The perfect storm

Abstract

The long waves of innovation described by Schumpeter have become shorter and shorter in the modern business arena. As a consequence, the impact on worldwide activities in general and Project Management in particular has never been more dramatic. In turn, the significance of this movement has become wed to the relatively recent rise and recognition of the importance of organizational and product Quality Management. The latter has become even more important in combating the considerable degree of variation in standards caused by rapid innovation. The precepts of Six Sigma have become relevant as they provide the methodology to identify and minimize variation through a data-centric approach. That approach is directly supported by information systems, which are effectively developed by astute Project Management methodologies. The result is a ‘perfect storm’ of major business confluences that offer both challenge and potential in the business environment.

The Gathering Storm

Project Planning, Management, and Control (PPMC) is hardly a new discipline – after all, the pyramids were not built on a whim. To be sure, they met all the basic requirements of a project – to paraphrase A Guide to the Project Management Body of Knowledge (PMBOK® Guide), there was a well defined deliverable that required the application of resources over a period of time. Moreover, there were surely the equivalent of change requests, as well as designers, supervisors, and pressures to perform in a quality manner. In that regard, there is little to differentiate them from projects in the modern world ….. with the major exception that today's projects are far more driven by technology and time constraints, not to mention the factors of resources and budget.

The introduction of technology has undoubtedly changed PPMC in ways that could not be envisioned by the ancients. In fact, the full impact of technology has only recently been fully appreciated. Again, the phenomenon of technology and innovation is not entirely new, but its impact has become increasingly felt by organizations and projects of all stripes. Therefore, to begin to understand the underlying forces of a ‘Perfect Storm’, it is essential to recognize their sources.

Force I – Technology and Innovation

As noted in an article in the February 20, 1999 edition of the Economist, many an excellent company has failed not because it had poor management, but because it failed to innovate in a timely and effective manner. Joseph Schumpeter identified this deficiency in the early 1940s with his description of the concept of ‘creative destruction’. Successive researchers and writers have refined this concept, culminating most recently in Clayton Christensen's identification of the ‘Inventor's Dilemma’. The common threads of this approach to business can be illustrated through several basic graphics. The first is an updated version of Schumpeter's presentation, where the long waves of technological advance have become shorter and steeper in recent history.

Schumpeter's Long Waves of Technology

Exhibit 1 – Schumpeter's Long Waves of Technology

These trends have had a major impact on organizational transformations. No longer can an organization base its business model or enter into a major project based solely on current trends and levels of technology. As recently as ten years ago, a business or government agency could implement a major project or development effort with the assurance that its product would be in demand for a substantial period of time, and that product improvements could be made at a reasonable, comfortable pace. That era is gone and not likely to return. The pace of activity in today's world demands that the organization and, more specifically, the business manager accurately forecast the customer need and technological frontier to ensure that a project is not outdated before it is even completed. The cost and complexity of major, new projects simply prohibit errors of judgment in these crucial areas.

Relative uncertainty over the development and application of new technologies and innovations leads to a primary concern to an organization – the general trend that the typical technology-innovation process is allied with and reflects a business perspective. This overall process can be mapped as shown in Exhibits 2 and 3, which clearly illustrate the risks involved in not understanding the impact of technological change and innovation. In addition, Exhibit 4 provides insight to the nature and source of a technological change or innovation to an organization's processes. As discussed above, organizations ignore these forces and associated risks at their own peril. Stated differently, the roles of Quality and Project Management have become too important to be left in the hands of isolated practitioners.

