Businesses in the world of projects
Rolf A. Lundin, Umeå School of Business and Economics, Umeå University, Sweden
When Jim March of Stanford University, in the beginning of the 90s, first mentioned and described the notion of “Disposable Organizations,” my initial thought was: “Nice idea, but very marginal in practice!” His observation was that in the Silicon Valley area some young, talented engineers, recently graduated from the university, often started small businesses on their own, sometimes together with a few friends around some business idea related to computers and IT. They did so with the intention to sell off their business at the first opportunity, making a nice profit in virtually no time at all (March, 1995). That seemingly odd phenomenon has become an everyday occurrence since then. The brave new economy rally at the turn of the millennium with an IT rally (including volatility of share prices) in the stock exchanges all over the world seems to have strengthened the tendency he described. The hunt is on for not only for young talent—especially in IT related areas—but also for small entrepreneurial companies with promising ventures. A new breed of very young and very well-educated entrepreneurs has arrived to the center stage of the economy in many countries. Making money fast while your talent is “hot” is a different and possibly also a new motive for starting a business. At least it is different if your comparison is with some kind of traditional entrepreneurs often starting companies because they are fed up with their present jobs or in connection with a situation when they have experienced some kind of turbulence in life (like a divorce).
These two types of entrepreneurs obviously have completely different intentions with their activities. For the traditional entrepreneur, the company in a sense is a goal in itself. Traditionally, that kind of entrepreneur has been found to stay with the newly created business for the rest of the life of the entrepreneur. That implicates two things: first, a lifelong engagement for the entrepreneur and second, the company is expected to have a life that might extend well beyond the lifetime of the original entrepreneur. For the other type of entrepreneur, the making money fast type, the company is merely a vehicle, not an end in itself. The effort is time limited in the sense that there seems to be a time limit beyond which the entrepreneur and the partners are not willing to put more energy into the venture at hand but to move on to something else. It also has some other definite project characteristics with a stress on the task at hand inducing not only high motivation but also a definite preoccupation with success where the entrepreneur is willing to sacrifice what is considered as normal life for the sake of the success of the venture.
The point is that we are witnessing a marked drift in the way an enterprise is perceived. The new kind of entrepreneur is likely to think of the enterprise in a project-like manner or at least as a temporary organization. This is in sharp contrast to the traditional entrepreneur who is solidly rooted in the bureaucratic type of organization likely to be the basic organization type of previous jobs. Most people who grew up during the heydays of industrial success in the post war era are also likely to think of industrial organizations as ever-lasting entities. Furthermore, the permanency character of those organizations is likely to have been strengthened by at least some of their experiences of working life. In a sense we see some kind of victims of traditions in that generation. Youngsters who come directly from universities are not bound to have become infected by those same traditions. Instead they at times become one with the observed projectization tendency (Lundin & Midler, 1998) in society. Their mere existence and their way of life lead to an organization novelty. The explanation to that appears to be too simple. Since most of the experiences of youngsters from schooling are project like, they tend to think in terms of time-limited ventures when setting up what they want to do. A side comment is that one important and significant corollary of this statement is that the much criticized tendency to use youngsters from the university system in experiments concerning industry and industrial practices might become increasingly relevant for the society with heavy projectization and with an increase of the disposable organization phenomena.
The death rate among entrepreneurial companies in the emerging industries has been very high (at least if you adhere to the traditional notion that death occurs when the company disappears as an entity that is legally independent). For Sweden it has been estimated that at the turn of the millennium when bankruptcies overall are relatively low not to say rare, the survival rate as legal entity for the type of companies we are discussing is still considerably less than one out of 10 during their first year of existence. It is tempting to think of the death rate in the new industries in Schumpeter (1996/1943) terms, that is to account for the death rate as a company failure where death is a form of “creative destruction” leads to a better use of resources tied up in an ailing company. Another view, the one suggested here, is that the companies in question should be thought of as projects where death is always natural. Possibly the outcome is approximately the same, that is the resources become available in a wider context. This remark concludes our discussion about companies becoming project-like. The next section will bring us over to an introduction about notions concerning the roles that traditional organizations have for projects.
