Lappeenrannan teknillinen yliopisto
Lappeenranta University of Technology
Helena Forsman
Business Development Efforts and
Performance Improvements in SMEs
Case Study of Business Development Projects Implemented in SMEs
Acta Universitatis
Lappeenrantaensis
209
Lappeenrannan teknillinen yliopisto
Lappeenranta University of Technology
Helena Forsman
Business Development Efforts and
Performance Improvements in SMEs
Case Study of Business Development Projects Implemented in SMEs
Thesis for the degree of Doctor of
Science (Technology) to be presented
with
due
permission
for
public
examination and criticism in the
Auditorium of Lahti Sport Centrum at
Lappeenranta University of Technology,
Finland on the 19th of May, 2005, at
noon.
Acta Universitatis
Lappeenrantaensis
209
Supervisor
Professor Hannu Rantanen
Department of Industrial Engineering and Management, Lahti
Lappeenranta University of Technolgoy
Reviewers
Professor Teija Laitinen
Department of Accounting and Finance
University of Vaasa
Professor Mika Hannula
The Institute of Business Information Management
Tampere University of Technology
Opponent
Professor Mika Hannula
The Institute of Business Information Management
Tampere University of Technology
ISBN 952-214-043-0
ISBN 952-214-045-7 (PDF)
ISSN 1456-4491
Lappeenrannan teknillinen yliopisto
Digipaino, 2005
ABSTRACT
Helena Forsman
Business Development Efforts and Performance Improvements in SMEs
Case Study of Business Development Projects Implemented in SMEs
Lappeenranta 2005
209 p.
Acta Universitatis Lappeenrantaensis 209
Diss. Lappeenranta University of Technology
ISBN 952-214-043-0, ISBN 952-214-045-7 (PDF), ISSN 1456-4491
Under the circumstances of the increasing market pressure, enterprises try to
improve their competitive position by development efforts, and a business
development project is one tool for that. There are not many answers to the
question of how the development projects launched to improve the business
performance in SMEs have succeeded. The academic interest in the business
development project success has mainly focused on projects implemented in larger
organisations rather than in SMEs. The previous studies on the business success of
SMEs have mainly focused on new business ventures rather than on existing SMEs.
However, nowadays a large number of business development projects are
undertaken in existing SMEs, where they can pose a great challenge. This study
focuses on business development success in SMEs that have already established
their business.
The objective of the present study is to gain a deep understanding on business
development project success in the SME-context and to identify the dimensions and
factors affecting the project success. Further, the aim is to clarify how the business
development projects implemented in SMEs have affected their performance. The
empirical evidence is based on multiple case study.
This study builds a framework for a generic theory of business development success
in the SME-context, based on literature from the areas of project and change
management, entrepreneurship and small business management, as well as
performance measurement, and on empirical evidence from SMES. The framework
consists of five success dimensions: entrepreneurial, project preparation, change
management, project management and project success. The framework provides a
systematic way for analysing the business development project and its impact on
the performance and on the performing company. This case evidence indicates that
successful business development projects have a balanced, high performance
concerning all the dimensions. Good performance in one dimension is not enough
for the project success, but it gives a good ground for the other dimensions. The
other way round, poor performance in one success dimension affects the others,
leading to poor performance of the project. In the SME-context the business
development project success seems to be dependent on several interrelated
dimensions and factors. Success in one area leads to success in other areas, and so
creates an upward success spiral. Failure in one area seems to lead to failure in
other areas, creating a downward failure spiral.
The study indicates that the internal business development projects have affected
the SMEs’ performance widely also on areas and functions not initially targeted. The
implications cover all the success categories: the project efficiency, the impact on
the customer, the business success and the future potentiality. With successful
cases, the success tends to spread out to areas and functions not mentioned as the
project goals, and with unsuccessful cases the failure seems to spread out widely to
the SMEs’ other functions. This study also indicates that the most important key
factors for successful business development project implementation are the
strength of intention, business ability, knowledge, motivation and participation of
the employees, as well as adequate and well-timed training provided to the
employees.