A closer examination of Exhibits 2 and 3 is warranted as the importance of Quality and Project Management is readily illustrated by how the development and application of new technologies and innovations lead to a primary concern – the general trend that the typical product or project process follows from a business perspective. Speaking at a summary level, this overall process can be interpreted as follows:

  • Stable Product, Process, and Market

    ■ Incremental improvements in Process to reduce costs and improve the efficiency of existing production methods to maintain existing market share

    ■ This is a period of relative comfort and the domain of existing firms in the industry and market

  • Major change in Product (‘Discontinuity’ or ‘Creative Destruction’) as a function of technology and/or innovation

    ■ Drive for increase in market share, revenues, and profits

    ■ ‘Period of Ferment’ in the industry and market until standards and expectations are established

    ■ Newcomers to the industry and market often introduce this period of dramatic change, frequently

    ■ upsetting the status quo in a dramatic fashion

  • Emergence of a Dominant Design and corresponding standards of Quality

    ■ Development of new processes and production processes

    ■ ‘Shakeout’ of industry participants and establishment of market shares

    ■ The aftermath of a product discontinuity and associated period of ferment is often the establishment of

    ■ new markets, organizations, and industry alignment

Of particular interest to the organization is the impact of the rise of a new product (discontinuity) resulting from a sea change in technology and innovation. This leads to a significant level of turmoil (Period of Ferment) until a Dominant Design emerges. It is during this period that organizations change with alacrity or become extinct. Organizational literature expands greatly upon this area, describing tendencies toward self-protection and propagation of the status quo vs. methods of acceptance and adoption of a new product and attendant processes. The former is often lethal to the organization; the latter, termed organizational transformation, is virtually mandatory for survival and growth, again stressing the need for Quality and Project Management.

To provide perspective, then, the force of technology and innovation can be viewed as the incubator for an organizational and market storm, forming the basis for what could occur if the proper ingredients are added to a potentially volatile mixture. Stated differently, the prospect for dramatic change is there, but requires form and substance to develop into an actual storm of change and opportunity.

Technology – Innovation Business Cycle

Exhibit 2 – Technology – Innovation Business Cycle

Product Life Cycles and Emergence of a Product Discontinuity

Exhibit 3 – Product Life Cycles and Emergence of a Product Discontinuity

Comparison of Types of Technology and Innovation Changes

Exhibit 4 – Comparison of Types of Technology and Innovation Changes

Force II – Quality and Six Sigma

The combination of rapid rates of change in technology, user/consumer demand, societal expectations, and governmental regulation, plus the cost and complexity of projects, has added a signficant impetus to the formal establishment of Quality and Project Management as integral parts of the planning and operational aspects of an organization. Neglecting to explicitly consider these factors runs the very real risk of failing to meet the threat (or opportunity) of transformation to an organization. Risk may be a companion to progress, but that does not mean it should go unchecked. Inclusion of Quality and Project Management methodologies can materially reduce risk to an acceptable level (at a minimum, they can eliminate pure uncertainty), provide direction, and significantly enhance the probability of organizational success. The question is which set of tools and methodologies to use and when to use them.

Enter Six Sigma in terms of philosophy and applications as an overall problem solving methodology, particularly well-suited for the identification and refinement of problems. Fundamentally, Six Sigma is a methodology for the minimization of mistakes and the maximization of organizational value. It accomplishes this laudable objective through a set of interrelated orientations:

  • Clear value proposition with an explicit appreciation of ROI
  • Strong customer focus
  • Emphasis on business metrics and data
  • Focus on process
  • Project orientation

These interrelated orientations are commonly implemented through a DMAIC project approach, where DMAIC stands for Define, Measure, Analyze, Improve, and Control. Each of these stages has multiple facets that can be studied in detail, but they all contribute to the same objective –

Minimization of variation in core processes to achieve tangible and measurable results.

While Quality and Six Sigma are applicable throughout an organization and its process or product life cycle, they are particularly relevant to two areas in the technology and innovation model discussed in the last section. Initially, they are directly applicable to the first part of the model where continuous process improvements occur through a focus on ‘critical values’ (most commonly, customer satisfaction, product quality, cost, and delivery). This is the traditional and familiar role of Quality Management. What is more important, though, is how both Quality and Six Sigma are required to identify and control the variation implicitly addressed as the ‘Period of Ferment’ in Exhibits 2 and 3. It is this area where the DMAIC approach reaches its zenith in importance through the manner in which it identifies core problems and moves to significantly reduce the element of variation and its close cousin – risk.

