Project management in radical innovation

Abstract

Radical Innovations require specific training for project management. The research work revises key project management concepts and uses theory and experience from disruptive environments based on real project cases. The conclusions are valuable in high risk activities like complex IT projects, mergers and acquisitions or complex capital projects.

Introduction

The paper is part of a research on project management and radical change or crisis. Radical innovations and crisis generate disruption of existing situations: persons, organizations, corporations, sectors, and regions are affected and many important patterns are hidden or invisible. We accept often that they fall into the category of unavoidable or unpredictable. Unavoidable means in some cases that we are not prepared to avoid or predict events because of our resilience to major crisis.

This paper explains human resistance to radical change and explores the regular patterns followed. On one hand, risk, hazard, and especially crisis management can be used in shaping innovation and “radical innovations” or “radical changes” that impact and affect firms' or affect the entire industries' survival. The patterns that are described are visible in high risk projects as complex capital projects, information technologies (IT) projects, and mergers and acquisitions (M&A). The paper's objective is to explain findings and promote a discussion and share experiences or recommendations.

Project Management and Radical Change or Crisis

Projects and project management are part of change or crisis. In radical change or crisis the systems affected often cannot respond in a self-adapting manner. Understanding Human psycho-cognitive process is part of the solution.

Radical change or crisis like the spiral growth (or death) of a corporation, disasters or catastrophes either natural or man-made, and complex projects involving high risks and uncertainties are increasing when we apply existing habits to more complex paradigms.

Incremental change, slow or no growth scenarios, rationalisation divestments, simple projects, and so forth adjust themselves or require little effort compared to the cases of high risk projects as complex capital projects, IT projects, and M&A.

Radical Innovations and Disruption Risk, Hazard, and Crisis

Innovation

Innovation is associated to technology, exo-somatic or external to the body, and formed by hard and softer dimensions. In the beginning (cotton mills, steel, electricity, chemistry, petroleum, and cars) materials (hard side) were essential. Late XX and XXI Century revolutions are “softer” and life sciences, environmental solutions, and information rely on the development of psycho-cognitive dimensions (Nefiodow, 2001).

The research is a departure point with the intention to develop contributions to the improvement of project management, using this last psycho-cognitive dimension, essential to face radical innovations, risk, hazards, and crisis. Project management and a project manager's tasks outcome is a combination of unique products or services. Projects followed trajectories of improvement thanks to innovation, and understanding the nature and evolution of innovation is crucial. This paper is focused on high-impact innovations: radical innovations. Our formal knowledge on innovation begins when Adam Smith (1994) explained the advantages of specialization in organizing a “needle” production in a more efficient manner. For a long period, technological innovation was not given an especially relevant place by economic theory while the innovative Industrial and Natural Sciences Revolution was following its way and creating the foundations of today developed society.

Joseph Alois Schumpeter (1934) is the first author that clarifies the importance of Innovation. Schumpeter said that innovation created “winds of creative destruction” and signaled the important role of the entrepreneur. The author described a series of innovations that linked new ideas, new ways of commercialisation, and new products with creation and destruction. For Schumpeter success had the seeds of failure, and failure was the departure gate for success…. Destruction and creation is the essential dilemma of the present work and how both affect the psychocognitive processes and products of human decision-making activities.

Robert M. Solow's (1987) Theory of Growth was awarded the 1987 Nobel Prize. He could explain that, from1929 to 1982, the main factor of growth of United States Gross National Product was technological innovation: “technology remains the dominant engine of growth, with human capital investment in second place.” The same author citation of Robert Frost's lines from “The Black Cottage”: Most of the change we think we see in life is due to truths being in and out of favour.” The two sides, positive and maybe negative, of the same stick are part of the same change as Solow signals.

Innovation is a process that involves an enormous amount of uncertainty, human creativity, and chance (Utterback, 1994). Authors like Abernathy, Klein, Christensen, Tushman, Twiss, Durand, Von Hippel, Nelson, Freeman, and Pavitt helped us to understand the important role of technological innovation in competition, in industry-shattering, the behaviour of existing firms when a radical innovation invades a stable industry, the habits of mind that prevent dominant firms from bridging present to future, and how renewal of technology from one generation to the next can succeed (Utterback, 1994). Uncertainty is closely related with risk.

Literature includes diverse definitions or discussions about architectural, incremental, and radical innovations and their relevance. Novelty or scientific merit is important but innovation theory is mainly concerned about how innovation affects the competitive game, the survival or death of institutions through competitive advantage creation. A vision that gives clarity to this discussion can be proposed from the process of marketing/selling value to executives “Arrow” of the Economist's Intelligence Unit document shown in Exhibit 1. It includes concepts like foundation, tactical, strategic, and competitive selling. Any institution or corporation departure point or status (foundation) was framed by success or failure from past innovations. Departure point also is important for choice (Kahneman); the decisions must also be examined. Exhibit 1 shows are the result of many different explicit or tacit projects, programs or portfolios—all of them represent a combination of success and failure and explain growth and survival of institutions.

