Blueprint for value creation
developing and sustaining a project management competitive advantage through the resource-based view
Just as scientists are working to crack the biochemical code for each of the 100,000 genes that determine human characteristics, business executives and researchers are trying to unlock the code for value creation within firms (O’Connell 2000). The code for business value creation involves tangible assets such as financial, physical, and technological ones and less tangible ones such as organizational, social, and human assets (Brush et al 2001). In the global race to unlock the code, firms interlock assets in unique ways to create value to achieve or sustain a competitive advantage in the marketplace. In the process of creating economic value, some firms may destroy it if they do not fully understand the value of the assets. This is especially true for less tangible assets.
Although research in project management predominantly emphasizes applied studies, there is a growing trend towards exploring strategic and organizational issues (Ulri and Ulri 2000). Economic and strategic management studies on competitive advantage focus on the question “Why do firms exist?” The short answer is that firms exist to make profits. Although economic and strategic theories agree on this aim, they differ in how firms achieve this important goal. The question on why firms exist has relevance to project management as it is increasingly used as part of companies’ competitive advantage strategies.
A relatively new area of strategy research is the Resource Based View (RBV). It examines the firm’s unique mix of resources as the source of competitive advantage. The RBV blends the external view of strategy involving industry and environment assessments as popularized by Porter with the internal assessment of the firm’s strengths and weaknesses (Porter 1996). The RBV explores how organizations develop certain resources necessary to support corporate strategy. The premise is that in order to do strategy a firm must have the capability to do.
This paper begins by exploring key themes from strategy research such as competitive convergence and competitive advantage. It discusses the importance of tangible and intangible firm assets and anchors these discussions in a project management context by assessing the potential for project management maturity models (PMM) to develop project management as a strategic advantage for firms. We then use the human genome as an analogy for the business genome to depict how project management could be a strategic asset in the RBV context.
Competitive Advantage and Competitive Convergence
Firms are primarily interested in improving financial returns and shareholder value to avoid situations of competitive convergence or parity (where no one firm has a distinct advantage). Dominant theories in competitive advantage take an industry or market approach in determining business strategy and downplay the unique resources within the firm (Porter 1991, 1996). These views emphasize asset valuation using accounting and economic measures over effectiveness measures and lack a holistic approach to understanding value as an internally driven strategic effort (Barney 2001; Hawawini et al 2000).
The importance of strategic planning rests in setting direction for the firm to achieve performance targets and make long-range plans. This is increasingly important in the economy as compressions of distance and time intensify competition and focus managerial attention on multiple internal and external factors, e.g., the local environment, national characteristics, and global competition (Thomas et al 1999). Both formally and informally, companies conduct strategic planning exercises using variations and combinations of internal assessments (strengths and weaknesses) coupled with environmental assessments (opportunities and threats) to position themselves in the market (Porter 1991). Executives are keenly aware that environmental scanning is an ongoing process involving adaptation through organizational strategies geared to improving the financial picture. Companies seek market dominance or strategic advantages relative to rivals but are not always successful in this aim.
Strategy implementation involves managerial decisions (Barney and Zajac 1994). Firms make choices in such areas as products, services, goals, policies, and industry positioning to name a few; project management fits the service category. Worldwide, firms are turning to project management as part of their competitive advantage strategies. This is evident in the exponential increase of membership in project management associations such as the Project Management Institute (PMI®), the billions of dollars being invested in projects, the increasing attention on maturity models, efforts to quantify the value of project management, and work on classification systems (Bounds 1998; Ibbs and Kwak 1997; Project Management Institute 2001; Schlichter 2000). Furthermore, the connection between successful projects and corporate strategy is important to businesses, practitioners, and academics in both the project management and strategy. Just this year, PMI® awarded a research grant to a team of academics to study the link between strategy and project management.
Although it is important to be able to evaluate business strategy in the long run, the results are not always visible or easy to measure (Rumelt et al 1994). Furthermore, many firms find it easier to set or achieve goals and objectives than evaluate them, especially the intangible benefits. As firms focus on competitive advantage strategies, they use a number of performance indicators to determine whether they are meeting their goals. Generally, these indicators are of the efficiency type (financial and accounting measures) and focus on tangible asset measures. These metrics downplay intangible (tacit) asset metrics such as those addressed by the Balanced Score Card (Germain 2000; Kindred 2001; Sveiby 1997). They also do not capture the essence of project management, a knowledge-based discipline that stems from the intellectual capital within people and shared between them (intangible assets).