Keywords: Business development, Performance, Project success, SME
UDC 65.011.8 : 65.017.2/.3
ACKNOWLEDGEMENTS
Professor Hannu Rantanen has guided and supported this thesis patiently even
when the researcher herself was unmotivated. I would like to express my warmest
gratitude to him. I would also like to thank professor Timo Pihkala, who has offered
guidance and valuable feedback during my research process. In the final stage of
the research work I have received valuable feedback from the reviewers – professor
Mika Hannula and professor Teija Laitinen – to whom I am deeply grateful.
I am indebted to the interviewees of the case companies for their time, their ideas
and suggestions to enrich the interpretation. They urged me towards the practical
relevance and the scientific contribution of the study. Due to the promised
confidentiality I am sorry not to be able to show my appreciation for them by name.
I gratefully acknowledge the financial support from Tekniikan edistämissäätiö
(Technological Foundation, TES) and Lappeenrannan teknillisen yliopiston tukisäätiö
(Research Foundation of Lappeenranta University of Technology). Their support
made it possible to finalise my thesis.
Several persons have helped me in the different stages of the research process by
fruitful discussions, insightful comments, or by providing their personal network for
my use. I wish to thank Tapio Järvelä and Heikki Kauppinen from Riihimäki Hyvinkää Chamber of Commerce, Anne Wickstöm from Ekes Oy, Anneli Mäkinen
from Helsinki Business College, Pirjo Puhakka from Ibero Liikelahjat Oy, PhD Juhani
Nieminen and Kaisu Sjögren from Aike Oy, Sirkku Verta-Lemmetty from the City of
Hyvinkää and many, many other people for their valuable help.
My husband Markku has encouraged me to commence, to continue and to finish
this thesis. Without his support and compassion my thesis would not have been
possible in practice. I am also grateful to my sons Jarkko and Lauri, who have been
patient and showed sympathy when their mother has submerged herself in the
“world of her science”. Two women have strongly affected me and my attitudes,
giving a model for a forward-looking view of life. I dedicate my thesis to them – my
mother Elli Linkolehto and my deceased grandmother Maria Kortekangas.
Launonen, May 2005
Helena Forsman
CONTENTS
ABSTRACT
ACKNOWLEDGEMENTS
LIST OF FIGURES
11
LIST OF TABLES
13
LIST OF ABBREVIATIONS
15
1
1.1
1.2
1.3
1.4
INTRODUCTION
Background
Objectives of the study
Key definitions and scope of the study
Structure of the study
17
17
20
20
23
2
2.1
2.2
2.3
2.4
2.5
BUSINESS DEVELOPMENT IN SMES
Definition of an SME
Characteristics of SMEs
Business success in SMEs
Elements of business success
Growth as a source of business success
Strategy and planning as a source of business success
Challenges of business development in SMEs
Summary
25
26
27
32
32
35
37
38
41
3
3.1
3.2
3.3
3.4
3.5
3.6
PROJECT AS A TOOL OF BUSINESS DEVELOPMENT
Project and project management
Development projects
Change in organisations
Project success and success factors
Project failure
Summary
43
43
48
51
54
60
64
4
4.1
4.2
4.3
4.4
4.5
4.6
BUSINESS SUCCESS AND PERFORMANCE
The concept of performance
Performance measurement
Performance measures
Business performance and project success
Challenges of performance measurement in SMEs
Summary
67
67
70
73
77
80
83
THEORETICAL FRAMEWORK FOR BUSINESS
DEVELOPMENT PROJECT SUCCESS IN THE SME CONTEXT
Characteristics of a business development project
Construction of the framework
Entrepreneurial success dimension
Project preparation success dimension
Change management success dimension
Project management success dimension
Project success dimension
Summary
85
85
86
87
88
89
90
91
92
2.3.1
2.3.2
2.3.3
5
5.1
5.2
5.3
5.2.1
5.2.2
5.2.3
5.2.4
5.2.5
6
6.1
6.2
6.1.1
6.1.2
6.1.3
6.2.1
6.2.2
6.2.3
7
7.1
7.2
7.3
7.2.1
7.2.2
7.2.3
7.2.4
7.2.5
7.2.6
7.2.7
7.3.1
7.3.2
7.3.3
7.3.4
7.3.5
7.3.6
7.3.7
7.4
7.5
7.4.1
7.4.2
7.4.3
7.4.4
7.4.5
7.4.6
7.4.7
7.5.1
7.5.2
7.5.3
7.5.4
7.5.5
7.5.6
7.5.7
METHODOLOGY AND RESEARCH STRATEGY
Research methodology
Qualitative or quantitative research?
