P1258854360iHWNh

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

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What is a project?

• Project
• Well defined goals
• Non-recurrent
• Time limited - life cycle
• Fixed budget
• Executed by a temporary organisation
• Project organisations
• RD, new product development (NPD),
  manufacturing, services and CoPS
• Wave of the future in global business

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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)

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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

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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
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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-)

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Project management trade-off
Cost
Channel Tunnel
Millenium Dome
Swanwick ATC centre
Schedule
Technical specifications
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Types of organisation
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Organisations unsuitable for CoPS
Key F1 - F5 functional departments (eg
Marketing, Finance, Human Resources, Engineering,
Manufacturing, RD) P1 - P5 projects within
the organisation (eg CoPS projects) SM
senior management
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Traditional functional organisation
Chief Engineer
Staff
Staff
Staff
Manager
Manager
Manager
Section heads
Group leaders
Subgroup leaders
Engineers and engineering aides
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Organisations ideal for CoPS
(E)
(D)
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, RD) P1 - P5 projects within
the organisation (eg CoPS projects) SM
senior management
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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
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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

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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

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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

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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
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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

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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

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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
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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)