As companies compete, they may find themselves in situations of competitive convergence (operational effectiveness) instead of competitive advantage. Operational effectiveness means doing similar activities better than rivals do. It is insufficient in achieving a competitive advantage though, because after a while, firms look alike, do the same things and this leads to diminishing returns (Porter 1996). Common strategies such as quality improvement, empowerment, and outsourcing help firms keep up with each other but do not enable them to excel. Operational effectiveness is a necessary, intensive part of management, but it is not strategy. Firms unable to maintain operational effectiveness have short life spans. In contrast, strategic positioning or having a competitive advantage refers to doing different activities from rivals or similar activities differently. A competitive advantage connotes innovation and creativity.
Thus, for project management to have relevance in the boardrooms of today’s organizations, it must not only provide advantages in forms of operational efficiency, it must also provide long-term, sustainable advantage through creative and innovative approaches to projects. One way strategy scholars are analyzing superior corporate performance is by looking at a firm’s resources, which set it apart from its rivals. These strategic assets are identifiable and studied through the RBV. The next section provides an overview of the RBV including a discussion of the nature of strategic assets, the role of tacit and explicit knowledge in asset creation, and the difficulties inherent in identifying and classifying these assets.
Resource Based View of the Firm
The RBV is a complex stream of study with relevance to project management. It emphasizes how firms create value (and profits) from their internal resources and focuses on its strategic assets. The RBV does not appear to have been used in the project management literature to date. However, it continues to gain interest as evident by the research and publications in the strategic management, organizational theory, economics, and social psychology literature (Barney 1986; Chandler 1962; Foss 1997; Penrose 1959; Peteraf 1993; Prahalad and Hamel 1990; Rumelt 1984; Selznick 1957; Teece 1980; Wernerfelt 1984).
The RBV involves an assessment of a firm’s tangible and intangible capital. Resources can be grouped as human, organizational, and physical assets or as tangible and intangible assets. The RBV focuses on a firm’s asset mix to identify strategic assets. They can be characterized as being rare, valuable, inimitable (difficult to copy), and non-substitutable. In particular, the RBV examines intellectual capital (knowledge, skills, and know-how) that stems from complex human interactions involving tacit knowledge. Tacit knowledge is rooted in action. It is hard to codify and resides in the relationships between people and within a firm’s routines (Nonaka 1994). Polanyi (1966) summarized this well by stating, “we can know more than we can tell,” as cited in Nonaka (1994, 4). Some call tacit knowledge the know-how that is in our hearts and minds.
The RBV has relevance to project management (a knowledge-based discipline) because it emphasizes intellectual capital. In addition, we can identify the circumstances related to creating value. For example, resources may be path-dependent (history matters), involve causal ambiguity (difficult to understand), socially complex, and immobile (firm-specific). The RBV also involves isolating mechanisms that firms use to protect assets from rivals.
The RBV involves resource categorization frameworks that can be applied to a firm’s asset mix to determine which ones are strategic (Barney 1998, 2001; Brush et al 2001; Mata et al 1995). One way to analyze the path of building a resource base is through the resource pyramid of value creation. This pyramid is composed of generic organizational resources (supplies and materials) at the base, followed by capabilities, core competencies, strategic assets, and unique advantages at the apex (Brush et al 2001). Once combined with other resources, generic ones can become capabilities that enhance a firm’s capacity to deploy resources. Capabilities involve resource interactions to achieve efficiencies and effectiveness. Capabilities are combinations of proprietary resources, knowledge, and skills that become institutionalized into operating routines and tacit knowledge. Within the firm, capabilities, competences, and routines are types knowledge-assets but the distinctions between them in the RBV are subtle, inconsistent, and can be impractical. What is clear is that these terms involve a knowledge dimension, skills, tacitness, and are the collective learnings of the firm.
Core competencies are capabilities that become crucial to a firms mission and are executed well on a consistent basis. Core competencies are “the things the firm does especially well that contribute to the value-creating aspects of a competitive advantage” (Brush et al 2001, 71). Beyond this, collections of specialized core competencies that allow a firm to outperform rivals are strategic assets. The unique advantage for the firm occurs when these assets meet the characteristics of strategic assets and are supported as such by managerial practices.
Terms such as core competences, integrative capabilities, dynamic capabilities, organizational architecture, meta capability, and combinative capabilities signify complex, higher order interactions between resources, processes, and knowledge and are synonyms for strategic assets (Eisenhardt and Martin 2000; Grant 1991; Henderson and Cockburn 1994; Kaplan et al 2001; Kogut and Zander 1992; Liedtka 1996; Teece et al 1997). The literature does not consistently distinguish between core competences and strategic assets and neither do the authors of this paper; we treat them as synonyms. Although the distinctions between the terms are not always obvious, firms have fewer strategic assets than generic ones. Strategic assets offer sustained advantages and generate long-term rents (profits). They underpin a firm’s cost advantage (Markides and Williamson 1994). Some examples include Sony’s strengths in miniaturization and 3M’s strengths in innovation and coatings. Some define strategic assets as the “collective learning in the organization” (Prahalad and Hamel 1990, 82). Clearly, a firm’s assets are a combination of tacit and explicit knowledge.
