Effective project management for the state-of-the-art technology markets in developing countries
Co-founder & CTO, Done, Turkey
Telecommunication technologies have been getting more crucial in our daily lives by time. Mobile Internet (MI) as the latest communication technology is positioned in our lives as the third communication channel in addition to Internet and broadcasting technologies. The state-of the-art-technology as an example of a radical innovation brought new business models inherently. This nature of the business increases turbulence and risk of failure in the market and makes management of these radical innovation based market projects rather complicated and difficult.
The high failure of risks caused by the turbulence in the market can be controlled only by the effective project management methodologies. Project management becomes a critical issue in this market since the project managers are the only body that can see the whole picture and fill the gaps in the industry by acting as a stabilizing force in the market. In order to find how to do effective project management in such a radical innovation based market, a broader analysis is done to understand the reasons behind the risks. A model is proposed for the trajectory of an innovative industry based on business model vs. technology. In addition to the investigation of business model and technology, the macro environment of a project is also examined. The development level of a county is taken as the macro environment of an innovative industry. Based on this perspective, developing and developed countries are compared to examine the effect of the macro level environment on project management and the market in the long run. Based on these analyses, it is concluded that the risk of failure is the highest for turbulent markets in developing countries. In order to decrease the risk, a specifically designed project management methodology is proposed based on the market and the environment conditions.
All analyses are based on real experiences in MI market in last 5 years.
The innovative industries have always been offering huge revenue potential. In MI markets, as an example of a radical innovation market, the revenue potential for its interested parties is likely to be worth up to €152 billion in 2008 (West Europe alone), Strategy Analytics, 2003). The huge revenue potential makes these markets very attractive for many players from diverse backgrounds. Fast and dynamic markets with new business models bring new challenges to projects in the market mainly because of its turbulent nature. When the macro environment of these markets is considered, the picture even becomes more complicated in developing countries. So far, project management methodologies developed in developed countries for rather stable markets couldn't decrease the risk of failure in the projects. The analyses of markets have been done based on market growth, market share, and product types. However, none of the analyses are mentioning new business models and unstable macro environments that bring projects a high risk of failure.
In this paper, as an example of radical innovation, MI market dynamics are introduced. Later, the business model and type of innovation parameters are analyzed to form the broader picture. In addition to that, the macro environment of a project is discussed in detail. Finally, a project management methodology is proposed to decrease the risk of failure in the most challenging conditions, in a turbulent market particularly in developing countries.
MI Market Dynamics
As an example of a radical innovation, MI is positioned as the third digital communication channel in our both daily and business lives in addition to broadcasting and Internet channels. As shown in Exhibit 1, it is a horizontal market, and as in any horizontal market, it is possible to have business relations with many diverse markets.
Exhibit 1: MI Market Positioning
This issue by itself makes the market dynamics quite complex. Besides its business model complexity, since it is the latest communication channel for both individuals and for any enterprises in any markets, it requires initial investment, some certain level of competence, and time to be adapted. These issues sometimes become serious barriers in front of the market.
In order to understand the market better, the market dynamics from different perspectives such as market awareness, business models, and financial situation are presented as follows:
Status of Awareness
The market is still in its developing phase. Thus, most of the work in the market is creating market awareness. In order to sell and launch the services, the customers should understand ‘what is the MI’ and ‘what value-adds does the MI bring to their existing business.’ Currently, the vertical markets that have used Internet or broadcasting channels widely have understood and applied the MI technologies earlier than the others. Therefore, the market awareness is satisfactory for the markets such as finance, media etc. However, the market awareness is still not enough to penetrate to the other non-technological markets.
Complexity of Business Models
Any radical innovation can bring complex business models inherently. Similar to Internet business, MI market has been bringing new business models into existence. However, the players in this new market have been quite careful not to make the same mistakes as IT world did in Internet business. The challenge is that many different players have come into the same picture for the first time.
The only way to succeed in this market for these new players is to understand and harness these new business models. As given in Exhibit 2, there are many players that have faced telecom players for the first time such as content providers. In addition to that, the value chain between the players has not been well defined yet. Therefore, it is quite difficult for these players who have neither worked with each other, nor have they established any kind of a reputation to convince each other to be in the same value chain.