It is just as imperative to note that Six Sigma and Project Management share a common goal in the objectives implicit in Exhibits 2 and 3 – effectiveness as a change agent. The reduction of variation during the period of ferment can reduce the associated area of organizational jeopardy, but that reduction is of no lasting value if the corresponding move to a dominant design is not accepted by an organization or its customers. In turn, mere acceptance is not enough – the new process must still be developed, produced, and used within pre-determined standards of performance to maintain a minimum degree of variation while maximizing overall levels of quality. This stage of the DMAIC approach, Control, is commonly seen through the application of control charts.

Note that the entire premise of Quality Management and Six Sigma is based on measurement, the basic premise being that one cannot improve a process or product if there are no data upon which to base rational judgments on performance. There are numerous ways to generate data, and one must be careful to gather meaningful data, but the point remains that data must be obtained and be available for use. This point leads to the next part of this discussion – Information Systems.

To add additional perspective to the perfect storm premise of this paper, Quality Management and Six Sigma present the crucial elements providing form to a building storm, but data is required to contribute the critical element of substance.

Force III – Information Management Systems

As a fundamental part of the substance in the development of a perfect storm, data cannot be overlooked. But, it is critical to note that data in and of itself will be of little value if it does not meet the criteria of being relevant, timely, and accurate. In other words, data is meaningful and useful only if it provides information that can be applied to the core problems identified by the combined force of Quality Management and Six Sigma. Herein lies both the problem and the opportunity.

Many organizations gather and store data in truly awesome ways and amounts. But, that data, although accurate, is not necessarily timely and does not necessarily address the core problems identified in the Six Sigma methodology. In effect, organizational systems have been developed at great cost in terms of time and resources for what is essentially a ‘data rich, information poor’ (DRIP) outcome. With regard to the environment just described in this paper, organizational systems are often used to describe what has occurred without the appropriate analysis to determine why it occurred and what will happen. There exists a great deal of potential, but little performance of an organizationally useful nature. In short, there is little, if any, substance to traditional data gathering systems.

The environments generated by technology and innovation require more – they demand information management systems. This need has not gone unnoticed by CIOs and their information technology departments, giving rise to the development of a spectrum of information gathering, processing, and analysis systems, as reflected by Exhibit 5.

Types of Information Systems

Exhibit 5 – Types of Information Systems

The key points to be gleaned from Exhibit 5 can be summarized as follows:

  • While traditional Transaction Processing Systems generate data, the advent of Management Information, Decision Support, and tailored Executive Information Systems have provided the all-important element of actual information for organizational decision making on events of a future portent.
  • The acquisition of information, as opposed to mere data, has permitted the movement of an organization from unstructured, uncertainty centric positions to ones of structure characterized by relative certainty. That is, the element of risk has been significantly reduced, and the organization can plan its activities with a greater degree of advance knowledge over the outcome of those activities.
  • The actual developers and users of information systems have slowly, but inexorably, shifted from the technical to the business sides of the organization. More importantly, the boundaries between these sides have increasingly become blurred.

Taken together, Information Systems empower an organization through the development and application of the key ingredient of business intelligence – the missing link of substance. This is the critical element enabling an organization to recognize and take advantage of the opportunities provided by technology and innovation and the methodologies offered by Quality Management and Six Sigma. Effective use of these capabilities can lead to a clear path of success; failure to do so can lead to organizational demise.

So, finally, the various forces of the ‘perfect storm’ have come together and, more importantly, been identified and placed in position to be mutually supportive. What is needed now is the means to manage and direct the storm to the advantage of the organization.

Managing the Storm – Project Management and Control/Leadership

Storms of any sort can be fearsome if one is not prepared for them. The classic discipline of Project Management and Control (PM&C) can offer not only a blueprint of preparation (in conjunction with Quality Management and Six Sigma methodologies), but also a clear path of execution for the handling of storms in the business arena. The real question that determines the success of preparation and execution involves organizational orientation – will it revolve around Project Management and Control (PM&C) or reflect forward movement based on Project Management and Leadership (PM&L)?