Tacit and Explicit Knowledge
Most theories of strategy and organization are based on western epistemology involving codifiable and unambiguous aspects of knowledge; a more pluralistic view of knowledge involves tacit and explicit knowledge (Oliveira and Santos 2000). The distinction between tacit and explicit knowledge is often used as a reason for separating knowledge from other resources. Since knowledge is both tacit and explicit, not all the firm’s knowledge can reside in one person’s head (Kaplan et al 2001).
Explicit knowledge is a “digital” or discrete process that is codified and can be transmitted in formal, systematic language (Nonaka 1994). It is not sticky but ready to use and easy to replicate (Kaplan et al 2001). It is a “public good” because it can be resold without losing it (Amburgey and Al-Laham 2001). In contrast, there are many more definitions and interpretations of tacit knowledge. Tacit knowledge is sticky; it is hard to replicate and can be transferred indirectly through time consuming socialization processes (Kaplan et al 2001). Tacit knowledge is a continuous process with “analogue” qualities (Nonaka 1994). It is hard to formalize or communicate and is rooted in action. It involves cognitive and technical elements. The cognitive elements include mental models, beliefs, or analogies people create to help them understand and define the world. The technical elements are the concrete know-how, crafts, and skills applied to work processes and practices. Tacit knowledge is inimitable and hard to appropriate. “At a fundamental level, knowledge is created by individuals. An organization cannot create knowledge without individuals” (Nonaka 1994, 17). Although tacit knowledge belongs to the person, it is also firm specific and resides within relationships and the firm’s routines. It is a path dependent process lending itself to a competitive advantage.
Tacit knowledge has low transparency for outside observers (Amburgey and Al-Laham 2001). It can be learned by observing and doing, but only parts of it can be codified (Oliveira and Santos 2000). It does not lose value when applied but gains value through transfer to new situations and in recombination with other resources (Amburgey and Al-Laham 2001). Tacit knowledge generates ambiguity because the person with the knowledge cannot codify all the decision rules that underlie performance. Although imitation can involve reverse engineering products with standardized technological components, this is not readily possible with unique, idiosyncratic routines (Reed and DeFillippi 1990). “Absorptive capacity, the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends is critical to its innovative capabilities” (Cohen and Levinthal 1990, 128). Absorptive capacity involves tacit knowledge and refers to how firms internalize new information within its capabilities.
Given the complexities of defining and trading knowledge in organizations, and its important role in the nature of these “strategic assets” it is no wonder that asset classification, identification, and generation is not a straightforward process in this new theoretical field. The next section explores some of the work done to date on asset classification in the RBV.
Exhibit 1. Similarities and Differences between Authors on Resource Features or Characteristics under Managerial Control for Developing (D) and Sustaining (S) a Competitive Advantage
Asset Classification Systems
The RBV is called a perspective or view because it is in the theory construction phase. As such, a complete asset classification system does not currently exist and there is terminology confusion (Barney 2001; Chalmers 1999; Foss 1997). This is evident in the breadth of terms used to characterize strategic assets: valuable, rare (unique), inimitable (difficult to copy due to firm history, social complexity, and ambiguity), immobile (firm specific), non-substitutable, durable (long lasting), heterogeneous, and having an organizational focus (corporate attention, support and funding) (Amit and Schoemaker 1993; Barney 1998; Collis and Montgomery 1995; Grant 1991; Peteraf 1993; Priem and Butler 2001a).
In economic terms, value is measured through decreasing product/service costs or differentiating it to charge a premium price (Barney 1998; Duncan et al 1998). Valuable resources are more worthy. A resource has value when it exploits opportunities and neutralizes threats in the environment (Barney 1991). Common or generic resources are not sources of competitive advantage; at best, they are a source of competitive convergence or parity. However, rare resources can offer temporary competitive advantages and are sources of strength (Mata et al 1995). Rare resources are said to be heterogeneously distributed because not all firms have them. If a resource is rare but a firm does not have it, it becomes a weakness (Duncan et al 1998). Rareness then, is necessary but not the only resource characteristic for a competitive advantage, as other variables are also involved (Barney 1998). Imperfectly mobile resources are “sticky” to the firm (Priem and Butler 2001a). These resources are characterized by being:
• Non-substitutable: Non-substitutable resources are those for which other resources cannot fulfill the same function (Priem and Butler 2001b).
