On the utility of project management techniques for new product development projects
New product development (NPD) is a critical activity for many organisations. Since it is often central to continuing business success, it is important that activities relating to NPD be managed properly. Most organisations that are involved in NPD use aspects of project management to run their product development projects. It is therefore of interest to ask: to what extent are project management techniques useful for managing NPD projects? This is the question addressed by Dirk Pons in his paper, Project Management for New Product Development, published in the June 2008 issue of the Project Management Journal. In his words, the paper aims to “…examine the existing research to determine the efficacy (or otherwise) of using project management for NPD and provide a case study for comparison…” In this post I summarise and review the paper.
The case study presented by the author is the development of a new dishwasher for a consumer white-goods company. The entire product lifecycle – from idea generation through design, testing, production, marketing, distribution, market growth, maturation, decline and withdrawal – is treated as a single project. I’m not sure I understand the rationale behind this. Wouldn’t it be more appropriate to focus on “genuine” development activities (i.e. from idea generation through to initial production) as the NPD project? Anyway, having identified the entire product lifecycle as his project, the author develops a high level WBS based on existing models of the engineering design process and then models the activities using Microsoft Project. The resulting model, the Project Management Body of Knowledge (PMBOK) guide and research literature are then used as a basis for evaluating the utility of project management for NPD projects.
Before going any further I should mention that, in my opinion, the author takes a restricted view of project management (with exceptions as noted below). His discussion focuses on project management as described in the PMBOK Guide. But project management is much more than one particular framework or methodology. There are a host of techniques – critical chain, or the plethora of methods that go under the banner of agile, for example – adaptations of which may be more suitable for NPD projects. A Big Design Up Front methodology, as implicitly advocated by PMBOK, may not be the best way to handle such projects.
Following the format of the paper, my review is organised according to the nine knowledge areas described in the PMBOK Guide.
Project Integration Management
This area is concerned with orchestrating the diverse elements (activities, resources etc.) that make up a project. In NPD projects, project management is more applicable to development activities (which can be planned and controlled) than to product conceptualisation (which can’t be planned or controlled). Further, as the author points out, companies may have more than one NPD project running simultaneously, often using common resources. In such cases resource management across projects becomes important. Using the example of Microsoft Project, the author contends that software is increasingly able to assist in managing project resources. Be that as it may, I think it is more important to focus on the strategic factors (such as business priorities) which determine resource allocation priorities across concurrent NPD projects ( business priorities etc.). These considerations are unfortunately beyond the scope of the paper.
Many NPD projects are subject to tight time constraints because of small windows of opportunity in the market. Hence time estimates for project activities have to be accurate. On the other hand, these projects are plagued by uncertainties – especially where innovative products are involved. Stock standard scheduling techniques such as CPM and PERT have limited utility in such projects as they are unable to handle the iterative and uncertain nature of product development activites.
The stage-gate method is a popular approach to managing uncertainty in NPD. As the author points out, however, “…there is surprisingly little research literature on the effectiveness of the stage-gate approach, and most of the claimed benefits are conjectural rather than substantiated…” . The fundamental problem is that the stage-gate method assumes that design is a deterministic process, i.e. it proceeds in a predictable manner. This is clearly not the case for many NPD projects.
On another note, NPD projects often assume that product development can be broken down into several relatively independent sub-problems. In reality, though, the sub-problems are rarely independent. The solution of one affects the other in a significant way. The author recognises that such distributed design problems, as they are called, cannot be treated by the “divide and conquer” techniques of conventional project management.
To sum up, the author recognises that uncertainty and complex dependencies (often unrecognised in initial stages) of the NPD process limit the utility of scope management processes outlined in the PMBOK Guide. In my opinion, novel ideas such as integrating agile and stage-gate methodologies may offer a better option. Unfortunately, the paper does not cover these areas.
