Application of Project Management by Small Businesses to Develop New Products and Services
Larson, Erik W., Gobeli, David H., Gray, Clifford F., Journal of Small Business Management
Organizations small and large have recognized the value of organizing complex product and service development endeavors into definable projects. The purpose of the present study was to survey the project management practices of small firms engaged in developing new products and services. More specifically, this study focuses on how small firms choose to organize and manage their projects and assesses managers' opinions concerning the relative effectiveness of different project management approaches. Before reporting the results, we will briefly discuss the significance of project management for the development of new services and products in small firms, the relative advantages of different project management approaches, and the application of project management by small firms.
OF PROJECT MANAGEMENT
Stuckenbruck (1982) has defined a project as a "...one shot, time-limited, goal directed, major undertaking, requiring the commitment of varied skills and resources." Project management is a critical mechanism for capitalizing on entrepreneurial spirit and generating new products and services. A key element of project management is the creation of a temporary organization within the existing hierarchy of the firm. This organization relies upon formal and/or informal coordinating mechanisms to integrate the efforts of people drawn from different disciplines who work either full or part time on the project. Within the product development process, project management is commonly used to complete the technological development and test marketing phases (Maile and Bialik 1984). Among the reported advantages of project management for development efforts by small firms are the following (Sayles 1989, Adams and Martin 1987, Kerzner and Thamhain 1984):
* Control. Project management centralizes responsibility for budgetary cost control, schedules, resource allocation, technical quality, and client, customer, or public relations.
* Innovativeness. Creative problem solving is enhanced by the diversity of the specialization, background, and experience of the participants working toward a common objective.
* Adaption. Sine the new product/service will eventually be incorporated into the mainstream operations of the firm, the involvement of specialists from different areas helps make the project specifications and functioning consistent with the existing constraints of the firm.
* Less Disruption. The normal routines and activities of the firm can continue because the innovation is conducted outside the normal boundaries of the organization by the new temporary operation.
While companies apply project management in many different ways, there are generally three basic approaches used: functional, project team, and matrix. These alterantives have been described in detail elsewhere (Youker 1977, Larson and Gobeli 1987, Galbraith 1971), so we will only highlight major differences. The functional approach utilizes existing chains of command to complete specific project. The project is divided into segments and assigned to relavant specialists or functional groups with the specialist or head of the functional group responsible for his or her segment of the project. No formal project manager is designated and coordination is provided by top management. The second, diametrically opposed type of project structure, utilizes semi-autonomous project teams to complete projects. Most of the resources necessary to complete the project are separated from the regular organization and set up as a dedicated team headed by a project manager. The project manager has direct authority over all or most of the critical resources and personnel assigned to the project. A matrix organization is a hybrid structure which superimposes a project system on the existing functional structure of the firm. …