• Non-transferable: Resources that are not freely transferable between firms are sources of a competitive advantage. Resources that are firm specific tend to fall in value when they are transferred (Grant 1991).
• Embedded: Returns to a firm from its resources and capabilities are enhanced when property rights are unclear. A firm has more control over its employee skills if they are embedded in its routines than reside within a few people who are mobile and can leave the organization and take their assets with them (Grant 1991).
Isolating mechanisms are a blend of resource characteristics and managerial practices (Barney 1989; Grant 1991). They make some resources more firm specific and less mobile. Examples include copyrights, patents, trademark laws, invisible assets (the features or organizational practices that one takes for granted and are the unspoken or tacit attributes), and small decisions such as the micro steps involved in quality improvement practices (Collis 1994; Grant 1991; Itami and Roehl 1987). Briefly, the following features characterize isolating mechanisms:
• Inimitability: Inimitability means firms protect their resources so that competitors cannot easily replicate them. If resources can be readily copied, a firm stands to only achieve competitive parity through resource value and rarity (Collis and Montgomery 1995).
• History: The role of history means a firm develops or acquires resources in low cost ways by being, for example, in the right place at the right time. It becomes expensive for rivals to recreate the conditions of the opportunity that were developed over a long time period (Mata et al 1995). History also involves path dependency, which is the path a company has followed through time (Barney 1991). Since history is firm specific, firms have idiosyncratic assets.
• Social complexity: Complexity is the result of the interrelationships of a number of skills and assets. Social complexity refers to a firm’s culture, relationships, and reputation (trustworthiness). These attributes cannot be changed rapidly and can provide firms with temporary advantages from low cost imitation. “In complex, highly interdependent human and technological situations, the causes of success and failure are often difficult to assign” [(Barney 1985, 12) in (Reed and DeFillippi 1990)].
• Causal ambiguity: Causal ambiguity means that the nested conditions within which resources create an advantage that is harder to imitate. Competitors may not fully understand the resource characteristics that contribute to the competitive advantage and are thus not able to replicate it. It also makes it costly and time consuming to figure out the sources of the advantage.
From our extensive review of the RBV literature, we determined that it is an evolving perspective and that a comprehensive, integrated framework does not exist. In part, this is due to the RBV lacking a taxonomy. We summarize our views on some of the gaps within the RBV in the following table. This analysis led us to develop a more comprehensive framework with which to assess project management as a strategic asset. Note that there is little consensus on whether certain characteristics contribute to developing or sustaining a competitive advantage. As a result, it is premature to make that distinction.
In the framework, the first column regroups the terms within each row and labels them as resource feature (characteristic) or that which is under managerial control. For now, it is clear that the two are interrelated but the differences are not clear. For this study, we used the seven headings in the first column to guide the development of our methodology instruments. Without a RBV taxonomy, it is premature to eliminate some of the characteristics or features in studying project management. In addition, although some authors list characteristics that others do not, some were not fully explained. It makes sense to use the breadth of them for project management first, and then examine which ones appear more relevant from our data analysis.
This is an appropriate step to take for a number of reasons. First, the framework is based on the extant literature. Second, these seven factors encompass the frameworks of key authors in the field. Third, these factors are more inclusive than the separate frameworks assessed in the literature. Lastly, since this is an initial application of the RBV to project management, it is acceptable to start with a more granular set of factors. There are some striking features in the above table regarding factors that help develop and/or sustain a competitive advantage:
1. The blanks in the table indicate a lack of consensus between authors on resource features or characteristics under managerial control (together called factors) for developing or sustaining a competitive advantage.
2. Some authors view the factors as contributing to developing a competitive advantage and others perceive of them as sustaining a competitive advantage. Using the first column as the anchor point, this is evident for the scarcity factor where Amit views it as a sustaining feature but Barney and Peteraf see it as a feature that develops a competitive advantage. The same discrepancy exists for appropriability.
3. Some factors do not line up with the eight factors that Amit puts forth, that is, organizational focus and replicability. The concept of organizational focus appears to be least developed in the RBV literature. Barney indicates that organizational focus is necessary throughout the VRIO framework (valuable, rare, inimitable, and organizational focus) and that it serves two functions—developing and sustaining a competitive advantage. However, other than Grant, the other authors do not acknowledges the importance of this with a separate category. Grant defines replicability as connoting resource regeneration involving management attention.
4. Priem does not label low transferability as an inimitability barrier.
5. Collis’ competitive superiority is an all-encompassing term, applicable to a number of other factors so we selectively assigned this to the terms rare, nontradable, and non-substitutable resources.
