Project Management and Innovation Past and Future Essay

It is unsurprising that development of innovation is often run as a project. Yet, theoretically both project management and innovation studies have evolved over time as distinctively separate disciplines. In this paper we make an attempt to conceptualize the innovation project management and past as well as future of same. By doing so, we contribute to the nascent academic debate on the interplay between innovation and project management. This paper is concerned with three topics and the interplay between them, namely â€Å"Innovation†, â€Å"Research and Development (R&D)† and â€Å"Project Management†. The interest in these topics has exploded recently as they emerged both on the policy agenda and in the corporate strategies. The contribution of technological innovation to national economic growth has been well established in the economic literature. In the last couple of decades, new technologies, new industries, and new business models have powered impressive gains in productivity and GDP growth. While originally there was a tendency to equate R&D and innovation, contemporary understanding of innovation is much broader than purely R&D. R&D is one component of innovation activities and knowledge creation among others. Innovation emerges as a pervasive and complex force, not only in the high-tech sectors in advanced economies, but also as a phenomenon existing in low-tech industry of developing, or catching-up economies. Still, the link between R&D and innovation is often at the core of the innovation studies. Presently, we are witnessing â€Å"projectification† of the world as a growing number of specialists organise their work in projects rather than on on-going functional basis. The connection between R&D and project management has a long history. Most tools of project management have been developed from the management of R&D, often with military purposes (Lorell, 1995). The most vivid example of managing R&D projects in the public sector is the PRINCE2 method (UK OGC, 2005). Due to the above mentioned difference between R&D and innovation, R&D projects should be distinguished from innovation projects too. Innovation is a non-linear process, not necessarily technology-led and may not necessarily result from formal R&D investments. Innovation is the exploration and exploitation of new ideas and recombination of existing knowledge in the pursuit of sustained competitive advantage. Besides, both innovation and R&D projects by their nature differ from conventional projects. Thus, there is a need to examine the Innovation Project Management (IPM) as a distinctive area of managing innovation in projects, using the tools and methods of the project management. The Evolution of Project Management Theory The genesis of the ideas that led to the development of modern project management can arguably be traced back to the protestant reformation of the 15th century. The Protestants and later the Puritans introduced a number of ideas including ‘reductionism’, ‘individualism’ and the ‘protestant work ethic’ (PWE) that resonate strongly in the spirit of modern project management. Reductionism focuses on removing unnecessary elements of a process or ‘ceremony’ and then breaking the process down into its smallest task or unit to ‘understand’ how it works. Individualism assumes we are active, independent agents who can manage risks and create ideas. These ideas are made into ‘real things’ by social actions contingent upon the availability of a language to describe them. The PWE focuses on the intrinsic value of work. Prior to the protestant reformation most people saw work either as a necessary evil, or as a means to an end. For Protestants, serving God included participating in and working hard at worldly activities as this was part of God’s purpose for each individual. From the perspective of the evolution of modern project management, these ideas were incorporated into two key philosophies, Liberalism and Newtonianism. Liberalism included the ideas of capitalism (Adam Smith), the division of labour, and that an industrious lifestyle would lead to wealthy societies Newton saw the world as a harmonious mechanism controlled by a ‘universal law’. Applying scientific observations to parts of the whole would allow understanding and insights to occur and eventually a complete understanding. LITERATURE REVIEW In this paper we seek to establish bridges between two distinctive disciplines – project management and innovation management (innovation studies). Despite seemingly interrelated nature of both subjects, these two research domains have been developing relatively isolated from each other. Innovation Studies Innovation studies are rooted in the seminal writing of Joseph Schumpeter in the 1920s-1930s (e. g. Schumpeter, 1934), whose ideas started to gain popularity in the 1960s, as the general interest among policymakers and scholars in technological change, R&D and innovation increased. The field formed as a distinctive academic discipline from the 1980s. Scholars like Richard Nelson, Chris Freeman, Bengt-Ake Lundvall, Keith Pavitt, Luc Soete, Giovanni Dosi, Jan