Who Needs Traditional Organizations?
Those of us who have been studying projects and temporary organizations tend to set our mind accordingly. We open our eyes more widely toward those kinds of phenomena leaving very little and very limited room for traditional thinking about organizations as permanent entities. In our view, most of the important economic activities can be regarded as projects. Wherever we look, we see projects, projects, and projects. This is not to say that we do not see organized activities as well. On the contrary, we see a lot of organization, but the organization we see is designed to get things done in a projectlike manner. As already indicated, projects appear to be of main importance for profit generation, but they are far from being organized as traditional organizations.
This leaves us with projects as a matter of utmost interest and a notion of traditional organizations with a decided stress on “traditional.” Together with the example of “making money fast” entrepreneurial activities mentioned under the first heading, this places a special emphasis to the question in the headline: “Who needs traditional organizations?” Part of the answer that is of interest in the present context is that these organizations often function as mothers to projects and that they are needed as hosts for projects. (The mother organization is where a project is conceived and the host organization is where a project is carried through. In the majority of real world cases the mother and the host is the same organization, but there are of course exceptions.) Out of the 25 major projects used as illustrations by Ekstedt et al. (1999), 21 were hosted by one and only one organization. (This proportion does not at all reflect proportions in the project populations. The reason is that most projects hosted by a single organization are close to invisible to the outside world. At least there are very few statistics available to the general public concerning such projects.) These 21 cases covered projects of a wide variety: building construction, theater and opera, product development and organizational renewal to mention a few. The remaining four projects were inter-organizational, meaning that they could be described as joint ventures with several important stakeholders involved. One feature of projects hosted by a single organization is that they are more or less totally under the control of that organization. Conversely, this means that the organization is responsible for how the project is handled.
Leaving the fairly trivial questions about hosts and mothers aside, there are two other types of answers to the question above why traditional organizations are needed after all. The discussion to ensue in the following sections is based on empirical work presented in Ekstedt et al. (1999) and by Pettigrew and his associates (Whittington et al., 1999) respectively. Essentially the arguments are of two types. The arguments based on the work presented in Ekstedt et al. center on learning in project work and how learning aspects relate to the organization of a traditional kind serving as hosts for the project in question. The Pettigrew material concerns how traditional and typically permanent organizations are changing character to become atypical and how new organizational forms for ventures also might alter the character of the host organizations. I will commence my discussion with the latter example.
Ventures and Organizations
Businesses are no longer what they used to be. This statement covers not only the “disposable organization” phenomenon mentioned above, but also holds true for more traditional companies. We have tended to think of them as some kind of permanent entities providing a high degree of stability for our economies with extensive employment in personnel and with heavy investments in machinery and in real estate. No longer so, at least not in a traditional sense! Recent empirical results indicate that the ongoing transformation of businesses is very fast indeed. Activities mentioned in current literature as well as in material from professional associations on organization in an industrial context, like “outsourcing,” “insourcing,” strategic alliances, joint ventures, mergers, acquisitions and movements concerning efficiency in terms of “back to core competencies” have become increasingly more prevalent over the last decade or so.
The examples in this enumeration are by no means unequivocal. A fairly simple and straightforward joint advertising campaign has been labeled “strategic alliance” even though it is time delimited, but at the same time the “strategic alliance” denomination is also used for very far-reaching cooperation. However, this is a nuance only. The main point is that there is a definite movement among business organizations. Sometimes elements of that movement related to the activities enumerated above are about projects or can be described as projects. A “joint venture” is probably the most obvious example of that type, but several of the others also have definite project-like components. The popular trends include a fair amount of projectization.