According to the author, the biggest problem with estimating time is bias – i.e. the inability of the estimator to be objective in his or her estimates. There are objective estimation methods – see my post on reference class forecasting for example – but these can be hard to apply in practice. Another technique that has been used to cure bias is the critical chain method. The paper does not refer to these or any other objective estimation techniques.
Bias also makes it difficult to get accurate, objective, percent-complete reports for tasks during project execution. The author claims there is no research done on the accuracy of self-reported percent-complete estimates. If this is the case, it is certainly an area where definitive research results could reap immediate practical benefits.
Project cost estimates are based on scope and time estimates. The author makes the point that deterministic project paths are generally assumed when estimating costs. Given the earlier discussion, it should be no surprise that this leads to inaccurate cost estimates.
Regarding the specifics of cost estimation, the author makes several points. He suggests that the strategy employed to manage costs can be important. For example, research has shown target costing could be inappropriate when the product is differentiated on factors other than cost. As far as costs are concerned, the main variable costs in NPD are those relating to labour. These costs can be hard to allocate properly, particularly if resources work on multiple projects. From the project management perspective it is important that only time spent working on product development is costed to the project. The author recommends handling this allocation through project management software.
Since the paper focuses on the PMBOK Guide as the basis for discussion, I expected a comprehensive discussion on the use of earned value in NPD projects. However, the author only makes the comment that earned value metrics have several different definitions, pointing out that this needs to be resolved to avoid confusion.
As I’ve stated in my ruminations on quality, it is important to realise that the term “quality” means different things in different contexts. The author’s discussion of quality looks at a couple of project management approaches, and finds both lacking for NPD projects.
Firstly, he points out that the PMBOK view of quality borrows heavily from Total Quality Management. Consequently, most of the items discussed therein are relevant to production processes rather than NPD project management. Factors that are important for NPD projects include functional and production quality standards and aesthetic considerations. It should be noted that there are two perspectives of quality here – consumer and producer. The former includes functionality and aesthetic considerations whereas the latter includes production quality. In NPD, the former considerations are paramount – after all, one wants to make a product that consumers will want to buy. The PMBOK guide has little to offer on this.
The paper also discusses quality from the perspective of lean project management. Lean project management attempts to optimise resource usage by adapting ideas drawn from lean manufacturing. Some examples include: just-in-time scheduling, minimisation of inefficiencies and waste etc. However, these will be more relevant for non-NPD projects (such as packaged software implementation) than for NPD projects. As the author mentions, lean project management is not likely to be useful for NPD because it removes organisational slack which in turn reduces one’s ability to deal with uncertainty. Further, lean project management does not provide a method for design, which is central to NPD.
Human Resource Management
The author rightly points out that the PMBOK Guide has little to say about social and behavioural aspects of HR management such as organizational culture and team dynamics. These are important for all types of projects, but even more so for NPD projects. The “mechanical” aspects of HR – definition of roles and responsibilities, staffing, task allocations etc. are well covered in the PMBOK Guide, but then they are also more straightforward to implement.
NPD projects often involve cross-functional teams drawn from various departments within the organisation. This has associated challenges. As an example, departments have to find temporary replacements for persons loaned out to the project. As another, it can be challenging to integrate people from diverse professional backgrounds into a team. There are also stresses associated with uncertainty and the temporary nature of projects.
The author draws attention to the area of strategic human resources management (SHRM), which he defines as the design of HR practices that encourage certain (desirable) staff behaviours that (are believed to) contribute to organisational success. He points out that SHRM might be particularly relevant for NPD, but that it has not yet been integrated into project management practice. On the other hand, he also mentions that certain SHRM practices can actually be counterproductive. For example, incentives may lead to suppression of open communication between team members (there being more incentive to hoard knowledge than to share it). In this context, the author points out that some SHRM research shows that input control (team selection, training etc.) tends to promote innovation but output control (incentives, performance management) may inhibit it. He makes the excellent point that current practices emphasise the latter over the former, to the detriment of many organisations. HR departments would do well to take note – efforts should be focused on hiring and training, not on managing performance.
