Thursday 28 April 2022

Project Management Strategy Supports Competitive Strategy


Looking at the strategic project management environment will help us understand some aspects of the new role of the toolbox — in particular, how the correspondence between the support of the "tool box" for standardized project management and the competitive strategy should be ensured. Since the point of reference is the top of the pyramid, we will start from here – with a competitive strategy.

The essence of the competitive strategy is to create an advantage that will allow the company to overtake its competitors. To ensure this advantage, companies use their organizational resources. Imagine, for example, project management as an organizational resource. For such a view, the block of general competitive strategies (hereinafter simply competitive strategies).

The essence of differentiation-oriented strategies (a quadrant corresponding to high differentiation/high cost in Figure 1.3) is their ability to offer customers something different from what competitors offer. This "excellent" may refer to shorter time to market (which is used as an example in Figure 1.3), high quality, technological innovation, special characteristics, excellent service, etc. In an effort to ensure the superiority of their products, companies using such strategies implement in them all the characteristics for which the customer is willing to pay. This gives them the opportunity to charge a higher price for their products, which covers the cost of obtaining distinctive characteristics.

Companies that choose minimum cost strategies aim to achieve a sustainable price advantage over competitors (a quadrant corresponding to low differentiation/low cost in Figure 1.3). The idea is to use the low cost factor to create a price gap from competitors and thereby take away a certain market share from them. Another way is to make higher profits by selling a product at the current market price. This method is good if you have a solid basic product, equipped with small additions, and at the same time look for new ways to reduce the price without deterioration of quality and abandonment of the main characteristics.

Best value companies combine distinctive characteristics with low cost (a quadrant corresponding to high differentiation/low cost in Figure 1.3). This approach should lead to the fact that the value of the product in the eyes of the customer will be especially high - due to the fact that such a product meets his expectations or exceeds them in terms of characteristics and at the same time in terms of price. At the same time, the goal is to become a supplier of a product that has a low price and good or excellent characteristics, and to use this advantage to create a price gap from competitors who produce products with comparable characteristics. Since the products of such a company have the lowest (best) price in comparison with the products of competitors occupying the same niche, this strategy is called the best value strategy. An empty quadrant corresponding to low differentiation/high cost in Fig. 1.3 is an option that is not acceptable in today's competitive battles for survival and prosperity.

Let's use the described block of competitive strategies to understand how project management helps to create competitive advantages. Consider three companies: Intel, Armstrong World Industries (AWI), and Oregon Anesthesiology Group (OAG). Intel's competitive strategy is focused on achieving differences (see Figure 1.3). It is aimed at technological innovation and minimizing time to market, considering these parameters as competitive advantages. In this strategy, a significant role belongs to product development projects, the task of which is to quickly and quickly produce "on-the-mountain" new processor crystals. This is where project management comes into play, allowing you to compress the development cycle of a new crystal and bring the product to market before competitors. The reduction in project schedules has also affected other non-processor areas of Intel's operations, from large new factory projects to small quality improvement projects. Of course, this is not an accident. That's management's choice to deploy project management to provide a competitive advantage by shortening project lifecycles across the company.

Other companies using strategies to achieve differentiation are also actively working to create a competitive advantage by shortening the length of project cycles. Firms such as General Electric, NEC, Northern Telecom and AT&T have managed to reduce the duration of the project cycle by an average of 20 to 50%. The implications of shortening the project cycle are its implications. For example, in the case of product development, a company that enters the market before competitors often receives sales at a high price, a longer sales period, a larger profit and a larger market share.

AWI's competitive strategy is completely different. Instead of focusing on product differentiators and time-to-market (an approach so zealously pursued by Intel), AWI intends to take the position of price leader in the relevant industry (a quadrant corresponding to low differentiation/low cost in Figure 1.3). One of AWI's managers said: "We have been working in the field of building materials production for more than 70 years. Technological change is not a major factor in our industry – unlike the ability to offer products at a lower price. To develop this ability and become a leader in this industry, we had to rationalize all production processes, constantly lowering the target bar for the cost of production. Part of our efforts was to provide cost reduction management and develop process development projects." A similar desire to reduce costs is noticeable in other, non-production projects of AWI. Project management in both the production and non-production sphere aims to reduce their cost, which is ultimately aimed at achieving a price competitive advantage.

It's no secret to other firms using project management to support the same minimum cost strategy. The reason for this situation is the increased cost of projects and the financial difficulties faced by many leading companies. With an enterprise-wide resource planning project costing $300 million [9] and a new factory costing $4 billion, companies have to reduce cost and financial burden in order to create a price competitive advantage. Consequently, support from project management helps companies capture a larger market share and generate higher profits.

The competitive advantage of Intel and AWI is ensured by project management, which is focused on minimizing the timing and cost, respectively. In contrast, OAG (Oregon Anesthesiology Group) seeks to obtain the best possible value (a quadrant corresponding to high differentiation/low cost in Figure 1.3). The goal of this corporation, which employs more than 190 doctors, is to provide health services at the best price compared to competitors offering services of similar quality. 


Accordingly, project management here is aimed at solving cost and quality tasks. The Vice-President of OJSC says: "A market like ours is a ruthless market. Healthcare management organizations are constantly pressuring all physicians to reduce the cost of services. To stay afloat, we have standardized all the management protocols we use in all information systems projects and continuous quality improvement projects. This made it possible to carry out projects in accordance with the target settings in terms of quality and cost. Otherwise, our customers will prefer to deal with someone else." Using its competitive advantage in terms of price and quality, OAG Corporation was able to maintain a significant market share.

Other experts confirm that the price-quality ratio is considered in a number of firms as the goal of projects. The fact is that companies that focus on the strategy of achieving the best price-quality indicator and the competitive advantages arising from it need project management that supports this strategy.

By and large, these examples form the context needed to provide a basis for understanding the following:

• companies choose their competitive strategies;
• companies align their project management strategies with competitive strategies.

First, companies choose competitive strategies as a means of dealing with their rivals in the market. While any type of competitive strategy ultimately has the same goal of creating a competitive advantage, the ways to achieve it vary. Some build an advantage on the basis of differentiation (difference from others), others on the basis of low cost, and still others on the basis of the "price - quality" indicator. Second, companies use project management according to their strategies. Therefore, Intel, AWI and OAG have different ideas about the indicator on which project management should be focused: on deadlines (Intel), on cost (AWI), on the ratio "price - quality" (JSC). And it is not surprising that some prominent researchers consider project management as one of the greatest dangers, as well as an opportunity that managers face in their competition.

While project management strategy plays a significant role, it is by no means the only driving force behind creating a competitive strategy. On the contrary, in order to create a workable competitive strategy, other business strategies, usually called functional ones, are needed. In particular, the strategies of R&D, marketing, production, work with personnel, etc. provide a certain contribution.

Until now, it has been an environment in which the "tool box" supports the standardized project management process exists and is provided. Before returning to the details of the new role of the "tool box", let's pay closer attention to the process of standardized project management.

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