Exhibit 2: An Example Player Map in Mobile Internet Market (Source: Juniper Research)
For example: Mobile advertising is a totally new concept. The classical advertising channels are through media companies, advertising agencies, and advertisers. However, in the mobile world, network operators, start-up wireless advertising companies, as well as other non-traditional channels have also had a large share. With this in mind, telecom players have actually started working with players in this new advertising market for the first time. The rules and the players' characteristics as well as business models are very different from both the telecom and the traditional advertising market. Due to lack of clearly defined leaders, it is quite difficult for an operator and an advertisement agency to be working together.
New Players in a New Market
In the early stages of MI market, almost all players are new and keep updating or changing their business models. There are different size companies from small start-ups to big corporations with different backgrounds and company cultures. The market needs a regulatory body that can be a bridge and act as a stabilizing force between these different sized companies.
Start-up companies and big corporations have totally different working styles, even if they are from the same market. For example start-up companies do not like bureaucracy and do not know how to handle problems caused by bureaucratic processes. Additionally, they are not as professional as big corporations about documentation, design, and the presentation of the work. Big corporations expect start-ups be as professional and process oriented as they are.
These different expectations and working style could sometimes be a serious problem in a project. Harmonizing the terminology or differences between the companies from different markets should be considered as a serious task and should be done in the beginning of every project.
From a project management perspective, important points that affect the success of project management are discussed above. The failures that are faced in MI market in the last 4 years motivated us to look at the broader picture and analyze innovative industries, in general, to see where the MI is in the broader picture. The challenging task is to find a common trajectory for innovative industries in general to be able to find a generic PM methodology to decrease the risk of failure. The following sections introduce this analysis.
A Proposed Trajectory Followed in Innovative Industries
The analysis of problems and risks in innovative projects such as MI, direct us to form a model where we can also analyze the other technology markets to see the reasons behind the risk of failure. A proposed model for the analysis is depicted in Exhibit 3. The proposed model can be explained with relations between type of innovation and business models where we see MI as an example of radical innovation.
Exhibit 3: Proposed Trajectory Model for Innovative Industries
The basic premise in our model is: “creating new business models is essential for a radical innovation because with the traditional business models, possibility of a market failure is more probable than new business models”. There are three pillars supporting our premise. First, radical innovations have to be managed differently. Old business models are good for traditional businesses, but they are not designed to cope with the radical changes. Radical innovations offer totally new technologies, which old business models have not yet considered. For example, newspapers published on the Internet pursue selling banner advertisements, rather than trying to sell its content to readers. Second, a new technology may be the best of all other alternative technologies; however, if the users do not adopt them, then it will not be used and it will be a commercial failure. Innovations will be adopted, if they involve new and flexible business models, which have a “win-win” approach between the producer and the customer. Third, thinking new business models, new paradigms, and new mental models enable the creation of new technologies which implies that, thinking about new business models may end up with creating new technologies meaning that innovations are inherently linked with new business models.
New business models can be regarded either/both as a natural consequence or/and creator of an innovation. So with our basic premise, we assert that new technologies with radical innovations start in the cell, which we named as “turbulence”.
In addition to new business models coming from the nature of the radical innovations, the huge differences in the size, pace, culture, working style, background, the ability of handling bureaucratic processes, and level of institutionalization of all players bring more turbulence to the markets in this cell. These differences sometimes bring more risks to projects than the complex business models do.
MI also began in the turbulence stage. It was a radical innovation that enabled access to Internet anywhere, anytime. New business models include revenue sharing among the parties involved in mobile services. Network operators agree to share its revenues with parties such as content providers, application service providers and media companies.
In the second stage, business models became common and widely used, however the technology is still new and offers incremental innovations. We named this stage as “settled”. The typical characteristics of this cell are, an increase in profitability and improvements in technology. For example, when revenue sharing models became common in MI, they became traditional business models and improvements in technologies (such as EMS instead of SMS-logo, and MMS instead of EMS), indicate that technologies are still new.
