Project Management Institute

The Key to Successful Product Development for Small Businesses

Nathalie Udo, President, Projectway, LLC

Rosemary Hossenlopp, President, PM Perspectives, LLC

Successful product development requires choosing the correct Project Management approach and development methodology for a particular project. Small businesses generally do not have the time to find all the information needed to optimize their Project Management approach and development methodology choices. This paper provides information on how to select a Project Management and development methodologies for the small business owner or stakeholder and gives an overview of the benefits and issues associated with key choices.

Critical Success Factors in Product Development

Project Management is no longer reserved for big corporations or limited to the disciplines of engineering, aerospace & defense, or construction. Today, Project Management approaches are critical for many small businesses; not just to get the job done on time, on budget, and fulfilling requirements, but also for financial survival. The key to improving project success in small businesses is not execution success but to make sure that you are executing the right project. Resources are scarce, time is short and politics are intense. One mistake can significantly negatively impact your business’ bottom line. There are limited second chances for a small business. Success at both the project and the corporate levels comes down to understanding the relationship between the different elements in a given project.

This understanding begins before the project starts by analyzing the business and project environment in specific. The right choice for new product selection means that in a small business, you need to begin earlier than the PMBOK Guide® definition of project initiation. As a small business you want to make sure you are committing project resources to the right projects by following these three steps to improve your project performance:

  • Step 1: Analyze environmental factors
  • Step 2: Choose development methodology
  • Step 3: Adapt Project Management approach

Following these steps, will give you a quick and easy approach to managing critical project formation issues. Small business owners and project managers are encouraged to explore what structure is needed for success in their project environment. Success is defined as verifying that you accomplished the project according to the competing project demands of time, cost and quality. But it is also validating with your end customer that you are building the right product. Both are needed to improve the economic value that your small business brings to the marketplace.

Time is very limited in small businesses. People are overworked. In this paper we will give you a prescriptive guide on how to improve your project success. Exhibit 1 illustrates the first three steps in this process.

Step 1 - Analyze environmental factors

Your small business does not exist in a vacuum. It is crucial to learn how to adapt to changes in the business environment. If you do not understand your business environment and are surprised by it, it can have disastrous consequences for your business. This makes it very important to analyze the environmental factors that influence your small business. Undertaking product development projects, even small projects, can put a strain on your business: either by pulling away resources of normal day-to-day business or straining the budget. Project failure means wasted money and resources.


Exhibit 1 – Prescriptive Guide to project success

Environmental Analysis Report

There are two groups of project environment factors: internal and external. Exhibit 2 – Environmental Factors lists some of the more well-known items. These factors affect the planning, organizing, staffing and directing of a project. Dealing with these factors comprises the project manager's main responsibilities.


Exhibit 2 – Environmental Factors

There might be other environment factors that influence your project. After identifying the high-level factors that influence your business and the projects you undertake, the next step is to analyze every factor in more detail. There are two main areas to analyze:

1) Current status of the factor

2) Propensity and scale of change for the factor during the life of the project.

It is outside the scope of this paper to go into detail on every single factor. But to give you an overview on how to analyze environmental factors, we have highlighted two items.

Company Culture - Internal Environmental Factor

One very influential internal environmental factor is company culture. Culture can be defined as a set of attitudes, values, beliefs and behaviors learned or created by individuals themselves or passed onto them by members of a group by social experience [Duffey 1999]. The culture of an business as a whole will be a strong determinant on its external relationships, internal processes and policies, performance criteria, and the amount of planning needed. You need to be aware of key attitudes, values and beliefs as they impact the development process and will influence the choice of the right development methodology.

Technology Level - External Environmental Factor

External environment factors are outside of your direct work environment control. An important external factor is the technology level of the market you are selling products or services to. Cutting edge technology means that you can expect many changes during your product development life cycle. This will influence the development methodology you use. In addition, the involvement of your customer base during product development will steer your choice.

Risk Identification Report

The internal and external environment factors are potential risks to your project. You need to identify all areas that might impact successful project completion and summarize these potential risks in risk plan. After that you can create a mitigation plan for every risk and actively manage the changing environment's effect during the project.

Obviously, the environment will not be the same for every project. There are three aspects that most likely will determine the project environment:

  • The product or service that is the output of the project
  • The technology used to create the product or service
  • The stability of the external environment

Step 2 - Choose development methodology

A methodology is a body of methods, rules, and assumptions employed by a discipline. As a small business, you need to find the balance between no process and too much process. Too much process will limit your competitive advantage because it will slow you ability to deliver products to market and makes it harder to adapt to change. The right level of methodology will give you proven steps to create and deliver products faster, at lower risk and costs.

