Management of product development and internal development projects

a comparative study

Päivi Lehtonen, MSc
Researcher
Department of Industrial Engineering and Management
Helsinki University of Technology, Finland

Lassi Lindblom, MSc
Researcher
Department of Industrial Engineering and Management
Helsinki University of Technology, Finland

Proceedings of the PMI Research Conference
11-14 July 2004 – London, UK

Introduction

The art of project management—the management of unique endeavors characterized by specific time, cost and quality expectations—has evolved greatly since it emerged in 1950s and 1960s. The nature of projects and, respectively, the requirements for project management have diversified due to the emergence of the various types of projects.

One of the most important areas that employ a project management paradigm is change management. In addition to planned and intended changes, the capacity to change has become one of the critical factors of today’s most successful organizations (Salminen, 2000). The activities selected to implement changes are often unique and temporary in nature, and such activities are carried out in a project-like manner. Thus, in today’s organizations, projects are known as common vehicles to deliver change both inside the organization and between different organizations (Clarke, 1999; Lanning, 2001; Partington, 1996). The increasing use of projects to implement different types of changes as well as a number of context-related issues, both internal and external to the projects, create different types of needs and expectations related to projects and their outcomes. The different characteristics of projects have led some project management authors to suggest that different types of change or development projects require different approaches in management practice (Loch, 2000; McElroy, 1996; Payne & Turner, 1999). Despite the need for different project-specific management practices, few researchers have investigated the suitability of different project management models to deliver change in particular contexts (Partington, 1996). However, the literature classifying projects according to different attributes—such as project culture (Andersen, 2003), size and resource type (Payne & Turner, 1999), and rate of change (Shenhar, Dvir, Lechier, & Poli, 2002), to mention a few—show a variety of attempts to create different typological explanations for projects of different nature, but this literature neglects addressing the different types of management approaches.

Mikkelsen, Olsen, and Riis, (1991) report findings from a study of characteristics of internal projects and propose that a traditional approach to project management does not suffice with internal projects characterized by a weak initial foundation, organizational development orientation, and high level of competition among internal personnel for management attention. Mikkelsen et al. (1991) define internal projects as encompassing a wide variety of different project types comprising those that aim directly at improving or renewing organizational structures or practices and those that aim at delivering new products or improvements of existing products. Within this article, we sharpen this analysis by distinguishing between product development projects and internal development projects. We define product development projects to include projects aimed at improving an organization’s internal structures or management system. Respectively, internal development projects are those aiming at creating new or improved products or technologies to external customers.

Using the distinction between product development projects and internal development projects as our point of departure, our article compares management practices used in managing product development projects and internal development projects. The article approaches the research problem from an empirical perspective and through the following research question: What are the differences in the management of product development projects and internal development projects?

Even if our approach is largely empirical, we acknowledge that for the observations to have meaning, some amount of related theory is required (Popper, 1989) Thus, in this study, we follow a logic similar to the hypothetic deductive method (Niiniluoto, 1983). We begin by analyzing the current literature on product development and internal development projects. Our analysis focuses on the general characteristics of projects and decision-making practices related to project selection and monitoring activities. Second, using this analysis, we suggest propositions about the differences in management practices and the characteristics between product development projects and internal development projects. Third, we use the empirical data to statistically test the validity of the created propositions. We conclude by proposing suggestions for further research in order to advance the development of project management paradigm.

Literature review on product development and internal development projects

Projects are almost always initiated to create some kind of change, whether the objective of the project is to develop new products, establish a new production process, or create a new organizational structure (Shenhar, Dvir, Levy, & Maltz, 2001). A need for change is a common denominator for both product development projects and internal development projects. However, the ideological backgrounds of product development and internal development differ significantly. Generally, product development is related to a wider context of innovation management; internal development can be respectively considered part of change management. According to King and Anderson (2002), the major difference between these two types of development projects is in the perspective taken by researchers. Whereas change management focuses mostly on large changes, taking a macro-level approach and focusing on the organization as a whole and its major subsystems, innovation management literature concentrates on changes that have a far more localized impact within organizations and considers to a greater extent the impact of change on work groups and individuals. Moreover, innovation research literature is concerned with both the origination and initiation of change and the implementation of change, whereas organizational change literature emphasizes the implementation phase.

