“Quietly but powerfully, projects have displaced operations as the economic engine of our times,” wrote Antonio Nieto-Rodriguez in “The Project Economy Has Arrived,” a December, 2021 article in the Harvard Business Review (HBR). Nieto-Rodriguez is a Fellow and past global chair of the Project Management Institute and the author of the Harvard Business Review Project Management Handbook: How to Launch, Lead, and Sponsor Successful Projects, on which the HBR article is based.
While that shift has been a long time coming, we still have a ways to go, he added. “According to the research firm the Standish Group, around 35% of the projects undertaken worldwide are successful. Given that we’re talking about tens of trillions of dollars, and the labor of millions of employees, that’s a mind-blowing number. It tells us that we’re not only wasting 65% of the time and money that we’ve invested in our projects but also forfeiting trillions of dollars of new value for organizations and society at large.”
A recent McKinsey global survey on the state of AI in the enterprise found that AI adoption has more than doubled over the past five years. Given that the survey was conducted in 2022, before the November 30 release of ChatGPT propelled AI to a whole new level of interest, we can expect a major increase in enterprise AI projects in the coming years. Nieto-Rodriguez's HBR article is thus particularly relevant as we enter the age of AI.
“What exactly is a project?,” he asked in the article. While project is a word we all commonly use, the article points out that the word means different things to different people. “That’s a problem. As projects drive more and more of the value that organizations create, everyone needs to have a common understanding of what projects and project management are”:
“Projects involve a series of planned activities designed to generate a deliverable (a product, a service, an event). These activities — which can be anything from a grand strategic initiative to a small program of change — are limited in time. They have a clear start and end; they require an investment, in the form of capital and human resources; and they are designed to create predetermined forms of value, impact, and benefits. Every project has elements that are unique. That’s key: Each contains something that has not been done before.”
“Project management, for its part, involves the collection of competencies, techniques, and tools that help people define, plan, and implement projects to achieve their goals. Most project-management methods we use today were developed in the 1970s and 1980s and reflect the efficiency and standardization methods used for operations management. Organizations typically adopted one standardized project-management methodology and applied it consistently to all their projects. Over time, what project management was and what it needed to be drifted apart. Organizations evolved rapidly, and although the number of projects increased exponentially, project management somehow stayed in the past.”
Note the contrast in these definitions between project management and operations management. Operations involve “the running of organizations,” while projects involve “the changing of organizations.” Running the organization means managing its core functions, — e.g., sales, customer service, finance, manufacturing, IT; improving the efficiency of the company and its key business functions and processes; and creating value by generating and growing revenue. “The focus is short-term, the objectives are mainly performance-driven, and the structure is hierarchical. Culturally, the model is command and control.”
Changing the organization means being responsible for the future of the company by driving strategic initiatives including the adoption of new technologies, innovative products, services, and transformative business models. “The focus is medium- to long-term, the objectives are more strategic, the structure is flat and project based, and the outcomes are less quantifiable than operational results. Culturally, the model is entrepreneurship and collaboration.”
To succeed in times of change, companies need to be organizationally ambidextrous to achieve the right balance of run and change, — “they must balance the exploitation of their current capabilities (operations) with the exploration of new competencies (projects).” This is hard, because business leaders are generally more comfortable improving the efficiency of their operations than driving long-term strategic change, — a legacy of the 20th industrial economy, when companies mainly produced physical goods, increased production by standardizing and automating processes, and grew through incremental improvements to their products.
“The biggest change in the structure of companies over the past century is that a century ago, the vast majority of employees were in factories, and now the majority of employees and supermajority of the wage bill are in office towers or parks,” wrote University of Toronto professor Roger Martin in a recent article in Fast Company. “If we ask what those people do, it is clear that they don’t produce products or services. What they manufacture is decisions. They decide what to produce, where to produce it, where to sell it, how to price it, etc. They are in Decision Factories.”
The nature of work in so called decision factories is completely different from the high volume production of products or services. “The need for a particular decision becomes evident, is worked on, resulting in a decision, and then it goes away, often never to be seen again — for example, the decision on how to launch a given new product. In a Decision Factory, work is organized around projects — projects that are related to decisions that come and go.” Those jobs should be highly adaptable based on the requirements of a particular project. Efficiency means matching people with the needed skills to the demands of a specific project. Thinking about work around projects rather than jobs allows an organization to be more innovative, more productive, and a better place to work.
“In a change-driven world, companies can’t apply just one methodology to all their projects,” wrote Nieto-Rodriguez in the HBR article. “Instead, they need a toolbox of approaches — among them agile and traditional project management, certainly, but also design thinking, change management, and product development — and then must build competencies in all of them throughout their organizations. But to make that possible, they first need a framework that allows everybody in the organization to see, understand, and work productively on the key elements of any given project.”
Nieto-Rodriguez has created such a framework to help explain the key elements and objectives of project management to both practitioners and executives. The framework is described in detail in his Project Management Handbook and summarized in the HBR article. To illustrate its key elements, he created a one page template, the project canvas, as a simple, step-by-step introduction to the framework, which I found particularly relevant given the transformative nature of AI-based projects.
The project canvas aims to ensure that every project has a well understood purpose that’s aligned with the organization’s strategy. It’s composed of just three domains: foundation, people, and creation. Each domain has three building blocks, each aiming to provide answers to questions vital to the success of any project:
Foundation
- Purpose: Why are we doing the project?;
- Investment: How much will the project cost?;
- Benefits: What benefits and impact will the project generate, and how will we know the project is successful?
People
- Sponsorship: Who is accountable for the project;
- Stakeholders: Who will benefit from and be affected by the project?;
- Resources: Who will manage the project, and which skills are needed to deliver it?
Creation
- Deliverables: What will the project produce, build, or deliver?;
- Plan: How and when will the work be carried out?;
- Change: How will we engage stakeholders and manage the risks?
The project canvas guides each stage of the process. “The canvas has to work for everybody, so it must be built on consensus. The project manager should start by convening a project-definition workshop — a meeting that brings together the project sponsor, key stakeholders, and company experts, not to mention anybody else who might provide relevant information, including customers and suppliers.”
Once completed, the project canvas is shared with other stakeholders to get and incorporate their feedback. “The canvas is now a living document, to be revisited regularly. Consult it each time you face a major decision, and update it any time you make changes to the nature of the project or your goals.”
“By 2027, some 88 million people around the world are likely to be working in project management, and the value of project-oriented economic activity will have reached $20 trillion,” wrote Nieto-Rodriiguez in the articles summary. “But research shows that only 35% of the projects undertaken worldwide are successful—which means we’re wasting an extravagant amount of time, money, and opportunity. To take advantage of the new project economy, companies need a new approach to project management: They must adopt a project-driven organizational structure, ensure that executives have the capabilities to effectively sponsor projects, and train managers in modern project management.”
Comments