Fagerberg, Bart Verspagen, Eric von Hippel and others have shaped and formed this discipline. The seminal publications in the area include, inter alia, Freeman (1982), Freeman and Soete (1997), Lundvall (1992), Nelson and Winter (1977, 1982), von Hippel (1988). Regarding the definition of innovation – a general consensus has been achieved among innovation scholars who broadly understand this phenomenon as a transformation of knowledge into new products, processes and services. An in-depth review of the innovation literature is beyond the scope of this paper (refer to Fagerberg (2004) for such analysis). Our intention is to outline main directions of research. In a recent paper, Fagerberg and Verspagen (2009) provide a comprehensive analysis of the cognitive and organizational characteristics of the emerging field of innovation studies and consider its prospects and challenges. The authors trace evolution and dynamics of the field. Reflecting the complex nature of innovation, the field of innovation studies unites various academic disciplines. For examples, Fagerberg and Verspagen (2009) define four main clusters of innovation scholars. They are â€Å"Management† (cluster 1), â€Å"Schumpeter Crowd† (cluster 2), â€Å"Geography and Policy† (cluster 3. 1), Periphery† (cluster 3. 2) and â€Å"Industrial Economics† (cluster 4). For the purposes of our analysis we shall have a closer look at the â€Å"Management† cluster, since it is here where the connection between innovation and Project Management can be found. In fact â€Å"Management† is the smallest cluster within the entire network of innovation scholars, consisting of only 22 scholars, mainly sociologists and management scholars, with a geographical bias towards the USA. This small number of scholars (22) is in sharp contrast with the biggest clusters ? â€Å"Geography and Policy† (298 scholars) or â€Å"Schumpeter Crowd† (309). In terms of publication preferences, apart from Research Policy, the favorite journal for innovation scholars, members of â€Å"Management† cluster see management journals as the most relevant publishing outlets, particularly Journal of Product Innovation Management, Management Science and Strategic Management Journal. Fagerberg and Verspagen (2009, p. 29) see a strong link between innovation and management and provide a following description: â€Å"Management is to some extent a cross-disciplinary field by default and firm-level innovation falls naturally within its portfolio. †¦. So between innovation studies and management there clearly is some common ground†. Project Management The project management as a human activity has a long history; e. g. construction of Egyptian pyramids in 2000 BC may be regarded as a project activity. However, the start for the modern Project Management era, as a distinctive research area, was in the 1950s. Maylor (2005) determines three major stages of the PM historical development. Before the 1950s, the PM as such was not recognized. In the 1950s, tools and techniques were developed to support the management of complex projects. The dominant thinking was based on â€Å"one best way† approach, based on numerical methods. The third stage, from the 1990s onwards is characterized by the changing environment in which projects take place. It is more and more realized that a project management approach should be contingent upon its context. It is also noted that a shift is observed over time in development of project management – from focus on sole project management to the broader management of projects and strategic project management (Fangel, 1993; Morris, 1994; Bryde, 2003). Reflecting these changes in the managerial practices, the body of academic literature on PM has evolved and burgeoned. International Journal of Project Management and Project Management Journals became the flagship publication outlets for PM scholars and practitioners. A large number of (managerial) handbooks outlining the methods and techniques of PM have been published, e. g. Andersen et al (2004), Bruijn et al (2004) Kerzner (2005), Maylor (2005), Meredith and Mantel (2006), Muller (2009), Roberts (2007), Turner (1999), Turner and Turner (2008). Despite a growing number of publications, there is no unified theoretical basis and there is no unified theory of project management, due to its multidisciplinary nature (Smyth and Morris, 2007). Project management has a more applied nature than other management disciplines. Although the PM has formed as a distinct research field, there is no universal, generally accepted definition of a project and project management. Turner (1999) develops a generic definition of a project: A project is an endeavor in which human, financial and material resources are organized in a novel way to undertake a unique scope of work, of given specification, which constraints of cost and time, so as to achieve beneficial change defined by quantitative and qualitative objectives. There have been several attempts to provide an overview of the state-of-the-art research in PM and outline its trends and future directions (e. g. , PMI, 2004; Betts and Lansley, 1995; Themistocleous and Wearne, 2003; Crawford et al, 