“Value Continuum” Arrow (Economist Intelligence Unit, 1999)

Exhibit 1 – “Value Continuum” Arrow (Economist Intelligence Unit, 1999)

The “Arrow” right end (Innovation) is mainly made of psycho-cognitive softer aspects; the left circle has a combination of soft and hard; “Foundation” and “Innovation” values together will generate change, surf on risk, etc. Changing industry and market practices often develops into a radical and disruptive scenario that will affect to all participants in different manner. In all it's a high risk and rewarding activity in case we create advantage, our market and revenue will grow. Normal life of companies that grow too fast is a positive disruptive scenario. The opposite can become true too. Normal life of companies that disappear is a disruptive event. Then, what are the contributions that our tradition of project's risk management can make to success and to avoid failure in face of radical innovation?

Radical Innovation

Discontinuities and disruptive or radical innovations are defined in different manners. Some authors considered novelty, scientific, or technical value as not especially relevant to define an innovation importance. Most of literature values innovation depending on the competitive result: how innovation affects destruction of existing positions and creation of new industries or sectors. Radical innovations can be better defined by their high impact on the competitive advantage of creation or destruction. As a result, radical innovations generate disruption of entire sectors and industries and speed of change increases as well (Brousseau, 1996). At one time successful corporations disappeared within a short period (spiral death); the opposite has also happened. Extremely fast-growing new-born companies are present (spiral growth) so it is extremely important to understand why managers often cannot react properly to radical innovations or big changes.

Complex capital projects, IT projects, and M&A projects often turn into radical or big changes, and of course have high impact on the competitive stance of corporations or institutions. Are they radical innovations? In many cases our findings are that they can deviate from normal patterns and generate growth and death of firms too. They involve high risk and uncertainty, require creativity, and are affected by chance.

Uncertainty and risk or hazards maintain special relationships, based on human nature potential and limits: decisionmaking involves a consideration of future, and future is amid a cloud of uncertainty. Human creativity is this, above all this: human; chance is also considered when for example we design a failure's tree as a risk analysis method and we humans can have different relations with pure chance. Good or bad luck can make a lot of difference in our human activities. We needed to understand how the human being supports destruction and creation. Creativity and the flow of ideas, and its power to shape innovation is it affected by the vision of destruction? How?

Risk, Hazard, and Crisis

Risk, Hazard, and Uncertainty

The word risk had different uses in the past and often confused with hazard, which are included in common or usual dictionaries. Risk comes from the Latin word “resecare”; it means also “to cut off, to tear, and to plough the waves.” One of the more common uses had reference to the cut off (“resecare”: “secare” is to cut, in Catalan language the equivalent word “segar” can be used with identical meaning) the vessel's body caused by hidden or submerged rocks.

The risk terms includes concepts such as: Exposure to or suffer possible harm, loss, or injury. We use terms as danger, destruction, peril, hazard, jeopardy, imperilment, or endangerment and a possibility of danger or harm, as chance, hazard, and gamble.

The meaning of hazard is often confused with risk. Hazard is defined as the inherent potential of a material or activity to harm people, property, or the environment. Hazard does not have a probability component as the risk concept. Chance too is present there.

Identification of risks in project management follows recommended rules like: “All project personnel should be encouraged to identify risks” (PMI, 2000, p. 246); brainstorming, experts, and so forth are recommended. Radical innovation, big changes, or simply a crisis generates abnormal situations. And the question is: Why and how the disruptive situations can have an impact in their risk identification activity? Human psycho-cognitive sciences have responses?

Crisis

Crisis means critical moment, turning point, sudden or decisive change, and so forth from most of dictionaries. Radical innovations have identical properties, big changes too; project management and especially risk management must identify the potential crisis.

The research study looked for important and relevant crisis. We analyzed cases where daily or normal life is threatened and disorganized, defined in literature as disruptive scenarios. There are events, like aggression, as an explosion, that affect our psyche and alter our mental and somatic processes. We recognised that we are often unable to foresee or predict disasters and catastrophes. In disaster intervention, persons that suffered injuries are subject to medical treatment first. We send the sick to the doctor but we do not send other persons to the doctor because they are apparently in good or normal health. We will find project team members that are apparently normal and only specialists can recognize their symptoms.