Traditional PM&C is based on what can be termed constrained optimization. It tends to focus heavily on control for purposes of stability and repeatability (giving rise to at least the lower levels of a typical Capability Maturity Model). However, the business environment engendered by technology and innovation, supported by modern information systems, stands in stark contrast with its need for forward movement and outlook. The discipline of PM&L has explicitly recognized this need through its increasing emphasis on such orientations and attendant techniques as Agile Organizations or Adaptive/Extreme Project Management.

Traditional PM&C has worked well for, literally, millennia where goals, requirements, and solutions were known (or at least relatively so – there have always been change requests!!!). However, the Period of Ferment and Area of Organizational Jeopardy, supplemented by Product Discontinuities and Competency Destroying Changes, as illustrated in Exhibits 2-4, have led to the need for a completely new paradigm where goals, requirements, and solutions are not only changing but are often unknown. The degree of variability so abhorred by Quality Management and Six Sigma not only exists, but does so with a vengeance, giving rise to increasing levels of uncertainty and risk.

To be sure, not every project is characterized with uncertainty and risk – some are relatively predictable. These projects can probably be managed very well with the linear control model used by traditional PM&C, as indicated below.

Recognized Need >>> Requirements Specification >>> Design >>> Development

>>> Testing >>> Implementation

But, even the most predictable projects can be upset by changes in environment, technology and innovation, client needs and expectations, etc. over time so that changes in key project parameters become the norm rather than the exception. When this occurs, it is incumbent upon the PM&C methodology to move from a focus on control of the status quo in terms of process and product to an emphasis on Project Management and leadership (PM&L) for the future, no matter how unclear that future may be. Such an orientation requires a shift in organizational expectations, supported by a corresponding shift in practices. This change may move the organization out of an existing comfort zone, but remaining in that zone, in today's environment, is quite likely a path to ruin rather than sustenance and growth.

The effective handling of change has become a continuing process that requires looking beyond the relatively easy challenges of improvements to existing efforts to achieve the greater rewards offered by the development of new, disruptive processes and products through project leadership for the assimilation of emerging technologies and innovations. In turn, this requirement is based on a proactive integration of the forces discussed in this paper to achieve sustainable organizational change and growth.

The net effect of this change in orientation and associated methodology is to move from the reactive slant provided by PM&C to that of a change agent supplied by a PM&L positioning for organizational transformation to meet future needs. Recognition of this vital, but often unasserted, role of PM&L ties directly back to the need for an effective vehicle for organizational management of the rapidly altered environment created by the changes in technology and innovation identified in the first part of this paper.

A PM&L approach is not easily accomplished, though, as it requires a major shift from the time-honored traits exhibited by Quality and Project Management and Control. A PM&L approach is characterized not so much by the introduction of a case of new tools and techniques as much as a change in process and, more importantly, attitude. Specifically, it requires a greater organizational tolerance for risk and ambiguity, as opposed to the quashing of these elements in the name of quality and control. It also requires the relinquishment of a degree of oversight and direct power by management to facilitate the open communication and functional integration required of leadership and forward, agile movement. Much more could be said on this topic, but it is best left to another day. In the interim, it is sufficient to note that the elemental forces of technology and innovation are changing the business world and how it operates. It is incumbent that project management practices change as well.

Summary

The increasingly prevalent and powerful forces of technology and innovation have been conventionally handled by the countervailing forces of Quality Management, Six Sigma, Information Systems, and Project Management and Control. While these forces have been largely effective on an individual basis in the past, the business storms of the future demand an approach of greater potential and energy, an approach that leads an organization as opposed to being a mere tool to enhance the status quo. The combination of the various forces discussed above, properly applied, can be that new approach – Project Management and Leadership – an organizational change agent that generates the energy needed for focused movement and success in an increasingly challenging environment.

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© 2007, Michael E. Thorn / NCCI Holdings, Inc.
Originally published as a part of 2007 PMI Global Congress Proceedings – Atlanta, GA

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