Despite the differences in perspectives, both innovation management and change management recognize projects as important vehicles of change and respectively employ the doctrines of project management to realize these changes (Benghozi, 1990; Clarke, 1999; McDermott & O’Connor, 2002; Trott, 2002). Several research papers report success factors and best practices in product development and in internal development (Brown & Eisenhardt, 1995; Clarke & Garside, 1997; Cooper & Kleinschmidt, 1995; Davidson, Clamen, & Karol, 1999; Griffin & Page, 1996). However, very little literature exists that simply compares practices or characteristics in product development projects and internal development projects. Excluding some exceptions (Griffin, 1997; Salminen, 2000), the literature on either side of these respective categories does not concentrate on reporting about the present state of management practices. The studies concerning internal development projects are often based on single case studies providing in-depth situation and context-specific solutions (Crawford, Costello, Pollack, & Bentley, 2003; Grundy, 1998; Hauc & Kovac, 2000) at the expense of generalizing the results.

Characteristics of product development and internal development projects

The general difference between these two project types is that internal development projects very often aim at achieving an intangible result (Linde & Linderoth, 2000; McElroy, 1996). In other words, the project product is more abstract than in product development projects. The objective and the scope of the internal development project may not be precisely known at the outset (Linde & Linderoth, 2000; McElroy, 1996), and thus the costs are also more difficult to estimate. Due to the abstract nature of internal development projects, output and performance criteria may also be difficult to define and measure (McElroy, 1996). Respectively, as product development projects aim at creating tangible products to external customers, the performance criteria are usually more explicit and tend to emphasize financial performance.

Adler and Shenhar (1990) emphasize that every change effort requires adaptation in organizational structure, strategy, culture, processes, and human skills. Furthermore, change projects continuously interact with their context (Linde & Linderoth, 2000; McElroy, 1996). So, not only is the goal of the project intangible in nature, it is also a moving target, which makes the evaluation of the development project challenging. These issues drastically increase the complexity of internal development projects. Such complexity is probably one fundamental reason for resistance to change, which is one of the central issues in the literature that discusses internal development projects (Salminen, Rintala, & Korpi-Filppula, 2000). Thus, attitudes, motivation, and behavior of all the people involved are critical to success of internal development projects (McElroy, 1996).

In addition to the differences in tangible results, another main difference that affects the nature of projects is customer relationship. In case of product development projects, the customer is external, while in internal development projects, the customer is internal, possibly the organization as a whole. Product development projects often include a broader network of external stakeholders to the organization, including customers, suppliers, and distributors. Internal development projects, however, are restricted in context to the organization implementing the project, even though the project team might include partners outside the organization. Because product development projects often balance between different stakeholders’ objectives, these projects require that decision-making representatives from the various functions are present and involved in developing and managing the project.

Even if the product development project aims at delivering results that directly affect an organization’s competitive position in the markets, the organization’s management of internal development projects is often more strategic than that of product development. Managing an internal development project requires a focus on the strategic alignment of projects rather than concentration on a strict project management process (Hauc & Kovac, 2000; Kaufman, 1992; Lanning, 2001; Verwey & Comninos, 2002). In product development, the strategic link has yet to be considered in the same proportion (Griffin, 1997); it is, however, emerging as a more critical element (Cooper & Kleinschmidt, 1996; Griffin, 1997).

Decision-making and management processes

As the context of internal development differs from the context of product development, it is often assumed that the two project types are also managed differently. Verwey and Comninos (2002) have studied business-focused development projects. They propose that fuzziness is a normal state in the project process, and that the focus of planning should seek to align project results with an organization’s strategies rather than on a project management process. Moreover, they argue that there is a need for a business process for selecting projects and a need for senior management to be aware of the number, scope, and benefits of the projects undertaken. Kaufman (1992) reported findings from case studies on process improvement and found that important factors determining the success of managing operational improvement programs or projects include clear links to strategic planning, non-authoritarian management styles with participative management efforts, and aligning incentives with the program’s or project’s goals. Thus, because of the complexity of internal development projects and the continuous shifting of organizational objectives (Linde & Linderoth, 2000), organization’s need flexible management processes (Crawford et al., 2003). However, due to the changing nature of the project objective, internal development projects do need continuous control, steering, and refinement (Grundy, 1998). Also the findings by Lanning (2001) show that the important success factors of change projects include a project’s connection to the organization through its strategy and planning processes, such as communicating a vision, establishing measurable goals, monitoring and controlling the progress, and instilling effective communications and management support. Thus, the literature suggests that the management of internal development projects should employ flexibility in management and decision processes and involve top management in decision-making through careful planning and monitoring activities.

