Service Companies Adopting Product Companies’ Project Management Strategies

Every time a company signs a contract, approves a project or takes a product to market, it accepts risk either implicitly or explicitly. Risk is an accepted reality in business. But just because risk is a reality, that doesn’t mean companies should passively let it wash over them while trusting the fates and good luck to make everything come out successfully at the other end. Smart companies always look for ways to minimize their risks and take informed chances, especially when deciding which products or services to take to market. In this way their risk becomes more calculated, like a scientific experiment, than the raw risk gamblers take when they bet the house on a royal flush hoping no one at the table is holding four aces.

Risk management is an important consideration in any period, but sluggish economies like today’s raise it to the critical level. With fewer resources and less guarantee of customer demand for a product or service, focusing resources on the right projects is often the difference between a company succeeding or failing. Companies must decide early in the development process which product is most likely to succeed, and then make the hard decisions about which projects to cut so they can channel time and money to the most promising projects.

This decision-making process varies widely between industries. Companies that make hard goods – everything from consumer products to aircraft – usually have well-defined processes for deciding which projects to fund. They developed these processes largely because of physical factors such as material costs, tooling, distribution schedules, etc. Service companies, with few if any physical constraints, have traditionally not needed such stringent processes. Whatever flexibility service companies might have enjoyed in project management in the past, however, is either gone or on its way out. Service companies are under constant pressure to cut development costs, and time-to-market is just as ruthless a market driver as material and inventory costs.

Responding to these changing conditions, service companies have begun adopting project management techniques and technologies traditionally found at industrial companies. These methods and software applications enable service companies to remain competitive by helping them focus on the services most likely to gain market share and produce revenue.

The Software Option

A growing number of companies in service industries as varied as insurance, financial services, information technology and government are turning to project management software to reduce product and service development risk. Web-based gaming company Stan James PLC is typical of this new wave of companies using project management software to manage development costs.

Gamers use one of Stan James’ eight localized web sites to play card games, casino games, “skill games” like chess and backgammon, and to place wagers on anything from horse races, to rugby games to darts matches. As part of its process for researching and developing new gaming services, the company uses a Web-based project management tool that enables it to monitor resources at the macro and micro levels. It provides planning tools for measuring high-level development costs, low-level issues and change requests versus actual effort. The reporting tools provide accurate cost/time reporting to Stan James’ senior executive committee. Those reports enable the company’s board to approve projects and set priorities based on factual data.

“Stan James PLC operates in a fast moving and highly competitive environment, where product differentiation is often small and time to market is crucial,” said project manager Duncan Marshall. “With a product development environment incorporating multiple teams and skill sets – project management, business analysis, in-house and offshore software development, testing and application support – a well-developed and consistent project and resource management tool is vital to our ability to effectively and accurately manage our costs, deliverables and resources.”

Project management software similar to Stan James’s Web-based application has been around in one form or another since the mainframe era. Vendors have produced a wide range of tools for forecasting, modeling, and tracking costs. They have most often been applied by product companies in the design phase through to production. Increasingly, however, companies have used software tools to get a better grip on the exploratory phase, the development process’s “free form” stage.

Quantifying Hard-to-Quantify

Even the free-wheeling exploratory part of the R&D process can be placed in an organized framework that helps executives make better decisions sooner by scoring projects’ potential. That’s critical if companies are going to successfully curb their expenses while developing new services.

There’s typically very little to base decisions on early in the development process, but that’s what executives are often called upon to do. Given some preliminary research, they are expected to decide which projects are worthy of funding and which need to be cut. Instead of relying on cursory data and intuition to guide this process, companies can use modeling tools to assign numeric values to different priorities – profit margin, time to market, development costs, etc. – then weigh the priorities to arrive at a score. That gives the discovery process more focus, which eliminates the cost of vetting impractical concepts that don’t meet the company’s needs. That is the point in the development process where product companies and service companies have very similar needs.

When a concept moves from research to development, the prerogative shifts heavily to cost control. Today’s development models make software automation a practical choice for driving results while managing resources. Many product development operations are spread over multiple sites in different time zones. It’s commonly accepted that the greatest advantage in this model is the ability of different groups to work on projects concurrently, which reduces the time to market.

Executing concurrent development, however, is difficult, and where much of the waste in the development process occurs. Coordinating activity over e-mail and shared calendars is too manual, consuming too much time for the results it yields. Also, although software automation permeates most avenues of business, a surprising amount of R&D management is paper-based at a great cost in time and efficiency, especially when several departments, locations, and partners are involved. Major project management processes, such as sign-offs, notifications and version control, must be automated to keep development moving ahead without expensive mistakes caused by skipped steps or incorrect procedures. A carefully selected project management solution reduces costs by helping cut the amount of time and effort spent choosing the most promising product concept to develop. During development, it can then shorten time-to-market by supporting concurrent efforts between multiple sites, or even between multiple departments in the same location.

Choosing a Software Solution for a Recovery

As with any class of software, functionality varies widely from one product to the next. There are some essential qualities that any project management solution needs to succeed in an R&D environment, however. They are:

• Accessibility. Everyone with a stake in R&D – from sales to financial to marketing to customer service – must be able to share and retrieve information, view statistical analyses, and monitor costs. When everyone who needs to be in the loop is included, R&D projects are less likely to go off track.
• Flexibility. The software should provide options so users can customize their information views, focusing on information critical to their responsibilities.
• Interoperability. Re-creating and copying data is time consuming and wasteful. project management solutions should interoperate with your existing systems, especially e-mail and other project management solutions so users are working in a single environment.
• Scalability. R&D is a collaborative and data-intensive process. Project management solutions must have the capacity to support hundreds of users and large, complicated data files.

When the recession hit, short-term survival was the number-one priority. True leaders, however, look past survival to recovery. Reducing expenses can be key to survival in the short term, but developing innovative new services is the key to recovery. When customers start buying again, companies that have new services ready to meet the pent-up demand will cash in. Less forward-looking companies may survive, but they are unlikely to prosper.

Maintaining development during a slump, however, increases companies’ risk. Risking the company’s fortunes on a poorly conceived project or one that doesn’t generate the expected revenue, squeezes profits that were lower to begin with and, siphons money, time and talent from projects that might have paid off. To keep that risk in a manageable range, service companies should adopt project management methods and technologies already proven in product development. That will help them keep their risks calculated, and less of a gamble.

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Christophe Borlat is managing director of project management solutions provider Genius Inside. He was the company’s first employee back in 1997, and since then he has been involved in all business activities from consulting to sales. With more than 10 years of experience in project management and sales, he has extensive knowledge of the project management market. He can be reached at [email protected].