2006; Kloppenberg and Opfer, 2002). In a recent article, Kwak and Anbari (2009) review relevant academic journals and identify eight allied disciplines, in which PM is being applied and developed. These disciplines include such areas as Operation Management, Organizational Behavior, Information Technology, Engineering and Construction, Strategy/Integration, Project Finance and Accounting, and Quality and Management. Notably, one of these eight allied disciplines is â€Å"Technology Application / Innovation / New Product Development / Research and Development†. The authors found that only 11% of journal publications on the subject of project management fell under the â€Å"Innovation† heading. Yet, importantly, this area showed sustained upward interest, and hence the number of publications, since the 1960s. Overall, Kwak and Anbari (2009) conclude that the mainstream PM research proceeds largely in the â€Å"Strategy / Integration / Portfolio Management / Value of PM / Marketing† direction (30% of all publications examined by the authors). PM AND INNOVATION: THE PAST Projects in one form or another have been undertaken for millennia, but it was only in the latter part of the 20th century people started talking about ‘project management’. Earlier endeavors were seen as acts of worship, engineering or nation building. And the people controlling the endeavors saw themselves as members of groups focused on specific callings such as generals, priests and architects. There is an important distinction to be drawn here between projects: ‘a temporary Endeavour undertaken to create a unique product, service or result’ and the profession of project management; or at least ‘modern project management’. For a discipline to be considered a profession a number of attributes are generally considered necessary; these are: †¢ Practitioners are required to meet formal educational and entry requirements, †¢ autonomy over the terms and conditions of practice, a code of ethics, †¢ a commitment to service ideals, †¢ a monopoly over a discrete body of knowledge and related skills. Within this context, project management is best considered an ‘emerging profession’ that has developed during the last 30 to 40 years. Over this period project management associations around the world have developed a generally consistent view of the processes involved in ‘project management’, encoded these views into ‘Bodies of Knowledge’ (BoKs), described competent behaviors and are now certifying knowledgeable and/or competent ‘Project Managers’. Certainly, if ‘modern project management’ does not qualify as a fully fledged profession at this point in time, it will evolve into one fairly quickly. The Evolution of Project Management Tools The central theme running through the various project management concepts is that project management is an integrative process that has at its core, the balancing of the ‘iron triangle’ of time, cost and output. All three facets must be present for a management process to be considered project management. The evolution of cost and scope control into relatively precise processes occurred during the 14th and 18th Centuries respectively. Time management lacked effective measurement and control until the emergence of ‘critical path’ scheduling in the 1960s. The branch of management that gave rise to the development of the Critical Path Method of scheduling was Operational Research (OR). OR is an interdisciplinary science which uses methods such as mathematical modeling and statistics to assist decision making in complex real-world situations. It is distinguished by its ability to look at and improve an entire system, rather than concentrating on specific processes which was the focus of Taylor’s ‘scientific management’. The growth of OR was facilitated by the increasing availability and power of computers which were needed to carry out the large numbers of calculations typically required to analyze a system. [pic] Figure 1. The Iron Triangle The first ‘project’ to add science to the process of time control was undertaken by Kelley and Walker to develop the Critical Path Method (CPM) for E. I. du Pont de Numours. In 1956/57 Kelly and Walker started developing the algorithms that became CPM. The program they developed was trialled on plant shutdowns in 1957 And the first paper on critical path scheduling was published in 1959. The critical meeting to approve this project was held on the 7th May 1957 in Newark, Delaware, where DuPont and Remington Rand jointly committed US$226,400 to fund the project. The foundations of modern project management were laid in 1957; but it took another 12 years before Dr Martin Barnes first described the ‘iron triangle’ of time, cost and output in a course he developed for his UK clients in 1969 called ‘Time and Money in Contract Control’. PM AND INNOVATION: THE FUTURE Defining PM for Future The biggest challenge facing project management is answering the question ‘what is a project? ’ Until this question can be answered unambiguously the foundation of project management cannot be defined. Current definitions such as the PMBOK’s ‘a temporary endeavor undertaken to create a unique