Title: Challenging Classic Project Management: Turning Project Uncertainties into Business Opportunities (Fee or subscription required)
Authors: Thomas G. Lechler (Stevens Institute of Technology), Barbara H. Edington (St. Francis College), and Ting Gao (Stevens Institute of Technology)
Publisher: Project Management Journal, vol. 43, no. 6
Date Published: December 2012
When companies take on major projects, unexpected hitches are inevitable. But this paper finds there’s often a silver lining to surprises, even those that first appear to be setbacks. The trick is for managers to recognize their potential for opportunity. In fact, when firms exploit uncertainties during a project development cycle, they typically boost the end value of the initiative far beyond initial expectations.
Researchers and managers alike have long lumped together uncertainties and risks as pernicious threats to a project’s likelihood of success. But this traditional view of project management ignores the positive potential inherent in uncertainties—the “unknown unknowns” that aren’t anticipated prior to a project’s launch, as opposed to the known risks that can and should be gauged beforehand and factored in.
To better untangle the effects of the unknown from known risks, and to explore how companies can take advantage of the curveballs that come their way, the authors of this paper conducted in-depth interviews with the project managers responsible for 20 major initiatives. The projects were varied; target schedules ranged from eight months to three years and budgets were set between US$500,000 and $69 million. More than half centered on product development or IT; the others included construction, R&D, and business realignment projects, as well as the launch of clinical trials, market prediction models, and feasibility studies. And each of the projects was buffeted by as many as three troubling episodes caused by uncertainty.
During the 90-minute interviews, the managers assessed the impact of those episodes—whether or not they had been exploited positively—on the ultimate value of the project. With the benefit of hindsight, they described any missed opportunities that could have been turned to their advantage. The managers also provided information on the initiative’s complexity and scheduling, the project’s proposed and final budgets, and the company’s stakeholder structure.
In 12 of the 20 cases, the managers spotted the uncertainties and worked with them. And when they did, the results were positive. Exploited uncertainties “led to a redefinition of a project’s initial baseline,” the authors write, and resulted in the companies’ implementing new technologies and processes or identifying future projects.
To guide project managers to a “broader range of potential opportunities,” the authors identified four categories to look for.
The first involves technical innovation. As an example, the authors cite the experience of one company that faced a new regulatory requirement that would have raised the cost of an ongoing project by $2 million. The executive team got around this hitch by pushing for the development of an inexpensive testing solution. That innovation not only brought the company into compliance with the new rule, but also saved money and established a lower-cost platform for future projects.
The second type of opportunity involves implementation processes. One manager in the study described a project that suddenly faced constrained technological resources. Rather than abandon or scale back the project, the company created a less-specialized building process that saved time and money. It also cut down on post-implementation problems, which dropped from an average of three or four action items to one.
The third category is new business. When the original outside sponsor of one initiative retired and support for the project waned, the study recounts, the initiative’s managers engaged in widespread networking to find a new backer. The effort paid off with a replacement sponsor who not only provided funding to revive the project, but opened additional business avenues by appealing to an even larger audience.
Finally, in several cases, work done in one project had value beyond its initial scale, pointing the way to similar future projects. For example, one of the companies solved a software implementation problem that afflicted a particular department. Once the fix was identified, it was quickly applied to other departments, improving efficiency and heading off new glitches.
Uncertainties, the authors found, can be grouped into six primary types.
- Contextual turbulence: external changes set off by shifts in the markets, for example, or new legal or regulatory rules
- Stakeholder fluctuations: shifts in the fortunes of customers, vendors, investors, and others
- Technological uncertainty: factors that can affect the functionality of products in different markets, among other challenges
- Project uncertainty: unrecognized complexities that crop up after a project has started
- Organizational uncertainty: ripple effects from unexpected corporate mergers or spin-offs, for example
- Malpractice: significant deviations from accepted project management standards
Not all uncertainties led to good outcomes in the study group, of course. In its postmortem, one company that had been in the malpractice group bemoaned the lack of a tracking system that would have facilitated a root-cause analysis of implementation problems. The system should have been in place under existing company procedures. Another project suffered from frustrating staff redundancies created by a “surprise” merger.
But when project teams are able to seize unexpected opportunities, their impact is “wide and deep,” the authors write, typically resulting in trimmed budgets, leaner schedules, and higher quality for ongoing projects as well as potential benefits down the line. Nearly 75 percent of exploited opportunities led to an uptick in the satisfaction of internal and external clients, the authors found, and 58 percent were linked to increased financial returns.
Nevertheless, the authors note that taking advantage of project-related opportunities is rarely straightforward and requires “exceptional and innovative decisions” that are often possible only when all key stakeholders of a project confer. “In these situations,” the authors write, “project managers should take the role of champions and use their communication skills to bring these opportunities to the decision-making level.”
To be sure, it is also necessary to recognize the opportunities in the first place. Many interviewees had difficulty identifying uncertainties and confused them with either risk scenarios or normal aspects of the project itself. This led to the unexpected insight, the authors write, that senior management has a crucial role to play in exploiting opportunities—by making sure to assign project managers with a business background to big and complicated initiatives that are prone to uncertainties.
On a broader level, it’s vital for the executive team to think about large projects in a different way, the authors advise. Senior leaders should abandon the classic risk management technique of simply sticking to the established goals. They should replace that technique with a more nuanced approach that embraces the potential for value creation.
“In situations of uncertainty,” the authors write, “the adherence to a baseline that was defined without the knowledge of uncertainty could lead to neglected opportunities, forsaken value opportunities, and consequently the potential for project failure.”
In the life cycle of a project, not all surprises are bad news. When managers can turn uncertainties into opportunities, the end value of the project (including its budget, schedule, and quality) typically exceeds initial expectations.