6. A key area of consistency in the table relates to inimitability. All the authors agree that there are organizational practices and/or resource attributes that sustain a competitive advantage by means of protective mechanisms or isolating mechanisms. A significant feature of these mechanisms is that they involve learning routines.
7. Lastly, resource characteristics and managerial actions are inter related and do not appear to be mutually exclusive; managerial actions can influence resource characteristics and vice versa.
8. To summarize, the key elements of developing and sustaining a strategic asset include, but are not limited to rarity, value, inimitability, nonsubstitutability, and nontransferability. Numerous combinations of firm practices and resource characteristics interrelate to produce a sustained competitive advantage and managerial actions and resource characteristics are not mutually exclusive.
Thus far, we have introduced the themes of competitive advantage, competitive convergence as well as the RBV and strategic assets. The next section briefly introduces PMMs as a way of assessing organizational competence in terms of codified knowledge. The intent is to demonstrate how the RBV can be applied to a well-known and used construct in project management.
Assessing Project Management’s Potential to Be a Strategic Asset
The previous section outlined the RBV framework we have developed. In this section, we assess PMMs according to our framework. PMMs are a popular approach for increasing project management competence in organizations and many assume that progress from one PMM level to the next results in project management as a core competence. PMMs capture explicit knowledge in a consistent, standard manner and many use A Guide to the Project Management Body of Knowledge (PMBOK® Guide) knowledge areas to achieve this. We argue that the PMMs capture one dimension of project management, the explicit, codified side but that in and of themselves, they lack a way in which to assess project management tacit knowledge in an organization. We argue that as per the RBV, a firm’s knowledge assets are a key dimension of its strategic assets. We know that project management is an applied discipline and that experience is a key factor in improving project management competences. We think project management has the potential to be a strategic asset but currently lack a framework with which to assess this.
Project Management Maturity Models
Project success and failure is a topical subject at both the operational and strategic levels of the firm because it relates to performance measures. For the most part, project management literature has focused on the operational level whereby project related success and failure characteristics are emphasized in terms of time, cost, and scope. Over the past thirty years, we have moved beyond simple critical success factor lists to more comprehensive, holistic frameworks (Belassi and Tukel 1996). However, we have yet to identify a framework that allows us to measure a project’s success in terms of strategic contributions. Furthermore, the literature on project success (performance) is not empirically linked to the literature on PMMs (Jugdev and Thomas, 2002). As building blocks in the formulation and execution of corporate strategy, projects contribute to organizational success in terms of competitive positioning.
PMMs have made significant contributions to the field and enhanced our understanding of individual and project competences. Maturity models assess the practice and organizational support for project management against standard criteria. Many consist of five linear stages (initial, repeatable, defined, managed, and optimized) (Dinsmore, 1998). PMMs emphasize knowledge that can be transferred through documents, surveys, guidelines, templates, or manuals. Overall, most of the models emphasize doing things efficiently. Most of the models are based on the national project management bodies of knowledge. An advantage of the five levels is that it enables repeatability in terms of assessments and permits a measurement of progress over time. PMM models are typically geared towards problem identification and awareness raising but not problem solving. It remains incumbent on the firm to develop a plan, implement, control, and adjust it (Dinsmore 1998).
The growing emphasis on PMM models (assessing competences at the project/program level) reflects an increasing desire to link competency in project management to corporate achievements (AACE 2000; AIPM 2000; APM 2001; Birnberg 2001; Cabanis 1998; CCTA 2000; CIPPM 2001; Cooke-Davies 2000; Dinsmore 1998; ESI-International 2001; Hartman 2000; Skulmoski 2001). PMMs typically refer to the need for executive sponsorship and call this the link to strategy. However, there is more to a construct that is strategic than labeling it “strategic” and using words such as “core competence” or “competitive advantage” (Chen 1999; Janda 1994; Skulmoski 2001; Stamps 1997). Value creation involves more than explicit knowledge capture. It involves combining tangible assets with less tangible ones.
It does not appear that any particular PMM has achieved worldwide acceptance (Schlichter 2000). Few have been empirically tested and many are based on anecdotal material, case studies, or espoused best practices (Skulmoski 2001). PMM models tend to be hierarchical and the exact points of transition between the levels are not always clear. Furthermore, they often blend individual competences with program or organizational maturity. Most of the PMM models reviewed are operationally focused and typically lack a holistic, strategic dimension.
PMMs represent a construct of project management we can use as a proxy for project management and explore through the RBV lens. Overall, the models are quite consistent in their approach and support the theme of convergence as explained next.