A study under the auspices of the University of Warwick, England, considering major changes in industrial organizations in the U.S., Japan and Western Europe seems to confirm these tendencies observed in the literature by revealing and characterizing the major changes in the way these industrial organizations have organized their activities through empirical investigations. The Western Europe material has been presented in an article by Whittington et al. (1999). In the home page of the research group at Warwick (http://www.wbs.warwick.ac.uk/HotTopics/HT6.html) it is said that over a four-year period, “outsourcing” was increased by 65% of the companies. At the same time IT related investments have increased in more than 80% of the same set of organizations. To top everything else off, project based organization is up by 175%. Generally, the activities described in the article have one thing in common, i.e., the supposedly permanent organization focused is generally involved in activities of a kind seemingly leading to a destabilization of self. (Among other things it is this destabilization that makes the denomination “permanent organization” inappropriate. Possibly that choice of words refers to a situation since long passed, but since there could be no such thing as a permanent organization anyway, the denomination will be used at times. The reader should remember though that “permanent” essentially means more permanent than others.)
One measure that supports the projectization notion is that temporary employment is increasing, at least in the European Union. In 1995 approximately 11% or the total work force in the Union had a temporary employment (SOU, 1999, p. 27). There were substantial regional variations with Spain on top with 35% having temporary employment. However, the general share has been increasing over the preceding 15 years and even though no statistics are available concerning the last years of the previous millennium, there is no reason to believe that the share has decreased lately. (It should be emphasized that “temporary employment” and “project employment” are two different things. The latter should be regarded as a subgroup of the former, but the former includes such things as seasonal variation in employment needs as well. Furthermore, it should be noted that the measure says nothing about people working in projects.)
Traditional organizations are the birthplaces for the new ventures alluded to above. The organizations become necessary conditions for the changes taking place no matter the origin of the changes per se. Some people would probably argue that the tendencies described should be understood in terms of institutional change or fads penetrating the organizational world. The movements concerning quality and environmental concerns just to mention a couple of obvious examples could most probably be understood and described in terms of institutions or fads. No matter the origins of the changes, the traditional organizations are necessary conditions for the developments.
If projects are action oriented it is probably fair to say that traditional organizations, especially business organizations are decision oriented. At least many theories on business organizations have decisions as a fundamental mechanism. The implication of the decision orientation is that these organizations have the facilities to deliberate upon decisions and generate alternative outcomes in a decision situation. Such facilities are needed when it comes to generating new project ventures. Traditional organizations are properly endowed to give birth to projects.
We will now leave the discussion concerning how the business world as such is changing in an overall pattern and focus the relationships between projects and their hosts from a different angle. The question concerns how knowledge generated in project action is handled and can be handled.
Action, Learning and Project Organizations
Projects are designed for action. In particular, getting things done by fulfilling an explicit and predetermined task is the main justification for the project itself. In normal projects such efforts are concerned with the orchestrated, concerted action of a group of people, the team. That team is entrusted with the project and the obligation of the members of the team is to get done. The function of the project manager is to see to that measures are taken and that results are achieved in such a way that the task is fulfilled. In the popular view among professionals in the area the only thing that counts is the project and the fulfillment of the task. Efficiency in working with the project at hand is of utmost importance.
Defining a project as a project points to the need for action. An implication of this is that the project as a work form comes in handy when a need for action is recognized. “Something has to happen” is a phrase often used in connection with unique projects. A project is called for when there is a need to focus a particular task and when it comes to intra-organizational projects, the task is related to the host organization itself.
A project does have one built-in weakness as an organization, though. It does not have an infrastructure of its own handy. The reason for that is simple. A project is a time-limited venture that eventually will evaporate or be dissolved. Thus the team members and other resources made available for the project manager are the means to fulfill the task at hand. Whatever aptitudes and knowledge not possessed by the team members and needed to fulfill the task have to be fetched from somewhere else. The knowledge needed has to be stored in a readily retrievable way. Conversely, there is no readily available infrastructure to take care of knowledge generated in action over the lifetime of the project. One classical, not to say eternal problem in any projectized company concerns how to distill knowledge generated in a project and how to store those experiences so that they can be put into use in future projects. Otherwise a lot of useful experiences might be wasted.
A traditional organization—to be thought of as permanent for the purposes at hand in the present context—has advantages over projects when it comes to transforming learning to knowledge and to store the results of the transformation in a retrievable system. This means that traditional organizations and projects might be thought of as complements to each other. Project action generates learning and a set of experiences in a knowledge formation process and the knowledge can be stored in a permanent organization.