Predictive or Adaptive Methodology Decision

In Step 1 you have analyzed your internal and external environmental factors. In Step 2 you will use this information to choose the development methodology that best fits the project environment.

How do you choose a methodology? Simply stated, you review the current project environment factors, evaluate their influence on your project type, and choose a development methodology. There are two main groups of development methodologies. Different names are used to refer to these groups. We refer to them as: “predictive” and “adaptive” [see Exhibit 3].


Exhibit 3 – Development Methodology Choices

Predictive methodologies see the world, as indicated by their name, as a predictable place. They focus on projecting exactly what will occur and what tasks are needed during the project. Project phases are clearly defined with quality or phase gates at the end of every phase. Predictive methodologies view process as a control mechanism and are resistant to change since change makes their plans useless and interferes with their fundamental view of being able to fore tell what will happen.

Adaptive methodologies welcome change. As their name indicates, they focus on adapting to a changing environment. Their strength is to adapt based on feedback mechanisms such as development iterations and continuous access to the customer. Adaptive methodologies only use processes when they support the work of the development team.

Exhibit 4 gives a generic overview of how to choose a development methodology based on the state of key environmental factors.


Exhibit 4 – Methodology Choice based on Environmental Factors

Step 3 - Adapt Project Management Approach

A Project Management approach is a particular manner of taking steps. A small business needs to tailor these steps to manage the work and find the balance between no process and too many steps. The real benefit of a Project Management approach is the application of knowledge, skills, tools and techniques to managing project activities to meet project requirements [PMI 2000].

A project manger is the individual responsible for managing a project [PMI 2000]. Those management activities look different depending on what development methodology is chosen. Our position is that the project manager should not dictate the choice of the development methodology but adapt the Project Management approach to how products are best created in each business's environment.

Project Management Approach Selection

As a small business you have two choices for a project management approach whether you are using a predictive or adaptive development methodology: either an informal approach or a PMBOK compliant approach.

The informal approach applies when a small business conducts mainly small projects with collocated teams. The communication and control needs are low and development, communication and control processes can be informal. There is a minimum need for documented processes and procedures.

If your projects are more complex and your development team is larger of dispersed, a PMBOK compliant approach is more appropriate. Due to the project complexity, it is better to have project principles and practices documented. Depending on your development methodology, the approach will be quite different. For an adaptive development methodology, the focus will be on optimizing communication through documenting roles and responsibilities and communication paths. For a predictive development methodology, the focus will be on change control by documenting tools and techniques for requirements and schedule changes.

Project Manager Role

If you look back at Exhibit 1, you see it illustrates the decision making process for aligning the Project Management approach to the development methodology after an environmental analysis has been completed. If a project manager wants tight control over the competing demands of cost, time and schedule but an adaptive approach is best to respond to a chaotic environment, team tension will flourish and market opportunities will be lost. Neither the predictive or adaptive methodology choice is right or wrong. They are only right or wrong for specific environments.

It is outside the scope of this paper to go into detail on the adaptation of the PMBOK knowledge areas to the chosen development methodology. But to give you an idea on how to adapt the project manager role to the development methodology, we have highlighted the project manager role factors in more detail.

Predictive Development Methodologies

A project manager in a predictive development environment is more focused on the traditional elements of a phased life cycle approach. The project manager will tend to operate under a command and control structure. They have team members responsible for product deliverables. They themselves coordinate the project deliverables around the competing demands of cost, time and scope.

Adaptive Development Methodologies

A project manager in an adaptive development environment will tend to operate primarily as a process facilitator and obstacle remover for the technical team so they can accomplish their delivery of a feature to a customer. The delivery cycles are usually very short, so not all the traditional elements of project control are needed as you may be able to track process on a white board or in an excel spreadsheet.

Small businesss Project Manager Roles

Since in a small business, resources are tight, a project manager in a small business tends to have several roles. The roles that they may fill include the following:

  • Business Analyst Function: The project manager in a small business is responsible for validating that the project that they are doing is the right project for the customer. This requires them to complete an environmental analysis.
  • Project Manager Function: The project manager in a small business will be responsible for stakeholder analysis to reduce project risk. On the surface it appears more important to have a Gantt schedule than a stakeholder analysis. Project success will be greater if it is known which stakeholders are positively or negatively impacted as a result of project execution or project completion. Project success will be greater if it is known who can exert influence over the project and its results [PMI 2000].
  • Technical Lead: The project manager in a small business may be responsible as a technical lead in software, hardware or engineering (e.g. bridge, plants) product environments or a subject matter expect lead in service oriented projects.
  • Outsource Manager: The project manager in a small business may be responsible for managing outsource vendors to produce your product deliverables. It is especially critical that you understand how to align environments up front and structure any needs in the procurement contract.