product, service or result’ can apply to the baking of a cake as easily as the construction of a multi story building. They are both temporary endeavors to create a unique outcome but in all probability the baking of a cake is not a project. The traditional view of projects embedded in the various BoKs is derived from both the management theories underpinning ‘modern project management’ and the industrial base of early project management practitioners (construction / defense / engineering). The BoKs tend to treat projects as naturally occurring entities that need to be managed. This is an easy enough assumption when focusing on a building or a battle ship. There is a physical presence that occupies a defined space that needs creating in a defined timeframe to a defined scope. This view assumes project exists and project management is about transforming the raw materials of the project into a finished and useful form. Consequently it is the presence of the project itself that defines ‘project management’. The PMBOKs version is ‘The application of knowledge, skills, tools and techniques to project activities to meet project requirements’. However, if we cannot precisely define a ‘project’, there is no basis for project management and consequently no foundation for a useable theory of project management. Researchers and academics are starting to reverse the idea that a project is necessary for project management to exist and suggest it is the application of ‘project management’ to an endeavour that creates a project. Some of the ideas being discussed include: †¢ Projects as ‘Temporary Knowledge Organizations (TKOs)’. This school of thought focuses on the idea that the primary instrument of project management is the project team and the recognition that predictability is not a reality of project management. Some key ideas include: o The concept of the project team as a ‘complex adaptive system (or organism)’, living on the ‘edge of chaos’; responding and adapting to its surroundings (ie the project’s stakeholders) offers one new set of insights. o The idea of ‘Nonlinearity’ suggests that you can do the same thing several times over and get completely different results. Small differences may lead to big changes whilst big variations may have minimal effect. This idea questions the validity of ‘detailed programming’ attempting to predict the path of a project (the ‘butterfly effect’, constrained by ‘strange attractors’). The concept of ‘Complex Responsive Processes of Relating’ (CRPR) puts emphasis on the interaction among people and the essentially responsive and participative nature of the human processes of organizing and relating. According to the modern trend in these field, consequence of accepting these theories is to shift the focus of ‘project management’ from the object of the project to the people involved in the project (ie, its stakeholders), and to recognize that it is people who create the project, work on the project and close the project with all innovation. Consequently the purpose of most if not all project ‘control documents’ such as schedules and cost plans shift from being an attempt to ‘control the future’ – this is impossible; to a process for communicating with and influencing stakeholders to encourage and guide their involvement in the project. Notwithstanding the advantages of project management, it would be unreasonable to expect all innovation to be carried out through projects. In fact, many ideas are generated by employees in a company on a regular basis, not only within project teams. Thus, there is certainly a room for functional, on-going organization of innovation process. Even more so, in certain situations project management can be detrimental to innovation. Aggeri and Segrestin (2007) show that the recent project development methods in automotive industry can induce negative effects on collective learning processes and these effects have managerial implications for innovative developments. Argument for Managing Innovation in Projects The origins of project management in the manufacturing and construction ndustries determine an engineering perspective, viewing a project as a task-focused entity, proceeding in a linear or similar way from the point of initiation to implementation. This view prevailed until comparatively recently. This view is seemingly in stark contrast with the nature of innovation. It is increasingly being acknowledged that the innovation is a complex non-linear process. The earliest view on innovation process as a pipeline model (whereby a given input is transformed to a specific output) has been largely abandoned. Presently, however, project management is increasingly recognised as a key generic skill for business management (Fangel, 1993), rather than a planning-oriented technique or an application of engineering sciences and optimization theory, in which project management has its roots (Soderlund, 2004). The â€Å"management by projects† has emerged as general mode of organizing for all forms of enterprise (Turner 2003). This new conceptualization of project management enables to embrace the non-linear nature of innovation. Even a creative and