It should be observed that knowledge in this case is not necessarily abstract and free of context. Rather, knowledge should be thought of as embedded knowledge. Ekstedt et al. (1999, p. 128) have analyzed notions of different forms of knowledge embeddedness One form is when knowledge is embedded in physical equipment. This is the so-called capital-embedded knowledge. Another form is when knowledge is embedded in the organization (organization embedded knowledge). A third, related form is when knowledge is embedded in institutions and “rules” of importance for more than one organization (Institution embedded knowledge). Individual embedded knowledge is the traditional case when knowledge is associated with the individual only.
The notion of embeddedness is important since many of the renewal projects carried out for industrial firms are aimed at renewing the embedded knowledge. For that case the storing of the knowledge generated in a permanent organization is more or less natural since it is so well connected to the aim of the work per se. All the 25 renewal cases alluded to by Ekstedt et al. (1999) are good examples of how knowledge created in projects is stored in the organization. The renewal program of ABB Sweden, the so-called T50 (meaning that all lead times in the production should be slashed by 50%) has definitely resulted in a renewed set of embedded knowledge for most of the subsidiaries participating in the renewal program.
Storing knowledge generated for a customer outside the organization is more difficult. To mention one example the habit in architectural firms is to store solutions to architectural problems from finalized projects in such a way that they are retrievable. (Such storage and retrieval is easier now than in old days with the extensive use of CAD, IT and electronic storage.) These solutions might be used for future projects. Storing knowledge related to how the project process per se is run is probably the most difficult case. In most project-organized activities in businesses, projects are evaluated in terms of the project process in the sense that evaluation reports are written to document what was good and what was bad. This is a regular habit when it comes to product development projects in industry. In practice it seems difficult to transform those experiences for future use in a systematic way, though.
This concludes our discussion concerning the implications of combining action prone projects and decision-oriented organizations. Suffice it to say at this point that this is a major task for what has been called “neo-industrial management” (Ekstedt et al., 1999, ch. 8). There are some good examples for how that can be handled.
Projects, Organizations and the New Modernity
This far in the essay—our treatise of businesses in the world of projects—we have tried to outline the roles that businesses might play in such a world. In the process we have covered different types of relations between projects and businesses. Thus, we have discussed instances where companies have come to be regarded and treated as projects. We have also alluded to the case where some aspects of business life have become projectized or transformed into project-like phenomena. We have also covered the case when projects and businesses seem to complement each other in terms of action and learning. This last section is supposed to take us a bit further but along a different type of avenue that will take us to grounds where historical developments play a definite role.
One way to analyze what seems to be going on when it comes to the development of projects and general organizations in thinking and in practice is to relate that development to changes in thinking of society and societal changes on a grand scale. One particular line of thinking appears relevant here, the sequence Modernism, Post Modernism and Neo-Modernism (or New Modernity). There is not space to develop in any detail at all for what these societal models stand. At that, such a task is very difficult since the views on these models or phenomena differ radically. I will refrain from delving into the details and try to outline the main characteristics only in order to back up the claims I want to make.
If you try to relate project thinking during the past century to the sequence mentioned above, you will find that the general notions of project management were formulated in the 50s in the U.S. (Engwall, 1995, ch. 4) when Modernism is regarded as the dominating line of thinking. People were not necessarily discussing societal developments in those terms at the time. Rather the Modernism characterization was a label used in the subsequent era to form the contrast for whatever was to be seen as new. Anyway, the notions of project management were mainly formed in the defense industry and in the ministry of defense in America. (One might even say that projects in the meaning of that time are a product of the so-called military-industrial complex.) The projects at that time had a technical character and were all representing major efforts on a grand scale with almost no resource constraints but with very seriously meant time limits. The cold war fostered such attitudes and the projects went well with the general characteristics of modernism. They represented major efforts concerning control of the world also encompassing social engineering efforts on a grand scale. In a general sense they were also like dreams of rationalization. Careful planning reassured the actors that the project adhered to the rationality norms of the era.
