Project management and the entrepreneur
Reprinted, with minor revisions by permission of the author and publisher, from the Winter 1989 PMI Pittsburgh Chapter Newsletter. All rights reserved.
By: Harold H. Mehr, President, Econcorp, Inc.
The development process for creating a business out of an idea is complex and highly sophisticated. It requires the identification and verification of many facts, the elimination of guesswork, and emphasizes control in the expenditure of limited resources (cash, time, and people) to operate profitably in a high risk environment.
Starting from scratch requires courage, confidence, innovativeness, and flexibility to deal with the ever-present uncertainty related to being first. There is a need for a “sixth sense” in avoiding potential pitfalls, identifying hidden risks, reducing time slippages, as well as avoiding and eliminating bottlenecks that are certain to appear during concept development.
Those entrepreneurs who are not equipped with “extra-sensory perception” should find that application of the basic principles of project management will aid the entrepreneur to achieve greater control and confidence in accomplishing the project objective (establishing a profitable business).
The process of scope management includes the identification, definition and documentation of a project's objectives. Considering the entrepreneur's project, scope management includes:
- Identification of the problems related to the establishment of a profitable business (products/services; customers; territory).
- Definition of offered solutions to the business problem (product uniqueness; type and location of customer; pricing of product/services; methods of distribution).
- Documentation of project execution (work breakdown structure; project master schedule creation with milestones of achievement; standards and criteria of performance).
The scope management process assumes that a project can be divided into manageable segments; that responsibility for management of each segment can be assigned to the proper management team participant and scheduled for completion. The establishment of a scope baseline provides for a basis for making future decisions, accomplishing verification measures, evaluating potential scope changes, and providing an audit trail of baseline changes. As the project progresses, status information should be recorded, accumulated, and transformed into structured information to judge project performance. By employing the principles of scope management the entrepreneur can identify bottlenecks, time slippage or resource waste, and is able to forecast trends. Methods of intervention can be developed and put into place in a proactive manner, thus providing control over the development process.
The Four Phases
All projects, including that of developing a new business, go through four phases: concept creation, process design, execution, and completion.
The entrepreneur (project manager) has the responsibility for success or failure of the business idea (the project). The entrepreneur must get things done through the active support of the project development team (investors, board chairman, chief administrator, chief marketing officer, and chief operations manager). The entrepreneur must demonstrate leadership ability and charisma; must be instilled with inventiveness, flexibility, and courage; and must be able to communicate enthusiasm to all who will ultimately influence the business's success.
Most of all, as project manager, the entrepreneur must develop high-quality policies specifically control of the process to meet objectives. These objectives are the economical expenditure of resources, quality assurance, performance verification, and the development of process quality management, all of which are encompassed within the Project Management Body of Knowledge (PMBOK).
Every project has a customer base. Business success and profitability depends on whether the entrepreneur has effectively identified and met customer needs and goals. In moving a business opportunity into becoming a thriving business, the entrepreneur must provide timely project direction within a specific window of opportunity to meet customer needs and goals. This requires:
- Time Management - planning what has to be done and how to do it;
- Scheduling - the execution of tasks in real time with limited resources;
- Estimating -determining the duration of each activity.
Control is achieved by comparing actual usage with estimates, measuring the effect of actual results, and evaluating and implementing alternatives to reduce negative impacts that may occur from unexpected variables.
Resource management is another project management principle that the budding entrepreneur should apply. It is a must for monitoring and controlling the often premature depletion of cash, labor, and information. The specific areas for applying resource management techniques include: budgeting, present value evaluation, cost/benefit analysis, cost/schedule and forecasting, sensitivity analysis, and resource accounting.
The implementation of a new business idea from concept to reality has distinct periods of transition: founding, infancy, growth, maturation, and decline. Management priorities, controls, processes and resources undergo changes to accommodate project implementation needs. New dimensions of risk and conflict are added to management decision-making. Risk and conflict management principles must be brought to bear on anticipated and unexpected situations.
The entrepreneur must be a systems integrator and project facilitator. The processes of integration and facilitation involve motivational influences that direct, coordinate and stimulate the efforts of the project management team to excel and to reach business goals and objectives within the scheduled time and budgetary constraints.
To start something new is to take chances, to venture into “new territory”. The entrepreneur must skillfully assess apparent risk, take precautions to be prudent, and employ appropriate techniques to assess risk and to set risk control priorities. To control risk, one must truly understand the entire process, including all inputs, outputs, and feedbacks.
Risk management for the entrepreneur must be considered as preparation for possible events in advance, with the project manager providing the means to intervene pro-actively instead of reactively. The entrepreneur must be able to identify the impact of variables at all levels of development and to give priority to the most influential. The project manager must be able to sort through uncertainty, to pinpoint critical variables, and to take cost-effective measures to reduce the impact of unexpected risk losses.
Through the PMBOK, we understand that risk response can be dealt with in terms of avoidance, reduction, transference, sharing, or retaining. There are various support systems that can be used in risk management. They include:
- 1. Strategic Planning -- listing strengths, weaknesses, opportunities, and threats; identifying critical issues; defining strategic objectives; developing action plans.
- 2. Analytical Hierarchy Process -- structuring the problem in the form of a hierarchy of mission, objectives, and strategies. The judgement of priorities are made with pair wise comparisons of their impact intensity.
- 3. Probability Analysis -- the likelihood of risk occurrence.
- 4. Intervention Techniques -- insurance, performance standards, deflection, mitigation, avoidance, contingency planning.
- 5. Sensitivity Analysis -- worst case/best case.
- 6. Response Planning -- elimination of the risk event by changing procedure (mitigation); transfer and sharing (deflection); monitoring, reviewing, and updating (avoidance); insurance, budget allowance, schedule altering (contingency planning).
In applying the above-mentioned risk management principles, new dimensions are added to management decision making. It is vital that the management team can deal with unexpected conflicting goals, changing priorities, new resource demands and unexpected competition. If confusion sets in at any point, such as poor scheduling or loss of budgetary control, or the drying up of resources, the odds of failure increase dramatically. These failures generally are symptoms of unexpected, untracked and uncontrolled changing conditions.
Proper project management involves direction, coordination, reassessment, and reconfigurration in real time. The entrepreneur must get the job done on time, within budget, and to the satisfaction of customers. This results in outstanding performance and profit for the business and its investors. The primary characteristic of a successful business opportunity is the management team's ability to get things done on time at lowest cost with maximum efficiency and effectiveness.
A great deal of preparation and careful planning is the essence of success. The founder becomes planner, designer, implementor, schedule maker, monitor, procurer, and director. There is an urgent need for formal project management tools to assist the entrepreneur.
Project management and control is vital, and proper information management is critical to effective and efficient project development. The size of the project is not a factor in the assessment of the use of project management techniques in creating new businesses, rather it is the organizational and project complexity that makes the requirement significant.
April 1989 pm network