Product development projects typically require more formality in project execution and management methods (Cooper & Kleinschmidt, 1996; Davidson et al., 1999; Tatikonda & Rosenthal, 2000). This also suggests that a formal project selection method will lead to success (Griffin, 1997). The field of project portfolio management research includes many suggestions for creating product development management processes. The processes typically include formal methods for project evaluation and selection (e.g., Archer & Ghasemzadeh, 1999; Bridges, 1999; Cooper, Edgett, & Kleinschmidt, 1997; Cooper, Edgett, & Kleinschmidt, 2000). Cooper et al. (1997) suggest a management model in which a project proceeds through stages and gates. In gates, formal decision-making practices are applied to the project and it is compared against the project portfolio before it can proceed to the next stages. In addition to the formality of this process, the formality of tools and methods used in portfolio decision-making can also be seen as a factor characterizing the formality of product development within an organization. However, the product development environment should apply not one, but several more or less-formal project management processes in order to achieve success (Griffin, 1997; Loch, 2000).

Differences between management approaches with new product development and internal development projects: Propositions

From our analysis of the above-mentioned literature analysis, we derive four propositions that address the differences in characteristics and management processes between product development and internal development projects.

Product development projects are pursued to create new or improved products to markets. Thus, they involve working with customer interface and with competitors and suppliers (Balachandra & Friar, 1997). The success of product development efforts is often ultimately judged through opinions of customers and efforts of competitors. Internal development projects, instead, often stem from an organization’s internal needs, aiming at improving the performance of the organization. Therefore, the initial phases of the project require substantial interaction between the project and the organization in which the project is being implemented (McElroy, 1996).

Proposition 1: An organization’s external environment is a more important source of project ideas for product development projects than for internal development projects. Respectively, an organization’s internal environment is a more fertile ground for the emergence of internal development project ideas than for product development ideas.

Having immense and direct impact on the organizations internal reality, which define how effectively and efficiently intended strategies are implemented, internal development projects are generally closely connected to an organization-level strategy. Product development projects, however, often employ expertise and knowledge of some specific business unit or multiple business units, and thus are often more connected to business unit level strategies and the product strategies of business units (Cooper & Kleinschmidt, 1996; Hauc & Kovac, 2000; Kaufman, 1992; Lanning, 2001).

Proposition 2: The emergence process of internal development project ideas is more tightly linked with the organization-level strategy formulation than the emergence process of product development project ideas.

In addition to the assumption that internal development projects are often more closely linked to organization’s strategy process than product development projects, the change management literature commonly recognizes that upper management’s support is often critical in terms of successful implementation of an organization’s internal changes (Lanning, 2001). In having an important role as a leader and supporter of the intended changes in an organization, top management actively participates in decision-making and monitoring activities through which changes are implemented. Product development projects, however, are often pursued under the authority of a specific business unit or different business units. Even if the efforts often require cross-functional cooperation, the middle-management level, which is responsible for resource allocation of some specific business unit or area, provides the support required to implement the often relatively localized development activities (Cooper & Kleinschmidt, 1996).

Proposition 3: Upper management’s involvement in decision-making and monitoring activities is more common with internal development projects than with product development projects, and, respectively, middle management involvement is more common with product development projects than with internal development projects.