Case study research
Methodological choices in this study
Research design
Research process
Case selection and data collection
Analysis and interpretation of data
93
93
93
97
101
102
102
104
107
CASE STUDIES
Introduction
Case A: Employee motivation as a source of productivity
improvements
Entrepreneurial dimension
Project preparation dimension
Change management dimension
Project management dimension
Project success and impact on performance
PIP-profile
Summary of case A
Case B: Integrated service package development
Entrepreneurial dimension
Project preparation dimension
Change management dimension
Project management dimension
Project success and impact on performance
PIP-profile
Summary of case B
Case C: Targeting at rapid growth and internationalisation
Entrepreneurial dimension
Project preparation dimension
Change management dimension
Project management dimension
Project success and impact on performance
PIP-profile
Summary of case C
Case D: New business venture with a new business concept
Entrepreneurial dimension
Project preparation dimension
Change management dimension
Project management dimension
Project success and impact on performance
PIP-profile
Summary of case D
111
111
112
112
114
115
117
118
121
122
125
126
127
128
129
131
134
135
138
139
141
142
144
146
148
149
152
153
155
156
158
159
161
162
7.6
Cross-case analysis
Project success and performance
Entrepreneurial dimension
Project preparation dimension
Change management dimension
Project management dimension
PIP-profile
Summary of the cross-case analysis
165
166
169
170
171
172
173
175
8.4
DISCUSSION AND CONCLUSIONS
Results of the study
Contribution of the research
Validity and reliability of the research
Construct validity
Internal validity
External validity
Reliability
Limitations and problems of the research
Outlines for future research
181
181
185
186
187
188
188
189
190
191
9
SUMMARY
193
7.6.1
7.6.2
7.6.3
7.6.4
7.6.5
7.6.6
7.6.7
8
8.1
8.2
8.3
8.3.1
8.3.2
8.3.3
8.3.4
8.3.5
REFERENCES
APPENDICES
Appendix
Appendix
Appendix
Appendix
Appendix
Appendix
197
1
2
3
4
5
6
– Definitions of terms
– Summary of the research data and informant feedback
- Interview guidelines used in the case study
– Structured interview (Questionnaire)
– Case comparisons
– Summary of the structured interview (questionnaire)
11
LIST OF FIGURES
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
1.1
2.1
2.2
2.3
2.4
3.1
3.2
3.3
3.4
3.5
3.6
3.7
4.1
4.2
4.3
Figure 4.4
Figure 5.1
Figure 5.2
Figure 5.3
Figure 6.1
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
6.2
6.3
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9
7.10
7.11
7.12
7.13
7.14
7.15
The structure of the study
Enterprise as a system
Strengths and weaknesses of small business
Model of small firm performance
Structure – conduct – performance
Goals-and-methods matrix
Management of business development projects
The spectrum of PSO-projects
The Iron Triangle of project management
Time frame of success categories
Ten key factors of the project implementation profile
Strategy-tactics effectiveness matrix
Three domains of performance
Performance, productivity and profitability
Levels able to examine the performance measurement
system
The linkage between performance objectives and
improvement objectives
Development project as microcosm of an enterprise
system
The business development project in goals-and-methods
matrix
Success dimensions of a development project
Dynamic balance between qualitative and quantitative
data
Replication approach in multiple-case study
The main phases of the research process
Status of the entrepreneurial dimension in case A
Status of the project preparation dimension in case A
Status of the change management dimension in case A
Status of the project management dimension in case A
Perceived project success in case A
PIP-profile in case A
A general view of the success dimensions in case A
Status of the entrepreneurial dimension in case B
Status of the project preparation dimension in case B
Status of the change management dimension in case B
Status of the project management dimension in case B
Perceived project success in case B
PIP-profile in case B