In the third cell, when the technologies became old, profits will decline because the competition will increase and new players will enter to the market. In this stage, margins will decrease. When the margins decrease, companies try to increase the margins in the last stage, - reheated business - and try to increase profitability by creating new business models. However this time, competitors are benchmarked and imitate the new business models, thus a return to the cell “low margin business” is inevitable.
Exhibit 4: Characteristics of Each Cell in the Proposed Model
Analysis of The Macro Environment of a project: Comparison of developed and developing countries
The analysis above helps us to see the dynamics of a market that has substantial effect on projects. Another important point to understand the dynamics of a project is the project environment. In radical innovations like MI, the status of regulations, laws, and economic market conditions play an important role in development of the market. Based on this approach, the development level of a country attracted us as an important factor to be investigated in detail. In this section, the development level of a country is added as the third parameter to the model given in Exhibit 3. The new complete model is presented in Exhibit 5.
Exhibit 5: The proposed Model for Market and Environment Analysis
Radical innovations create new markets, and these markets are often turbulent because of the differences in the size and pace of companies, company cultures, working styles, backgrounds, the ability of handling bureaucratic processes, and the level of institutionalization of all players. These differences create a serious imbalance and turbulence within the market. Therefore, the stability level of the environment that market is surrounded by has a great effect on the risk of failure (Exhibit 6). When we look at the model in a macro level, the stability level of an environment points out us the development level of a country.
In our model, although the same path (from turbulence to settled, settled to low margin business, low margin business to reheated business, and again back to low margin business) is followed in innovative industries, there are some differences between the developed and developing countries. In the former, the external environment is stable and predictable in terms of well-established regulations, laws, and economical and political stabilities. In the latter, the external environment is turbulent because of the absence of regulatory bodies and laws being much behind the new technologies. Furthermore, the developed countries are more capable of handling turbulent markets than developing countries, as these countries strategically support development of these markets. There are some special governmental programs to support radical innovations. The major difference between developing and developed countries is depicted in Exhibit 6.
Exhibit 6: From Project Management Perspective, Turbulent Market and its Environment
Turbulent markets within the turbulent external environments are unsafe and more chaotic. In developing countries, ambiguities are everywhere, and expecting the unexpected is a common habit. Under these conditions, a person within teams, teams within companies, and companies within industries have a tendency to “think in the short term”. They need to find solutions to daily problems in order to first survive and then to prosper. They are usually faster than their counter parts; they start earlier and work longer hours. The focus is essentially on implementation and execution because usually there is no time for “enough planning”. Actually this tendency works well in the beginning phases. They are much ahead of developed countries in the beginning. However, since the time allocated for planning is limited, new and unanticipated problems began to rise, where managers need to stop, think, evaluate each alternative solution, and decide in one of them. The result is “fatigue”, and everyone blaming another for being responsible for not thinking, foreseeing or anticipating the problems. This decreases the performance level of the market in the long term in developing countries and diminishes the expectancy of becoming successful and pioneering in the long run.
Exhibit 7: The Characteristic of Turbulent Markets in Developing and Developed Countries
On the contrary, developing countries first try to anticipate the effects, make plans earlier. Thus, they have a slow start in the beginning. They have a tendency to “think long term”. They are inclined to think proactively. They are much behind the developing countries in the first phases of market development, but eventually pass them in the long run.
Actually the system and its structural components, depicted in Exhibit 7, determine the behaviour in developed and developing countries. The major challenge is to find leverage points in these developing countries to finish the competition ahead of other countries. We believe that one of the leverage points is a specifically designed project management methodology that will allow performing effective project management in developing countries.
Particular Interest from Project Management Perspective: Turbulent Markets in Developing Countries
As analyzed in Exhibit 3, the most challenging cell is the turbulent cell, where the markets consist of new business models and new technologies. From a project management perspective, turbulent markets are the most challenging markets because of high risk of failure and lack of concordance among the players. If the environment were also considered, then developing country dynamics would add an extra challenge to project management as explained above. In this paper, turbulent markets in developing countries are considered. Our main motivation to focus on this particular business conditions is that this would be most challenging working area for project managers where we believe specially designed projects are a must for the success. In this section, a specifically designed project management methodology will be presented. Before introducing the proposed model, why project management is more crucial in turbulent markets, in turbulent environments, than the markets in general will be discussed. In all analyses, MI will be taken as an example of a turbulent market.