In real crisis the author observed certain unexplained patterns that were similar; radical changes affecting an individual person or a bigger group of persons. Radical innovations had too similarities to the previous. Understanding the patterns and creating proposals could help us to surf on the wave of destruction and creation? We studied the human factor in the different phases of disasters and catastrophes (WWII and other wars and crisis military psychiatrists from the World Psychiatric Association were interviewed, and persons from emergency departments, gave excellent comments): it's common to find apparently normal persons are affected by post traumatic stress—a category difficult to define—that affects their cognitive processes.

Moreover, the real impact of terrorist attacks, car accidents, industrial accidents, natural disasters, and so forth is wider that the damaged ones, and the society generates processes like the victimization process—society lack of adequate response, whenever possible, generates a sense of guilt and need of memory that is passed to the damaged ones and prevents them from a rapid recovery.

Again, project managers, risk managers, and innovative entrepreneurs are all of “human nature” and mental processes may prevent them and us to run in the right direction. As an experiment, practiced with groups of more than 20 project managers of a post-graduate project management course; they were questioned whether and/or who was facing now a major crisis situation in the projects they are at work. It is very often an opportunity to hear absolute silence and a bigger group usually means a longer wait for the first response; denials or “no-crisis,” “it is or was someone else's problem” as normal response, etc. Few exceptional persons immediately recognize they are involved or part of crisis. Unlocking the protection was done when some critical or typical personal situations are refreshed (loss of job, divorce, accidents, surgery...). The number of students that accept crisis will immediately increase and finally they accept to share their feelings and emotions.

Project management in such radical innovation or crisis situations needs the support of people that must maintain their own immunity—distance is essential. The opposite position is needed too. Practitioners understand that training gives better results than education, and that it is essential “on the spot” intervention and being exposed to the disruptive environment. Next topic discussed is how our cognitive system works and how our emotions are affected in real disruptive radical innovations, crisis, etc.

Cognitive Process and Innovation

Crisis and radical innovations have the “power of the situation” (Ross & Nisbett, 1991). How do we judge under uncertainty? How do we predict and evaluate evidence? How do we make choice under risk? These and other important questions and responses are in the work of Kahneman (2003, p. 1449-1475), and has inspired the statements that follow about cognitive systems, our capability to adapt, and the importance of intuition.

According to the author we have two modes of thinking and deciding that correspond to reasoning and intuition. Reasoning is done in a deliberately and effortful manner. Intuitive thoughts seem to come spontaneously to mind. Most of actions and thoughts are intuitive—a plausible judgement comes to mind. Exhibit 2 summarizes the importance of perception. System 2 operations are slower, serial, etc., and as the author refers, they are potentially rule-governed. System 1 operations are governed by habit and emotionally charged and then difficult to modify. We add under normal conditions like most of bounded risk scenarios, in case of a main disruption, emotions and habits must be adapted. As an example, experienced decision-makers working under pressure (emergency team members, like fire fighting teams, etc.) rarely need to choose between options—only a single option comes to their mind.

Adapting oneself to disruptive environments and radical change innovation, we need a cognitive system adapted to that environment that includes a long-term process of skill acquisition capable to responding effectively to surprises. We also cannot ignore emotions, feelings, and beliefs. Our heuristics that once made reliable our risk management solutions can lead to severe and systematic errors. Skilled decisions-makers “do better when they trust their intuition than when they engage in detailed analysis” (Kahneman, 2003, p. 1469).

Three Cognitive Systems (Kahneman, 2003, p. 1451)

Exhibit 2 – Three Cognitive Systems (Kahneman, 2003, p. 1451)

Optimism affects risk taking, and fear in predictions of harm, and the tradition of the separation between belief and preference in analysis is psychologically unrealistic (Kahneman, 2003, p. 1470). Crisis resilience and change resistance have psychological aspects that are described next.

Crisis and Radical Change Resilience

Human resistance to big change or crisis is in our minds taboos that used to generate social consensus and to help our normal life are included. Complex projects may apply taboos and may prevent us to discuss in full depth about failure visible through behaviours that are hard to explain unless we refer to the topic that follows.

From Dr. José Luis Pérez-Iñigo Gancedo, military psychiatrist private communication, we learned about the process of facing our own death. Observe your own reaction. The cycle of sorrow or grief is different for different stakeholders. The crisis generated by risk and hazard is an unusual environment, and crisis triggers a process of sorrow or grief. Details are different than usual, and even minor details become then important to solve the problem. Leaders and organizations generally prefer to back or support the “no-change” that apparently avoids going through the grief process of the crisis.

Using a citation of Freud included in this communication, in the bracket (...) we have deleted the word death from the original, and would like for you to introduce the word “crisis” or “radical innovation or change.” And in the bracket (-----), instead of “mortality” please use destruction. Both destruction and creation are part of the same crisis: “The unconscious doesn't know (...) and no one believes really in its (-----). Our own (...) is unimaginable and when we try to imagine it we realize that we really survive as spectators.”