Assessing Project Management Maturity Models with Resource Based View Frameworks
One RBV frameworks is based on RBV features of value, heterogeneity, and immobility (Mata et al 1995). It is presented next and then followed by an interpretation of how PMMs measure up to it.
Exhibit 2. Mata’s Resource Based Model of Competitive Advantage (Mata et al 1995)
Exhibit 3. The VRIO Framework (Barney 1998)
In assessing PMMs according to Mata’s model, the first question asks if the resources are valuable. PMMs are valuable and have worth (Mata et al 1995). In part, their worth is measured by companies’ willingness to pay to have the maturity assessments completed so that they can improve their positions up the five-point scale. PMMs are part of quantifying the value of project management (Ibbs and Kwak 1997, 1998, 2000). The contribution of PMMs is also evident indirectly through efficiency oriented success metrics as measured with financial indictors and the iron triangle (time, cost, and scope). PMMs also have worth as they are increasingly used by companies and firms are willing to invest in them as well as pay consultant fees, software licensing fees, and provide staff training. In addition, those companies that do not view PMM model as offering an edge do not invest in them and are seen to be at a disadvantage as their project management practices are not managed or controlled.
The second question of the Mata framework asks if the resource is heterogeneously distributed among competing firms. Heterogeneous resources connote rarity as not all firms have the same assets. PMMs are heterogeneously distributed because they are not used consistently or across the board. Firms are at varying levels of maturity and the average firm’s rating is Level 2 (ESI-International 2001). The application of PMMs also involves heterogeneous outcomes among firms.
The final question posits whether the resource is imperfectly mobile. PMMs are not imperfectly mobile so they can offer temporary competitive advantages and not sustained competitive advantages. The models involve codified knowledge that makes them transferable between firms. The knowledge staff gain from using the models is readily moveable to other firms. Some PMMs are even available in the form of mini online assessments that can be completed in short order. PMMs have characteristics that meet the RBV frameworks to varying extents in terms of resource complexity. However, they are not strategic assets that lead to sustained competitive advantages. The Mata framework indicates that at most, PMMs lead to temporary advantages for some firms and competitive parity for most.
Exhibit 4. RBV Characteristics of Project Management Maturity Models
We also applied Barney’s framework to PMMs and confirmed this finding. Barney’s framework is based on RBV criteria of assets being valuable, rare, and inimitable (Barney 1998). The following table portrays the criteria and indicates that meeting them leads to various competitive implications.
This paper has discussed PMMs as being valuable. But are PMMs rare? PMMs are widely available. They are also common or similar in that they reflect the software maturity framework. Most follow a linear five-stage approach. Many consulting firms and professional associations offer PMMs or are in the process of developing them. It could be argued that PMMs are rare because they are heterogeneously distributed and their application within firms varies. In this sense, PMMs can be considered rare. Those firms with higher PMM levels have temporary competitive advantages over other firms with respect to codified practices, but not necessarily their knowledge-based assets. The advantages are temporary because rival firms can also improve their PMM practices to meet or exceed the temporary advantages.
With respect to being inimitable, we have indicated that PMMs can be copied. PMMs can be purchased like commodities; they are sold like products. They are not in fixed supply. PMMs are also relatively unambiguous. Imitability is a key feature that vendors highlight when they state that the PMMs were created from “best practice” databases. Since PMMs have been in existence since the 1980s, they have not been in use long enough to offer the advantages of significant history or path dependency. PMMs are known for their concrete nature and codifiable knowledge. The degree of tacitness is not a feature expounded on in the literature. PMMs do not offer a cost advantage as for the most part, they can be readily purchased, and there are sample versions available on the Internet. The lack of protective mechanisms underscores that PMMs do not offer an enigmatic ambiguity that rivals cannot understand.
It appears that PMMs are substitutable because the majority of them are linear, five-stage models. In addition, the processes and outputs of most of the PMMs are relatively similar and can be mimicked. They are not difficult to copy. Since PMMs face a substitution threat, customers have choices and can selectively pick the ones they want.
Based on this framework, most companies that use PMMs achieve competitive parity and some achieve temporary advantages. A firm that melds its PMM abilities with its other organizational assets may have the potential to achieve temporary competitive advantages. The authors of this paper are currently examining the characteristics of these other organizational assets. No one PMM model or approach is outstanding or original in its approach on improving practice. The focus within the models is on achieving incremental improvements at the project or operational level. The practices reflect commonality and standardization instead of innovation and creativity. The models also demonstrate competitive converge when assessed using RBV frameworks. Lastly, they lack a clear and direct link between project efficiencies and effectiveness and organizational success (Cooke-Davies 2000).