The author concludes the section by noting that the PMBOK Guide is of limited relevance as far as HR management is concerned, and that NPD project managers may find it more useful to look at SHRM literature instead.
The PMBOK Guide focuses on communication between a team and other parties external to it (such as stakeholders), but has little to say about communication within the team. Smooth and open communication within a team is important for any project, not just those involving product development. Teams that communicate effectively are able to solve problems more efficiently. The author also makes a mention of the role of technology in enabling collaboration within teams. Although he doesn’t say so explicitly, this is more relevant for distributed teams.
The author also makes a brief mention of the role of communication in enabling knowledge transfer. There is a vast literature on this in relation to project management. In earlier posts, I have commented on effective knowledge capture and the role of organisational culture on effective knowledge transfer in projectised organisations. Many of the considerations highlighted in those posts apply to NPD projects as well.
The PMBOK Guide views risk management as consisting of the following processes: risk management planning, risk identification, risk analysis, risk response planning and risk monitoring and controlling. Since NPD projects are inherently uncertain, managing risk is a significant aspect of these projects. The author points out that these projects typically employ risk management principles and techniques that go beyond PMBOK’s view of risk management.
This deals with activities relating to the management of the purchase of goods and services for the project. Some projects engage contractors to perform all or a part of the work; some others may outsource work. In either case this involves setting up of and management of contracts and other agreements. These are the main focus of procurement management as laid down in the PMBOK Guide.
In the case of NPD projects, the author recognises that a lot of consumer electronics products consist of a large number of parts. It is unusual for an organisation to have the capacity to produce all components in-house. Outsourcing is thus inevitable and must be managed. This highlights the need to develop and maintain strategic links with suppliers, an area not covered in the PMBOK Guide.
The above considerations are more relevant for the production phases of the product lifecycle. They have a limited role in the important phases of NPD, such as product conceptualisation and design.
Based on references to research literature the author establishes that there are significant gaps in the PMBOK Guide, at least as far as NPD projects are concerned. As such, the guide provides useful tools for managing routine aspects of NPD projects (italics and emphasis mine, not the author’s). Gaps exist in many of the “softer” areas such as team dynamics and organisational learning. Given this, the author recommends that NPD project managers try new techniques and adopt them if they prove to be useful.
As far as future work is concerned, the author suggests that the PMBOK needs to incorporate techniques that can deal with uncertainty. He also emphasises the need for detailed research into the effectiveness “non-conventional” techniques such as lean project management. This is a good point: if new methods are useful, we need to understand the factors that make them useful. He also points out that some researchers have questioned the utility of project management for NPD, suggesting that trial and error, empathy and cooperation are superior to plans and processes. May be so, but a certain amount of the latter is necessary. The question is: how much? I think NPD projects require a bit of both. Exactly how much is best left to the judgement of the individual project manager who is familiar with the realities and quirks of his or her project.
The research discussed in the paper indicates that conventional project management (as described in PMBOK) is of limited utility for NPD projects. This is primarily because NPD projects involve a high degree of innovation and are, as a consequence, relatively ill-defined. This should be no surprise to practising project managers, who know from experience that conventional project management works best when scope is well-defined upfront. As far as NPD projects are concerned, the author identifies several areas in which the PMBOK is deficient. These have been discussed in detail in the paper (and above!).
To complement his coverage of the PMBOK, the author also looks into a few novel methods such as lean project management, which originated in construction or manufacturing. Unfortunately, he overlooks techniques such as iterative / incremental methods which have proven their effectiveness in NPD projects in the software industry. Although it isn’t clear how these can be adapted to projects that involve tangible products (as opposed to software), they merit inclusion in any study that deals with the utility of project management techniques for NPD projects.
To conclude, the paper is a useful read for project managers who work on NPD projects, particularly for its coverage of deficiencies in conventional project management techniques and how these may be addressed by alternate approaches.
References: Pons, Dirk, Project Management for New Product Development, Project Management Journal, 39 (2), 82-97. (2008).