Importance of Project Management in Turbulent Markets in Developing Countries
As mentioned above, as an example of a turbulent market, MI is in its early phases. It's in the period that players in the picture are trying to know each other and learn how to build strong relationship with their customers. The MI Service industry should give a good impression to end-users to make people get used to the services. If MI players cannot give a good impression in the beginning to end-users (B2C related services) or to other corporations (B2B services), then it would be difficult to convince customers to continue using those services and even make them use new services on 3G technologies. Therefore, future of the market highly depends on today's service quality.
High quality services depend on many parameters. One of them is launching these services successfully. If MI projects are not well managed, even if the service is launched, during the operation, many other problems might occur. This would affect the service-usage as well as the future of the market (indirectly).
Currently, the main challenge in the market is to show the value-adds that MI brings to an individual's life or to the corporate business in the vertical markets where they are not familiar with using the technology in their businesses. This stage can be called the proving phase for MI market. This proving phase has to be successful, otherwise the future of market cannot be mentioned. For a successful trial, concordance between the players, as well as successful launch of the services, is required. Because of developing country conditions, there are no regulatory bodies to stabilize the market and no players that understand the market and other players well. However, for successful project completions, a dummy regulatory body is needed during the project in especially developing countries. Project managers are the only group that can fulfill this expectation.
The vertical markets that are just a step into mobile technologies don't want to spend money for “trial” services. They want to see the value-add first and then make the investments. Therefore, during this proving phase, MI projects have small budgets. These complicated projects with small budgets need very professional project managers for successful completions.
Unsuccessful projects will cause serious problems for the market players. At this proving stage, they are the ones making the investments without getting any payments from the customers. Unsuccessful projects will cast a serious doubt on the validity of their existence in the market. So, the market players are very much in need of successful project managers in their projects.
A Specifically Designed Project Management Methodology for Turbulent Markets
The problems that naturally occur from the uncertainties and immaturity of the turbulent markets increase the risk of failure in the projects especially in developing countries. We believe that the classical project management methodologies, that are mostly designed in developed countries for more stable markets, cannot handle the projects under these conditions and decrease risk of failure. Therefore, there should be specifically designed project management methodologies that can provide protection against turbulence in the market and the environment.
In this section, we will propose a project management methodology that is designed based on our experience in a turbulent market, MI in a turbulent environment - Turkey. This methodology helped us in successfully running our local and international MI projects. The methodology proposed is based on PROPS®-Ericsson PM methodology (Ericsson). However, this methodology can also be based on other methodologies as well.
A Methodology for Successful Project Management in Turbulent Markets
In MI projects, the most challenging barrier is bringing different size companies with different cultures from various markets to work with each other. Therefore, there are many holes in the picture that can only be filled by project managers taking further measures. These measures, of course, vary depending on the location, the market conditions, and the players.
These measures can be explained based on any generic project methodology. In this article, PROPS®-Ericsson PM methodology is taken as an example. PROPS® is based on 4 main phases, which are: pre study, feasibility, execution and conclusion phases. The PROPS® general model is given in Exhibit 8. PROPS®, in general, is designed for “Settled” markets described above.
Based on our PM experience, the most important design criteria is that a pre-phase of the project should be designed according to market conditions that mainly point out status of players, market awareness as well as market maturity. The conclusion phase should be designed based on development level of a country. That mainly points out status of operational regulations, laws, and economic market conditions.
As stated above, PROPS® shown in Exhibit 8 is mainly designed for “Settled” markets. Therefore the pre-phase and conclusion phases have to be redesigned to handle the risks caused by turbulent markets and environment respectively.
A specific model based on PROPS® model, as shown in Exhibit 9, is suggested to increase the success of projects in turbulent market as in MI market.