To summarize, this section has examined PMMs through two RBV frameworks and found that they lead to temporary competitive advantages but not sustained competitive advantages. In part, we attribute this to PMMs focusing on tangible assets when the essence of strategic assets is often rooted in intangible assets or the know-how in organizations that PMMs do not address. The following table presents a preliminary assessment of PMMs against our composite RBV framework. It shows that PMMs meet some of the RBV characteristics but not all.
Exhibit 5. DNA Analogy on the Firm’s Genome for Competitive Advantage
PMMs possibly meet the characteristic of having an organizational focus as firms invest in them and this indicates some senior management support. However, PMMs fail to meet many of the other characteristics according to the RBV framework. Since the maturity models do not meet all the attributes for strategic assets, they may not lead to a competitive advantage, but they may be a building block towards that end, provided that the tacit knowledge dimension is included.
PMMs do not appear to reflect upon project management as a strategic asset. One reason is that PMMs address codified (tangible) knowledge and a large part of project management knowledge is intangible. The intangible knowledge resides in a firm’s organizational, human, and social capital. Instruments to assess the intangible project management knowledge are not evident to date in the literature. Since knowledge is multidimensional, an area of future work involves exploring the tacit side of project management to better understand its knowledge-based assets. Project management has the potential to become a strategic asset. Our research explores this by going beyond an examination of codified practices. As the RBV is an emerging perspective, we are using a case study approach to assess project management as a strategic asset. This will enable us to explore how specific firms support project management as a strategic asset through their business practices. We anticipate final findings to be available in 2003. Using the human genome analogy, we have developed a business genome framework to discuss strategic assets in project management.
Human Genome Analogy: Defining the Business Genome
The human genome is useful in explaining the intricacies of the business genome and the RBV. Humans have twenty-three pairs of chromosomes. The chromosomes consist of over 80,000 genes (units of heredity) made up of units of deoxyribonucleic acid (DNA). The genome consists of approximately three billion chemical units of DNA arranged along the chromosomes. Genes hold the genetic code (units of inheritance) that parents pass on to children. Each chromosome consists of collections of DNA strands called a helix. Each DNA structure is a double-stranded helix of various combinations of four chemical nucleotide bases linked by hydrogen bonds. Due to specificity rules of how the four bases combine, only adenine and thymine bond with each other and guanine and cytosine pair up. The strands of DNA are the basic genetic building blocks (Dentzer 1999). Various cellular structures also play a part in protecting the cell’s genome. Although the genes are an important building block, the chromosomes are vital in passing on the genetic code. As well, the hydrogen bonds may appear to be nondescript and secondary but they are crucial in how the bases combine with each other. Understanding how all the genetic components interact and chemical units of DNA are sequenced is key to breaking the genetic code.
Similarly, the components of the code for business value creation reside primarily within the firm and involve industry factors. Unlocking the business genome involves defining, grouping, and characterizing the component parts involved in developing a competitive advantage. The following diagram portrays the elements of the analogy and then explains the analogy.
A firm’s genes (tangible resources, complementary assets, inputs) and combinations thereof combine in specific ways to create chromosomes (strategic assets). Just as the human genome consists of more genes than it does chromosomes, a firm’s genome consists of more resources than strategic assets. In addition, just as different genes exist in our genetic makeup, an organization’s resources vary and some are more important than others are. As molecular chemistry determines how the DNA bases bond specifically to certain bases through hydrogen bonds, a company’s intangible resources, i.e., knowledge-based resources (also known as capabilities, routines, processes, or competences) are like knowledge bonds that serve a similar function. They are vital in linking resources to resources and creating competences and capabilities. Just as the human genome involves long DNA strands that comprise chromosomes, a firm’s formal processes and production functions are the backbones that support the strategic assets (chromosomal structure). In addition, just as cells protect their genome with cellular structures and chemical processes, firm protect their assets from being copied by rivals through their business practices coupled with resource characteristics. As part of evolution, the genetic code passes from parents to offspring and involves genetic characteristics such as hair color, eye color, and other traits. Similarly, a firm’s strategic assets (chromosomes) characterize its strengths.
Strategic assets are the culmination of the interactions between the simple and complex tangible (genes) and intangible resources (hydrogen bonds) within a firm. The intangible resources within a firm are appropriately depicted using hydrogen bonds because they are less visible yet very important in holding the other assets together. Strategic assets involve individual, team, and organizational assets and represent the apex of the resource pyramid of value creation. The firm’s formal processes and production functions (helix) are the backbones that support the strategic assets. Akin to cells protecting their genomes through cellular structures and processes, firms protect their assets through their business practices coupled with resource characteristics. Strategic assets then, are the “difficult to trade and imitate, scarce, appropriable and specialized resources and capabilities that bestow the firm’s competitive advantage” (Amit and Schoemaker 1993, 36). They are as unique to the firm as the genetic blueprint for reproduction is to the individual.