Internal development projects are often characterized by fuzziness related to the project scope and overall goals, while product development projects aim at more specifically defined goals (Crawford et al., 2003; Davidson et al., 1999; Linde & Linderoth, 2000; Loch, 2000; McElroy, 1996; Tatikonda, 1999; Tatikonda & Rosenthal, 2000; Verwey & Comninos 2002). Thus, based on their loosely defined objectives, internal development projects often balance between a variety of divergent expectations about the outcome, while product development projects, being evaluated by financial measures, are characterized by more homogenous opinions concerning the output. Moreover, due to the fuzziness of objectives and divergent expectations, internal development projects are managed incrementally towards the best possible solutions. Product development projects, however, employ more firm management approaches with predefined targets and outcomes.

Proposition 4: With product development projects, project management and decision-making processes are more formal than with internal development projects.

Data collection and analyzing methods

In this section, we describe the methods we used to collect and analyze the data that served for testing our propositions empirically. The empirical data used to test the propositions was collected with the help of a vast cross-sectional survey that was seen as most appropriate method to acquire as wide a view as possible on existing practices in organizations. The unit of analysis in this study is an organization as a whole or an organizational unit pursuing either internal development efforts or product development efforts through projects.

The data was collected via a self-administered questionnaire. Five researchers participated in constructing the questionnaire. Ten people, consisting of both research experts and industry representatives, implemented the testing of the questionnaire. The questions concerned the management of development projects, project ideas, and project entities, along with requests for background information on the responding individual and respondent organization.

A national industry database was the source for selecting a target sample for the study. The targeted sample group included 1,102 large organizations from Finland’s public and private sectors. Health care, education, and registered associations were left out, as it was assumed that they do not have project-like development work in similar proportion. In some cases, many branch offices of the same corporations were included in the sample. The individual respondents were individuals from organizations with at least 100 employees. The occupational titles of target respondents were directors and managers of development, quality, product development, and technology, as well as project directors and project managers.

The research data consists of responses from 288 organizations; the response rate totaled 26.1%. Approximately one-half of the respondents represent the industrial sector; one-fourth represent organizations in the private service sector and one-fourth respectively the public service sector. The questionnaires list examples of internal development projects that involve the development of internal information systems, processes, quality, organization, new business models, human resources or strategy, and equipment or machinery investments. Product development projects were characterized as development of technology, existing products, new products, and product platforms in project form. Almost two-thirds (64%) of the respondents worked closely with internal development projects; little more than one third (36%) worked with product development. The respondents were asked to fill in the rest of the questionnaire from the point of view of the project type they had specified in this question. The responses were analyzed statistically with the help of an SPSS 11.5 (Statistical Package for the Social Sciences) program. Cross-tabulation and Pearson’s Chi square were used as methods to find out statistically significant differences between the two project types.

Several questions were used to operationalize the propositions. These questions are listed in Appendix 1, in the left-most column. Appendix 1 lists the analysis results. The actual questions are written inside parenthesis; the question titles are more descriptive towards the propositions. The results are discussed in the next chapter. The first proposition concerning the source of project ideas was tested by a single question, in which the respondent was asked to identify the three most important sources of project idea, based on a predetermined list. The second proposition stated that the link of the emergence process to the formulation of the organization-level strategy is tighter with internal development projects than it is with product development projects. This was tested by asking the respondent if project ideas arise from the strategy, if the ideas are born as strategy is being formulated, if strategy is (re)formulated based on project ideas, and/or if the emergence of project ideas is isolated from the strategy formulation. The third proposition suggested that internal development projects are more often in the focus of the upper management and that product development projects are more often the interest of middle management. This was tested by three questions. In these questions the respondent was asked to select from a list of titles the persons or groups of people who participate in the decision to proceed with the project, select the project idea, and choose the whole set of projects. Finally, the fourth proposition, concerning the use of formal management practices, was tested by three questions. The first question asked about the proportion of organizational projects that use a project management model or process. In the second question, the respondent was asked whether formal decision-making was employed in different phases of the project process. Lastly, the respondent was asked to estimate, using a five-point Likert scale, whether the way of managing the whole set of projects is used to make concrete go/continue/kill decisions on projects.

Results

Results from the SPSS analyses are depicted in Appendix 1. For every variable included in the propositions, the appendix states the difference between project types and the respective Pearson’s Chi-Square value, and the significance of the observed difference and the level induced from the significance. In the column indicating whether statistically significant differences where found, the type of projects that was observed to have higher frequency related to the respective variable is depicted. For instance, for the first variable in the table, “ID” (=internal development) is stated, because with internal development projects upper management is more often mentioned as an important source of project ideas than with product development projects. The significance of the difference is 0.003. The other results are introduced in the order of propositions.

