criteria
||A collection of activities that need to be executed as planned to meet the triple constraint
||An organization and a process to achieve the expected goals and business results
||Plan once at project initiation
||Plan at outset and re-plan when needed
||Rigid, focused on initial plan
||Flexible, changing, adaptive
||Predictable, certain, linear, simple
||Unpredictable, uncertain, non-linear, complex
||Minimal, detached, once the project was launched
||Affects the project throughout its execution
||Identify deviations from plan and put things back on track
||Identify changes in the environment and adjust the plans accordingly
||All projects are the same
||One size fits all
||Adaptive approach – one size does not fit all
According to this model projects are not just a collection of activities that need to be completed on time. Projects are business-related processes that must deliver business results. They are not predictable or certain. Rather, they involve a great deal of uncertainty and complexity, and they must be managed in a flexible and adaptive way. Planning is not rigid, fixed, or done once and for all; instead, it is adjustable and changing, and as the project moves forward, re-planning is often appropriate or even unavoidable. Project management styles must adapt to the specific project and its requirements, and one size does not fit all. While this approach represents a shift in thinking, it is inevitable to meet today’s organizational challenges. While no framework could provide all the answers, we believe that every organization can significantly improve its business results and achieve more homeruns from its projects if it will consciously apply the adaptive project management frameworks.
Old versus New Project Management
One final word: We do not suggest, however, eliminating the traditional approach. Rather, we are building on it. Many elements of traditional project management continue to be useful; yet, the overall approach will be augmented. As established by the conventional approach, each project must have a work breakdown structure, a schedule, a budget, an organization and a process. All those are necessary building blocks for well-organized successful projects. These building blocks will only form the baseline to leading the project in a flexible way. Not only do projects have to monitor and review their progress, they must periodically examine the need for the product and the customer’s position. Are the initial assumptions still valid? And if not, what adjustments does the project have to make in order to guarantee better success. Furthermore, in many projects it is impossible to build a clear and detailed plan. The uncertainty involved is simply too high to enable creating a clear project plan with all its bell and whistles. Instead, companies must initiate pilot programs, namely, small-scale efforts that will help remove some of the unknowns before the company can commit to the major large effort. In other situations, managers must create product prototypes that will be tested by customers before the final product requirements are set and determined.
In sum modern projects involve a great deal of uncertainty and complexity, as well as other constraints such as time, political pressures, economical risks, and many others. Each project is unique and it has to be managed it its own way that best fits it unique characteristics, risk and complexity. Only after companies learn how to manage projects in an adaptive and flexible way, will projects become the powerful competitive assets that they can be.
Mapping the Dimensions of Project Success, by A. Shenhar, O. Levi and D. Dvir
In search of project classification: a non-universal approach to
project success factors, by
D. Dvir, S. Lipovetsky, A. Shenhar, and A. Tishler
Refining the search for project success factors: a multivariate, typological approach, by A. Shenhar, A. Tishler, D. Dvir, S. Lipovetsky, and T. Lechler
Towards a NASA-Specific Project Management Framework, by A. Shenhar, D. Dvir, D. Milosevic, J. Mulenburg. P. Patanakul, R. Reilly, M. Ryan, A. Sage, B. Sauser, S. Srivannaboon, J. Stefanovic, H. Thamhain