Adoption Plan

One of the key tools to guarantee adoption is stakeholder analysis. Stakeholders are individuals and businesses that are either actively involved in the project or who are positively or negatively affected by the project [PMI 2000]. There are many ways to organize the process and document the results. Much of this information is available elsewhere but there are several key questions that need to be answered [PMI 2000]:

  • Which stakeholders can positively or negatively impact project execution?
  • What medium or style of communication do stakeholders prefer?
  • What is the timing of stakeholder communication?
  • What should be communicated?
  • What is their risk tolerance?

You might think that doing a stake holder analysis in a small business is a luxury; however, it is even more important in a small business than in a larger business to understand the stakeholders’ expectations and objectives.

Execution Success: Critical Factors

Project Management is primarily focused on achieving results. As the project manager, you need to create an environment in which a project can succeed. This is not done by mandating methodologies or processes. This is done by analyzing the environment drivers that drive selection of a development methodology and then adapting the Project Management approach to the development methodology. There are three key success factors you need to manage during project execution.


Most project issues can be traced back to communication issues. Communication must occur constantly in both a predictive and an adaptive environment but there are significant differences. Communication in predictive environments is generally done formally via status reports and during phase gate milestone meetings. Communication in adaptive environments is very active. Stand-up meetings are used to share information and communicate roadblocks. There is a constant communication flow between developers and the user community to make sure that user priorities are delivered in the next release cycle.


Project manager skill building and certification requirements remain a constant in both environments. The Project Management Professional (PMP) certification of the PMI business is a must for all project managers. The knowledge base must be understood to be a strong manager. The focus for skill building is different under each methodology. Predictive skill set focus areas will be in both Project Management and technology domain areas. Adaptive skill sets also requires knowledge in those areas but require a more facilitative skill set to manage the need for a small business to understand iterative build priorities and to remove business process issues that keep a project from being successful. It isn't that predictive methodologies don't do this but it is more emphasis in the adaptive area.


Project Management is not for the timid or the person who relies on top down direction. The Project Management body of knowledge is constantly expanding. You are the expert. You will be the one in the business to make recommendations. Increasing confidence requires acquiring skills to understand the customer needs and an understanding of the stakeholder opinions, attitudes and support via the stakeholder analysis. This perspective entitles you to a seat at the management table to drive a small business new product development structure and style.


There are many development methodologies and Project Management approaches to choose from when deciding the course of a project. Understanding that you have a choice in which ones you choose to implement is a very powerful tool. Understanding that these choices should be made by first taking environmental factors into consideration can lead you to project success. Technologies change techniques, cultures change norms and distances change communication. Because of this it is not conceivable to have a single, common methodology or approach. Every project is slightly different and will needs its own. View the Project Management approach and development methodology strategically. At the start of the project define the environmental factors, then select the right development methodology and tailor it. Only then, adapt the Project Management approach.

Transforming the business's thinking to see every project as unique with its own needs, will limit disruptive surprises during the project life cycle that cost time, money and profitability. Utilizing a perspective of environment factors as a process starting point will improve the integration with corporate strategies, increase the accountability, improve project responsiveness to the environment and increase the visibility on how project results create customer value and stakeholder value.


Duffey, T. (1999) Developing a Cultural Perspective in Community mediation. Mediation Magazine.

Fowler, Martin (April 2003), The New Methodology. Retrieved on Oct 23, 2004 from

Highsmith, J. (2004) Agile Project Management. Boston, MA: Pearson Education, Inc.

Khatovar Technology Pty. Ltd. (2003) The Problems of Predictive Development (or, Why Fixed Price Contracts are a Bad Idea). Retrieved on Oct 23, 2004 from

Murch, Richard. (2001) Project Management; Best Practices for IT professionals. Upper Saddle River, NJ: Prentice Hall, Inc.

Poppendieck, M. & Poppendieck, T. (2003) Lean Software Development: An Agile Toolkit for Software Development Managers. Boston, MA: Addison Wesley.

Product Development & Management Association (2004), The PDMA Glossary for New Product Development. Retrieved on Aug 22, 2004 from

Project Management Institute. (2000) A Guide to the Project Management Body of Knowledge (PMBOK® Guide) (2000 e.). Newtown Square, PA: Project Management Institute.

Schwaber, K. (2004) Agile Project Management with Scrum. Redmond, WA: Microsoft Press.

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