Sources of project ideas

The first proposition suggested that external sources of project ideas are more important with product development projects and that internal sources of project ideas are more important with internal development projects. The study showed that: Upper and middle management, as well as shop-floor level employees, are more often the sources for internal development project ideas, while external customers, competitors, and suppliers or distributors are more often the idea sources for product development projects. Upper clerical personnel and partners and company networks were mentioned equally as often for both project types. When looking at the frequencies, the most important sources for internal development project ideas were: upper management (57 % mentioned them among the three most important sources); middle management (41%); partners and networks (44%); upper clerical personnel (41%); and external customers (35%). Respectively, the most important sources for product development project ideas were external customers (69%); upper clerical personnel (39%); upper management (38%); middle management (38%); competitors (33%); and partners and networks (33%).

The emergence of projects and strategy process

The second proposition addressed the relationship between the emergence of project ideas and the strategy process of the organization. Interestingly, the only statistically significant difference was that with internal development projects, project ideas are born in unison with the strategy formulation more often than with product development projects. This supports the hypothesis that the emergence process of internal development projects is more tightly linked with the organization’s strategy formulation than the emergence process of product development projects. Still, it could have been assumed that project ideas would arise based on the strategy more often in internal development context and more often in isolation from strategy formulation in product development context. No correlations were not found to support these assumptions. Thus, the second proposition is only partly supported by the empirical analysis.

In all, in most organizations, there are several ways as to how project ideas can relate to the strategy formulation process. More than half of all respondents stated: that some project ideas arise from the strategy (70% with internal development projects and 76% with product development projects); that some project ideas are born simultaneously with the strategy (65% with internal development projects and 53% with product development projects); and that some project ideas are born in isolation from the strategy formulation (70% with internal development projects and 62% with product development projects). Still, only 15% of the organizations pursuing internal development projects and 22% of those pursuing product development projects stated that the strategy is formulated or renewed based on project ideas.

Management involvement in decision-making and monitoring activities

In the third proposition, the decision-making level of project types was addressed. It was proposed that upper management’s involvement in the decision-making and monitoring activities is more common with internal development projects, and that middle management’s involvement in the decision-making and monitoring activities is more common with product development projects. Participation in decision-making was addressed in three cases: monitoring a single project, evaluating and comparing project ideas, and reviewing the set of projects as an entity. The hypotheses were at least partly supported with the results.

In all, group decision-making is very common. Usually several parties representing different organizational levels participate in decision-making concerning projects, project ideas, and project entities. When considering decisions on single project’s proceeding, two statistically significant differences between the two project types were found. Upper managers participate more often in the decision-making of internal development projects (69%) than with product development projects (51%). Also, a group of experts more often participate in the decision-making process of internal development projects (27%) than they do with product development projects (14%). No statistically significant differences were found concerning the participation of middle managers in the decision-making process. Interestingly, in the case of decisions concerning project idea evaluation and selection, the only statistically significant difference was that middle managers more often participate in the decision-making for product development projects (72%) than with internal development projects (57%). When examining decision-making of the project entity, all of the differences mentioned above were found. A group of upper managers participates more often in decision-making with internal development projects (81%) than with product development projects (67%); a group of experts participates more often with internal development projects (31%) than with product development projects (12%); and a group of middle managers participates more often with product development projects (61%) than with internal development projects (43%). In all, regarding these three decision-making situations, there were no statistically significant differences between project types concerning the participation of project managers and the project’s steering groups.

Management and decision-making processes

The last proposition suggested that with product development projects, project management and decision-making processes are more formal than with internal development projects. This hypothesis is also at least partly supported by the results. First of all, the use of a project management process or model is more common in product development projects than in internal development projects (see Exhibit 1). From the all of responding organizations, 38% employ a project management process or model in all or nearly all projects, while only 10% state that such a process or model is not in use in their organization. Corresponding figures for internal development projects are 21% and 24%.