Subsequently, the character of projects changed. Initially, the techniques and the organization spread to other technical areas outside the military applications. However, the techniques for planning and follow-up still favored major projects involving extraordinary personnel and a lot of monetary resources. Over time, however, project management found applications in areas where it never had been used before. Over time notions of project management have also become integral parts of a variety of professions. At the same time the tendency has been that the size of projects (in terms of personnel and money) has decreased (Engwall, 1999, p. 549). Small projects appeared in a wide variety of contexts and the projects themselves as well as their contexts gave a fragmented impression. In that sense the projects of the 80s and the 90s go well with the notions of the Post-Modern era. The ideas of social engineering on a grand scale have given way to the notions that control is very difficult, if not impossible. Problems are rather solved in a patchwork fashion, where the fragmented world views become very apparent. The spreading of project ideas to a diversity of new application areas is another sign of fragmentation.
In the 90s Neo-Modernism has appeared as a leading theme for the development of societies. Rationality is back as a key word for how societal problems are attacked. Efforts to that effect lead to a “risk society” according to Beck (1992). The notions of this new modernity (or neo-modernism) are that the introduction of rationalization efforts carries risks with it. The entire societal development might be regarded as a host of efforts to form rational institutions and at the same time trying to ameliorate dysfunction resulting from these efforts.
On a macro level, the focus of this essay has been on concomitant changes in the life of businesses and in the way projects seems to function. Possibly, both of them are examples of rationalization. Projects are governed so as to promote action rationality Businesses are adapted in the same vein according to notions of how profitability arises and in accordance with the needs for rational projects.
To conclude this essay with one notion of what the future might have in readiness for us, there is a need to illustrate how the discussion above has one fundamental weakness. The discussion about storing knowledge generated in projects ends up in the solution that the task of a permanent organization is to have a natural storage and retrieval system at hand. At the same time the argument is that businesses are on the move as well. In other words, businesses are no permanent organizations that can be used as fix points for the knowledge created in the temporary projects. Most likely, the storage problem alluded to has to be solved in another way in the long run. This might be regarded as one of the risks to which Beck (1992) alludes. It will give rise to new forms of storing and retrieving knowledge through reflexive modernization? Is there a need for institutional reflexivity carried by individuals to handle the unforeseen under these circumstances? Will there be a new role for universities in storing and retrieving knowledge?
Beck, Ulrich. (1992). Risk society—Towards a new modernity. London: Sage.
Ekstedt, Eskil, Lundin, Rolf A., Söderholm, Anders, & Wirdenius, Hans. (1999). Neo-industrial organizing—action, knowledge formation and renewal in a project-intensive economy. London: Routledge.
Engwall, Mats. (1995). Jakten på det effektiva projektet (“In Search of the Effective Project,” in Swedish), Stockholm: Nerenius & Santérus.
Engwall, Mats. (1999, September). Multiproject management: Effects, issues and propositions for future research (pp. 16–17). Nordnet’99 conference in Helsinki, Finland.
Lundin, Rolf A., & Midler, Christophe (eds.) (1998). Projects as arenas for renewal and learning processes. Norwell, MA: Kluwer Academic Publishers.
March, James G. (1995). The future, disposable organizations and the rigidities of imagination. Organization 2, 427–440.
Schumpeter, Joseph A. (1966/1943). Capitalism, socialism and democracy. London: Allen & Unwin.
SOU. (1999). Statens Offentliga Utredningar: 27 DELTA—Utredningen om deltidsarbete, tillfälliga jobb och arbetslöshetsersättningen. (“The Official Investigations of the Swedish Government, No. 27 DELTA—Investigating Part Time Work, Occasional Work and Unemployment Compensation,” in Swedish), Stockholm.
Whittington, Richard, Pettigrew, Andrew, Peck, Simon, Fenton, Evelyn, & Conyon,Martin. (1999). Change and Complementarities in the New Competitive Landscape: A European Panel Study, 1992–1996. Organization Science 5, pp. 583–600.
Proceedings of PMI Research Conference 2000