non-linear nature of innovation is often characterized as an organizational or management process, rather than spontaneous improvisation. Davila et al. (2006) state, â€Å"Innovation, like many business functions, is a management process that requires specific tools, rules, and discipline†. Hence, a project, with its defined objective, scope, budget and limitations, can be an appropriate setting of innovation. The other closely linked element in the new world of project management with innovation is embracing uncertainty. Writing on paper cannot control the future! Schedules do not control time; cost plans do not control costs. Plans outline a possible future and provided a basis for recognizing when things ‘are not going to plan’. For innovation project management to succeed, both project and senior management are going to need to embrace uncertainty and learn skills to manage it rather than expecting predictability and inevitably being disappointed by the variability of ‘reality’ as it unfolds. Challenges of Empirical Studies Scarcity and unreliability, or even lack of data poses a big challenge in research in both innovation and project management. A macro-level research n PM is obstructed by the lack of data on the number of projects, carried out by firms and public institutions, and their characteristics. Problems stem from the definition of a project and the non-disclosure policy of most companies. In such circumstances, PM research has tended to rely on case-studies or on small-scale tailor-made surveys. There i s a widely acknowledged lack of large-scale empirical research in PM (Kloppenborg and Opfer, 2002; Soderlund, 2004). It is claimed that the Independent Project Analysis (IPA) is the market leader in quantitative analysis of project management systems, i. . in project evaluation and project system benchmarking (IPA, 2007). All IPA analyses and research are based on proprietary databases. As of mid-2009, IPA’s databases contain more than 11,000 projects of all sizes ($20,000 to $25 billion) executed across the world. Each year, approximately 1,000 projects are added with representation from the many different industries served by IPA. Each project in our databases is characterized by over 2,000 project attributes, including technology, project scope, project type, project costs, year of authorization, and geographical location (IPA 2009). All information contained in the IPA databases is carefully protected and kept as confidential proprietary data (IPA, 2009). Due to the issues of confidentiality, access for academic researchers is restricted. In the innovation field, academic community has been increasingly using several sources of data, such as granted patents, tailor-made surveys, as well as other data provided by national statistical offices. European research on innovation uses several instruments to obtain data on innovation indicators and to assess national innovation performance. The two main instruments are the Community Innovation Survey (CIS) and the European Innovation Scorecard (EIS). As of 2009, five successful CIS surveys have been carried out: CIS1 (1992), CIS2 (1996), CIS3 (2001), CIS4 (2004) and CIS 2006. Each new round was characterized by an improved questionnaire, in line with the evolution of understanding of the phenomenon of innovation. The more recent surveys embraced understanding of innovation in a broader sense, and for example, paid more attention to service innovations. Further, it is expected that the future surveys will also include management techniques, organizational change, environmental benefits, and design and marketing issues. We argue that, taken into consideration the growing relevance of innovation projects, a clearer and explicit wording should be used in CIS questionnaire for determining whether innovation is organized and carried out in projects or functionally. CONCLUSIONS Innovation studies and project management as distinctive disciplines have been developing in a relative isolation from each other. The analysis in innovation studies domain has rarely explored the mechanisms and patterns of innovation in projects in contrast to traditional (functional or hierarchical) organization. However, since innovation management in companies is increasingly organized in projects, it is of utmost importance to directly address the interplay between innovation management and project management. In this paper, based on the relevant literature and insights from practice, we conceptually examined the relationships between these two research areas aiming at bridging the gap between them. It is widely acknowledged within the discipline of innovation studies that there is a high percentage of failure of innovation initiatives, in other words, failure is inevitable when managing innovation. The key skill set of the competent project manager will be identifying and managing stakeholder expectations using tools such as the Stakeholder circle to help identify the project’s key stakeholders. Innovation is perceived as a luxury, not as a necessity. Therefore, it is of high priority to manage innovation effectively and efficiently with constrained budgets.