In the RBV, a firm’s outputs are of the product and/or service nature, including its strategic assets that are not always readily visible (i.e., invisible assets). Management teams assess and reassess their resource mix on an ongoing basis to determine which ones they are going to emphasize and how. They invest time and labor in the combinations and recombinations to gain increased economic rents and intangible value from the products and services. Just as the chromosome is more important than the separate genes, strategic assets are more important than the individual resources. However, neither the chromosome nor strategic assets are of any use without the basic building blocks.
According to our analogy, the PMMs are analogous to the tangible resources or genes. They document the codifiable project management practices that are basic building blocks. We are more interested in the intangible resources, or knowledge-based resources (hydrogen bonds). The concepts of learning and knowledge are crucial to understanding intangible assets. They help in the understanding of how some resources can be codified whereas others cannot. They also help in the understanding of what makes knowledge assets firm specific. Our research asks questions on how project management is understood within the firm and how know-how is shared to help elucidate the tacit side of the construct. In concert, an organization’s chromosome or strategic asset is the synergistic combination of tangible resources, business production and process backbones, intangible resources and isolating mechanisms or firm practices (that have an organizational focus).
Just as the human genome requires its key and support components to effectively pass on genetic blueprints to off-spring, each component of the business genome has a crucial role in helping the firm develop and sustain its strategic assets. Just as it has taken scientists years to break the code to the genetic blueprint, researchers are still working on understanding the business genome. An overall taxonomy for the RBV would be an ideal way of understanding the business genome and its strategic assets, but the field has not progressed to that stage yet. Instead, a conceptual framework that draws resource characteristics and organizational routines and processes together into a meaningful whole and makes connections to resource categorizations is a constructive step to further understand the business genome.
In order to gain the interest and commitment of senior executives, project management must be shown to contribute to shareholder value and a sustainable competitive advantage. A recent empirical study sponsored by PMI® on the challenges of promoting the value of project management to executives confirms that many executives view project management as having worth at the operational and tactical rather than strategic level (Thomas et al 2001a, 2001b, 2002a, 2002b). Senior executives are unlikely to view project management as a strategic imperative as long as the primary criteria applied to judge project success fall within the operational realm.
In this paper, we introduced the concepts of the RBV and competitive convergence in relation to PMM models. We introduced strategic assets as those that meet a number of resource characteristics and involve business practices that support them. Our assessment of PMM models using several RBV frameworks indicates that, as a representation of project management, they do not meet the RBV criteria for strategic assets. There are some gaps in our understanding of project management as a strategic asset. In particular, the paper identifies the lack of focus on intangible assets within the discipline.
This research makes several practical and theoretical contributions to our understanding of the complex ties between project management and its value as a strategic asset. Practically we know that projects are essential building blocks of business value but until now, we did not have an approach to study project management using strategic asset criteria. The RBV provides that perspective. Understanding, developing, and sustaining core competencies is key to long-term survival and growth (Porter 1991). Although this assessment of PMMs indicates that they alone cannot make project management a strategic asset, it does show that project management has the potential to become one and firms stand to gain considerable ground by nurturing these assets accordingly.
Theoretically, this work develops connections between project management and strategic management literature. It shows how an innovative strategic management theoretical framework can broaden our understanding of project management’s role in organizations. In addition, it critically examines PMMs as a field-based “best practice” construct. The research also develops a unique project management-RBV model on competitive advantage based on seven categories. Finally, the discussion of intangible assets and practices is likely to develop into an important area of project management research. On a broader scale, our research contributes to the profession because it is a first of its kind study applying the RBV to project management. It helps identify the gaps in our understanding of a project management competitive advantage through the RBV.
To summarize, the intent of writing this paper was to promote dialogue on project management as a strategic asset and heighten awareness within the project management community on the intangible knowledge assets within the discipline. Ultimately it contributes to the debate on the value of project management to corporations. We welcome further discussion on this topic, as it is fosters learning and enables us to further refine our frameworks and contributions to the field.
Note: We would like to thank Umeå University, Sweden for its generous support for our research as well as Athabasca University, Alberta, Canada. We appreciate Project Management Solutions, Inc. granting us permission to use their PMM instrument. We also appreciate the support and interest from the four international firms that are participating in our data collection. These firms span the telecommunications, utilities, banking, and manufacturing industries.
For further details, please direct all correspondence to the primary author at [email protected]
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Proceedings of PMI Research Conference 2002