Exhibit 8: PROPS® block Model
Exhibit 9: The Model Suggested for Projects in Turbulent Markets and Environments Based on PROPS® Model
The pre-study phase of a turbulent market project differs from the ones in other projects. In turbulent market projects, PM people face a complicated picture where the players do not know each other's expectations and company cultures. So, in addition to pre-study phase, which includes regular preparations, there should be a new phase that includes concordance between the different players, cultures, and expectations. Regular preparations are included in the “pre-study” phase in Exhibit 9. The highlights of “Concordance” phase based on MI market example can be given as follows:
- – As the project management team, understand all the different players' company cultures, and the “pros and cons” of working with them
- – Communicate the PM team's role “as a stabilizing filter” in the project, and explain that this is different from other telecom projects
- – Introductory meetings to warn the involved groups about the different company cultures or problems that they may face during the project
- – Oversee committees for the most time consuming and problematic issues such as hardware and agreement discussions, etc.
- – Introducing the idea of new market partnering structures to start-ups
- – Introducing big corporation's bureaucratic processes and corporate PM methodologies to start-ups
- – Introducing start-up's cultures to the corporations
- – Explaining the importance of data-synchronization between the project players
- – Warning the different groups about how much time legal agreement discussions can take
These are the important tasks to be completed for the success of the project before starting the feasibility and execution phases, and this is besides the regular preparations.
Feasibility and execution phases can be applied as they are defined in the PROPS® model. The conclusion phase should be also detailed like the pre study phase to handle the risks caused by developing country environment. Regular conclusion tasks are listed in the “conclusion” phase shown in Exhibit 9. Different from other telecom projects, the highlights of the trial phase can be listed as follows:
- – Acting as the operational body during the trial phase to see the whole operational picture
- – Executing a closed-user group test for the trials
- – Warning the player who will take care of operation about the operational problems they may face after the handover
- – Recommending operational process flow for “commercial” phase
- – Monitoring the complete system's operational flow and technical performance
- – Preparing the performance criteria for the trial phase with the feedbacks from the customer
- – Motivating the players to finalize the contract work.
- – Preparing system and service training documents for the players
The tasks listed above should be carried before the closing phase, which are the standard tasks done during the conclusion phase. An important point is that these tasks may be not seen as Project team's responsibilities. However, in turbulent markets such as MI and especially in turbulent environments such as developing countries, one body has to take care of these issues. Otherwise it is very difficult to complete the projects on time. Project Managers are the only group qualified to complete these tasks among all the players.
The Mobile Internet market is currently developing and creating future revenue streams. Many of the players are experimenting with new services, building partnerships, developing business models and marketing communication strategies to pave the way for the MI business expansion. This state-of the-art-technology is an example of a radical innovation brought new business models inherently. This nature of the business increases turbulence and risk of failure in the market and makes management of these radical innovation based market projects rather complicated and difficult.
The high failure of risks caused by the turbulence in the market can be controlled only by effective project management methodologies. Project management becomes very crucial in this market since the project managers are the only body that can see the whole picture and fill the gaps in the industry by acting as a stabilizing force in the market. In order to find how to do effective project management in such a radical innovation based market, a broader analysis is done to understand the reasons behind the risks. A model is proposed for trajectory of an innovate industry based on business model vs. technology. In addition to business model vs. technology analysis, the macro environment of a project, the development level of a country, is also investigated. Based on these analyses, a project management methodology is proposed. In the model, pre-phase of the project should be designed according to market type and conclusion phase should be designed according to the development level of a country. Based on this new perspective, “Concordance” and “Trial” phases are added to the reference model. An important point is that the tasks listed for these phases may not be seen as project management team's responsibility. However, in a turbulent market like MI, a group has to carry these tasks. Otherwise possibility of success in projects will be low. The PM people are the only people who can carry these tasks among all the different players.
An important conclusion could be that this model can be applied in any turbulent market that has a multi-disciplinary business environment.
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© 2005, Gulay Ozkan, Ozgur Zan
Originally published as a part of 2005 PMI Global Congress Proceedings – Edinburgh, Scotland