Use of general project process or project model

Exhibit 1: Use of general project process or project model

Also, the decision-making related to the different phases of a project’s proceeding was addressed empirically. The only statistically significant difference found was that in the case of product development projects, decision-making related to conducting a feasibility study on a project idea is more common (29% with every or almost every project; 7% never) than with internal development projects (21% with every or almost every project; 19% never). In later phases, there were no differences due to the project type in decision-making on project’s proceeding. However, when asked whether the way of managing multiple projects is used to make concrete go/continue/kill decisions regarding projects and the set of projects, differences between project type were found: the answers were more affirmative with product development project than with internal development projects. For example, with product development projects 70% of the respondents at least somewhat agreed that concrete decisions are made with the current practice, while with internal development projects, the corresponding figure was 51%. Thus, it seems that management and decision practices tend to be more formal with product development projects.

Discussion

This article focused on studying the differences in organizing for the management of product development projects and internal development projects. The research question for this article was: What are the differences in the management of product development projects and internal development projects? We approached the research problem by analyzing current knowledge on internal development projects and product development projects. Based on our findings from the literature analysis, we formulated four propositions. Using a vast cross-sectional questionnaire as our source for empirical data, we tested the validity of our propositions. Based on the results of statistical analysis, we found that all four propositions were at least partly supported by the empirical data. Statistically significant differences were found between product development projects and internal development projects in terms of sources of emergence, relation to an organization’s strategy, management involvement in decision-making, and formality of related management and decision-making processes.

First, we conclude that the sources of project ideas differ significantly between internal development projects and product development projects‥ This finding supports existing knowledge about the role of product development and internal development projects, and reflects how clearly informants perceive the difference in the contexts related to product development and internal development projects. These findings justify the notion that differences exist between these project categories in terms of their characteristics. These findings also provide insight about which external or internal groups of individuals should be considered as important sources or generators for novel project ideas.

Second, we found that project ideas are more often born in unison with strategy formulation in the internal development context than these are in the product development context. Project ideas do not particularly arise based on strategy. Neither is there any significant difference between the two contexts in the case of project ideas emerging in isolation from the strategy. It is a somewhat surprising result that no differences were found in these two questions, even though the two project types are drastically different in terms how they affect the strategic reality of the organization. Internal development projects shape an organization’s internal environment, while product development projects aim at delivering changes to external competitive market structures. We could not find any single logical explanation for the results of our analysis. Thus, we propose that the phenomenon should be further studied. However, one possible explanation may be that most often, in large organizations, development projects are not merely vehicles to implement intended strategies, these also emerge through strategic meetings, due to the project’s capacity to shape pre-existing strategies. Moreover, an in-depth study of the reasons for these results would require consideration of other variables, such as how localized the intended changes are in the case of internal development projects, how strategic the intended changes or product developments are, and how evaluation and selection mechanisms differ between different types of projects.

Third, the findings clearly support the notions that top management support is a critical factor in increasing the potential for internal development projects to succeed, and the idea of business unit localized product development processes.

An interesting finding was that middle management participation was not more common in the product development context than it was in the internal development context. In project idea selection, upper management participation was not more frequent in the case of internal development than it was in the case of product development. One possible explanation for these observations is that in addition to project type, the scope and required resources may define the most appropriate authority, which monitors and makes decisions on the project. Furthermore, internal selection processes employed to evaluate project initiatives and to select the most promising for implementation, are often located at the middle management level in organizational hierarchy. Thus, even if top management ultimately authorizes the decisions, the initiatives, whether being intended or autonomous, most often flow through the middle management layer.

Fourth, we suggested that in the context of internal development, project management and decision-making processes would be more formal than in the product development context. Our claim was partly supported by the empirical results. The strongest support came from the question about the use of a general project process. It was clearly visible that the use of standardized processes is more common in product development context. This is probably due to reasons already stated in the literature analysis, such as the tangibility of project objectives and the maturity of project management disciplines.

In the product development context, the way of managing multiple projects was found to be more often used to make real go/continue/kill decisions than with internal development projects. This is partly due to the same reasons concerning the use of a standard project process. In addition, as the internal development projects are more abstract in their nature and their objective is more likely to change during the project execution, exact go/continue/kill decisions may not be so applicable in this context. Rather, the projects are likely to be only redefined or steered instead of being cancelled or paused.