Crisis if they are acute generate a grief and/or sorrow process. Grief means affliction, agony, distress, melancholy (more enduring). Sadness and melancholy can also arise because of a loss or other causes. Human beings firsthand, start a denial process. (We first do not accept our own crisis or the crisis of the activity, etc. Reality is denied and when the feelings are shared with other persons, denial diminishes. It protects the individual to experiment the intensity of the loss. It diminishes when the person is conscious of the loss.)

Our ability to solve the crisis is blocked at that denial point. The next stage named annoyance or anger is as follows: We are angry because the crisis is unfair. It happens generally when persons feel helpless and without capability to act. Guilt feelings appear if feelings are expressed. Anger is moved towards other persons. It improves or betters when social support is possible. When we are angry, emotions too block essential percepts.

It follows a sense of guilt for everything done or not done before the loss and then “negotiation.” (We make offerings to return to the previous situation. We think about what could be done better. We imagine things or situations that would not be possible anymore.)

Depression appears too (we experiment the sensation of a big loss; low and high spirit fluctuations and sense of loneliness; and, after understanding the nature of the loss: sleep and appetite problems and a feeling of loneliness and abandonment).

Acceptance helps to solve the crisis (Reality is accepted and we face it. From that point the project should begin. It does not mean happiness and feelings are reordered.)

Hope: A certain point is reached where memories are less painful and we can look towards future.

It is needless to say that this process must be understood by the main stakeholders. The author experience in real cases is: first symptoms appear in mere details that can be classified as part of the previous process. On the other hand, “immunity” of decision-makers is essential as it affects their capabilities. We learned that not “solving” crisis to that final point and blocks the possibility to “face” future crisis. We may ask for leaders experienced in success and failure cases—both are important.

Concluding Remarks: Creation is Disruption

Radical innovations and crisis may turn into disruption. Complex projects may also turn into disruptive situations that are involved in a grief or sorrow process. We need to evaluate fear and opportunity. Impersonal and personal aspects affect our decision-making once the disruptive situation associated to radical innovations and crisis is triggered.

The power of the situation, destruction and creation combined, requires skilled and specially trained personnel and a different or non-traditional organizational support.

The grief process must be understood especially by project leaders and stakeholders; also it is strongly recommended that key project decision-makers or sponsors need “immunity,” essential as crisis affects their capabilities that the much needed closeness to the situation destroys. Leaders experienced in success and failure can have that capability.

Traditional risk and risk management is mainly a rational approach to opportunity and fear. Intuition is important and the contribution of experts and other kinds of stakeholders can generate important contributions to risk management. We must consider that intuition need skills training to avoid errors too. Future paradigms have different traits from past paradigms (Kuhn, 1962). “... we must constantly adjust our lives, our Thoughts and our Emotions” (Smith, 2003, p. 465).

Experts insist that project leadership and stakeholders must agree that any remediation, contingency plan, etc., after the radical change or crisis would never return the situation exactly to the same that existed before the disruptive situation appeared.

New situation means creation from disruption and destruction. Coping with success and failure is a skill that project management is essential. Training methodology in these skills will be part of our future research.

References

Brousseau, R. K., Driver, M. J., Eneroth, K., & Larsson, R. (1996). Career pandemonium: Realigning organizations and individuals. Academy of Management Executive, 10(4), 52-66.

Economist Intelligence Unit. (1999). Assessing the strategic value of information technology, the “Value Continuum” Arrow.

Kahneman, D. (2003). Maps of bounded rationality: Psychology for behavioral economics. American Economic Review, 93, 1449-1475.

Kuhn, T. S. (1962). The structure of scientific revolution. Chicago, IL: University of Chicago Press.

Nefiodow, L. A. (2001). Der sechste Kondratiev. Bonn, Germany: Rhein Sieg Verlag.

Project Management Institute. (2000). A guide to the project management body of knowledge (PMBOK®guide) (2000 ed.). Newtown Square, PA: Project Management Institute.

Ross, L., & Nisbett, R. E. (1991). The person and the situation. New York: McGraw-Hill.

Solow, R. M. (1987). Retrieved Feb. 28, 2008 from Nobel Prize Foundation, Stockholm Web site http://nobelprize.org/nobel_prizes/economics/laureates/1987/solow-lecture.html

Schumpeter, J. A. (1934). The theory of economic development. Cambridge, MA: Harvard University Press.

Smith, A. (1994). La riqueza de las naciones. Madrid, Spain: Alianza Editorial.

Smith, V. (2003). Constructivist and ecological rationality in economics. American Economic Review, 93, 465-508.

Utterback, J. M. (1994). Mastering the dynamics of innovation. Boston: Harvard Business School Press.

© 2008, Luis Pons
Originally published as a part of 2008 PMI Global Congress Proceedings – St. Julians, Malta

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