SPRU Masters - Spring 2003 managing innovation in complex products and systems

1. SPRU Masters - Spring 2003 managing innovation in complex products and systems Project-based organisations Andy Davies

2. Overview • Nature and scope of project management and project organisations in CoPS • Organisational forms used in managing CoPS design and implementation • Matrix, project-based organisation (PBO) & project-led • Hobday (2000) 'The project-based organisation: an ideal form for organising complex products and systems?' Research Policy

3. What is a project? • Project: • Well defined goals • Non-recurrent • Time limited - life cycle • Fixed budget • Executed by a temporary organisation • Project organisations • R&D, new product development (NPD), manufacturing, services and CoPS • ‘Wave of the future in global business’

4. Who manages CoPS projects? • Individual firms • Set-up & execute projects in multi-project environment • Various projects compete for same resources • Suppliers (e.g. Ericsson) or customers (e.g. Vodafone) • Multi-firm alliances • Consortium of firms e.g. Channel Tunnel Rail Link • Rail Link Engineering (Arup, Halcrow, Systra and Bechtel)

5. Types of projects in CoPS • Development projects • Design & develop new or improved technologies and products • Lead user play vital role in development projects • Afterwards technology is rolled out as a mature product • Mature product line projects • Implementation projects using known or existing technologies • Many CoPS projects involve development and implementation activities

6. Project life-cycle Full operations Installation complete Major contracts let Percentage complete 100% Project go decision III IV I I II Stage I: Feasibility Stage II: Planning & Design Stage III: Implementation Stage IV: Start-up

7. Project management • Project management • Management practices related to the evolution of a project through its life cycle • Technical discipline for managing trade-off between technical decisions, time and money • Origins of PM: • Development of core techniques and concepts - largely aerospace and defence (1955-1970) • Slow expansion into other sectors (1970-1980s) • Extension and refinement - largely driven by Total Quality ideas and professional societies (1985-)

8. Project management trade-off Cost Channel Tunnel Swanwick ATC centre Millenium Dome Schedule Technical specifications

9. Types of organisation

10. (A) (C) SM SM SM F1 F2 F3 F4 F5 F F F F F F F F F F (B) P P1 Functional P2 P P3 Balanced Matrix Functional Matrix Organisations unsuitable for CoPS Key: F1 - F5 = functional departments (eg Marketing, Finance, Human Resources, Engineering, Manufacturing, R&D) P1 - P5 = projects within the organisation (eg CoPS projects) SM = senior management

11. Traditional functional organisation Chief Engineer Staff Staff Staff Manager Manager Manager Section heads Group leaders Subgroup leaders Engineers and engineering aides

12. (F) SM SM SM P1 P2 P3 P4 P5 P1 P1 P2 P3 P4 P5 P2 P3 P4 F Organisations ideal for CoPS (D) (E) F1 F2 F3 F1 F4 F2 F5 F3 F4 Project Matrix Project-led Organisation Project-based Organisation Key: F1 - F5 = functional departments (eg Marketing, Finance, Human Resources, Engineering, Manufacturing, R&D) P1 - P5 = projects within the organisation (eg CoPS projects) SM = senior management

13. Matrix organisation General Management Project manager Functional line manager Functional line manager Functional line manager Manager task 1 Manager task 1 Working groups Manager task 1

14. Matrix in CoPS • Matrix structure • common in CoPS e.g. Ericsson, Cable and Wireless • Strengths • performing routine tasks • achieving economies of scale • coordinating cross-project and cross-functional resources • facilitating company wide technical development • promoting organisation-wide learning

15. PBO strengths • PBO • within a single firm or consortium of firms • Strengths • Innovative 'organic', adaptive form • Creates and recreates organisational structures around the demands of each CoPS project and each major customer • Copes with emergent properties in production, project risks and uncertainties typical in CoPS • Good at integrating different types of knowledge and skills • Responds flexibly to client needs

16. PBO weaknesses • PBO can work against the interests of corporate strategy • strategies for learning & innovation cut across project interests • isolation from the organisation results in lack of regular reporting • Project tracking at corporte level is vital to achieving business goals • but senior management - often do not know enough about PBO

17. Matrix swing Project orientation Functional orientation Percentage complete 100% III IV I I II Stage I: Feasibility Stage II: Planning & Design Stage III: Implementation Stage IV: Close out

18. Case study: US missile projects • Project management phase 1946-1954: • 1946 - Convair Corporation won a contract to study Atlas missile • Project manager ran small project for Atlas • Project grew to 300 employees in 1954; 9,000 in 1958; 32,500 1962 • 1955 Convair created Astronautics division to run Atlas as a single project office

19. Shift from project to matrix • Problems of project management phase • Difficulties with many versions of Atlas & related new projects • Created conflicts of priority among functional depts. • Matrix management phase (1954-1963): • Resolved by matrix management & organisation • by 1963 every programme used matrix structure • Production of Atlas included 22 industries, 17 major contractors, 3,500 subcontractors and suppliers

20. Functional-project continuum Project influence increases Functional influence increases FUNCTIONAL MATRIX PBO One-off & small batch Non-routine tasks Customised product Economies of repetition Organic High-volume production Routine tasks Standardised product Economies of scale & scope Mechanistic

21. Conclusions • CoPS projects • Matrix used for more routine, standardised projects • PBOs for complex projects and new markets • Project-led - strikes a balance • Difficulties in learning from project to project • 'The management challenge facing CoPS producers is both to realise the potential of project-based forms for current markets, and to develop the firm's overall capabilities to exploit and create new market opportunities' (Hobday, 2000)