Project prioritization and selection as it is defined in many product development originating project portfolio management studies, is probably not so feasible in an internal development context, since it is more difficult to compare and prioritize internal development projects against each other. As the internal development projects are harder to measure, accurate data on projects may also be harder to obtain. Additionally, when compared to product development projects, the pressure for significant and immediate financial advantages from the projects is not as heavy. Instead of screening out internal development projects due to resource constraints, it is perhaps more likely that due to their stronger link to corporate strategy, all internal development projects need to be carried out, but their magnitude and objective may need refinement by management in order to match the available resources.

The validity of the fourth proposition was further studied by one more question about the formal decision-making in different project phases. The more formal nature of the product development context did not reveal itself in this question except in the feasibility study phase. In all the later phases of the project no statistically significant differences were found in the rate of formal decision-making between the project types. However, this result might mean that even though we did not find difference in the decision-making formality of the later stages, the fuzziness of the beginning of internal development projects inhibits formal decision-making in the feasibility study phase. If the question is analyzed in the light of frequencies, more can be said: In all the project phases, approximately sixty percent of organizations in both contexts use formal decision-making occasionally or often. Thus, a conclusion can be made that formal decision-making is usually neither totally standardized nor totally lacking in either of the environments throughout the project life cycle.

Generalized representation: validity and reliability of results

Due to the fact that the results of this study are based on an extensive amount of empirical data from large and medium-sized Finnish organizations, we assume that the state and practices of managing development projects in other western countries is somewhat similar, although the level of analysis was relatively abstract, we accept the findings as generalized representation.

However, when interpreting the results presented in this paper, some limitations should be noted. The results of this study represent opinions of the managers responsible for development activities in the observed organization. Thus, different informants could affect the results of subsequent studies, especially in questions concerning the actual use of project management processes and practices. Possible implications of background variables, such as the size and the industry of the organization were not examined. These variables could affect the choice of project type (as the respondent was asked to choose a project type he or she is more familiar with in his or her work), and in this way, responses may have a different effect on the results.

Contribution and suggestions for further research

The findings of this paper contribute significantly to scientific knowledge by presenting empirically tested propositions on differences between two common project types: internal development projects and product development projects. Prior empirical studies are often limited to the study of either internal development projects or product development projects. In addition, most of the existing studies on internal development often do not provide statistically tested, generalized results, but instead rely on empirical data achieved through single cases.

In addition to its academic contribution, this study contributes significantly to both existing knowledge on project management and to the practical needs of the individuals in the project management profession, to individuals responsible for multiple project management, and to organizations developing their activities or products. The results of this study can help organizations understand the different nature of product development projects and internal development projects, providing them with guidelines that show how the management practices of these two types of projects differ.

The differences and observations achieved, as result of this study, demonstrate the need for further research on empirical comparison of context-related organizing models and best practices to successfully manage different types of internal development projects and product development projects. Moreover, we see that the front-end phase of both internal development projects and product development projects and the link of these project types to an organization’s strategy process as an important area worthy of further study.

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Appendix 1: Variables and respective results from analyses

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Author contact information:

Perttu Dietrich, MSc

Researcher

Department of Industrial Engineering and Management

Helsinki University of Technology

P.O.B. 9555

FIN-02015 HUT

Finland

Gsm: +358 50 385 3490

Fax: +358 9 451 3736

Email: perttu.dietrich@hut.fi

Päivi Lehtonen, MSc

Researcher

Department of Industrial Engineering and Management

Helsinki University of Technology

P.O.B. 9555

FIN-02015 HUT

Finland

Gsm: +358 50 386 2763

Fax: +358 9 451 3736

Email: paivi.lehtonen@hut.fi

Lassi Lindblom, MSc Researcher

Department of Industrial Engineering and Management

Helsinki University of Technology

P.O.B. 9555

FIN-02015 HUT

Finland

Gsm: +358 50 581 7187

Fax: +358 9 451 3736

Email: lassi.lindblom@hut.fi

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

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