A general view of the success dimensions in case B
Status of the entrepreneurial dimension in case C
24
25
31
33
34
47
50
52
56
57
58
61
68
69
71
71
85
86
87
96
99
102
113
115
116
118
119
122
125
127
128
129
131
132
134
138
140
12
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
7.16
7.17
7.18
7.19
7.20
7.21
7.22
7.23
7.24
7.25
7.26
7.27
7.28
7.29
7.30
7.31
7.32
8.1
Status of the project preparation dimension in case C
Status of the change management dimension in case C
Status of the project management dimension in case C
Perceived project success in case C
PIP-profile in case C
A general view of the success dimensions in case C
Status of the entrepreneurial dimension in case D
Status of the project preparation dimension in case D
Status of the change management dimension in case D
Status of the project management dimension in case D
Perceived project success in case D
PIP-profile in case D
A general view of the success dimensions in case D
PIP-profile of the successful projects
PIP-profile of the unsuccessful projects
A general view of the successful cases
A general view of the unsuccessful cases
Framework of business development project success in
SMEs
142
144
145
148
149
152
154
156
157
159
160
162
165
174
174
176
176
184
13
LIST OF TABLES
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.4
5.1
5.2
5.3
5.4
5.5
6.1
6.2
6.3
6.4
6.5
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9
7.10
7.11
7.12
7.13
7.14
7.15
7.16
7.17
7.18
7.19
7.20
7.21
7.22
Features of projects
Different versions of projects and their tasks
Four success categories
Success factors of change management
Eight steps to successful change efforts
Total market value of the company
Dimensions of performance
EFQM and PMPA models
SME performance measurement against the topology
Success factors of the entrepreneurial dimension
Success factors of the project preparation dimension
Success factors of the change management dimension
Success factors of the project management dimension
Success categories of project success
Relevant situations for different research strategies
Process of building theory from case study research
Application possibilities of case study
Summary of the cases
Coding principles of categorisation
Summary of the entrepreneurial dimension in Case A
Summary of the project preparation dimension in case A
Summary of the change management dimension in case A
Summary of the project management dimension in case A
Perceived project success in case A
Important factors for project implementation in case A
Summary of the entrepreneurial dimension in case B
Summary of the project preparation dimension in case B
Summary of the change management dimension in case B
Summary of the project management dimension in case B
Perceived project success in case B
Important factors for project implementation in case B
Summary of the entrepreneurial dimension in case C
Summary of the project preparation dimension in case C
Summary of the change management dimension in case C
Summary of the project management dimension in case C
Perceived project success in case C
Important factors for project implementation in case C
Summary of the entrepreneurial dimension in Case D
Summary of the project preparation dimension in case D
Summary of the change management dimension in case D
Summary of the project management dimension in case D
44
46
56
59
63
74
75
79
82
88
89
90
90
92
96
98
98
105
108
113
114
116
117
120
124
126
127
129
130
133
137
140
141
143
145
147
151
154
155
157
159
14
Table
Table
Table
Table
7.23
7.24
7.25
7.26
Table
Table
Table
Table
Table
Table
7.27
7.28
7.29
7.30
7.31
7.32
Table 8.1
Perceived project success in case D
Important factors for project implementation in case D
Perceived project success
Perceived performance of the business development
projects
Summary of the entrepreneurial dimension
Summary of the project preparation dimension
Summary of the change management dimension
Summary of the project management dimension
Summary of the key factors
Common indicators for measuring or assessing project
success
Case study tactics for four tests
161
163
167
168
170
171
172
173
178
178
187
15
LIST OF ABBREVIATIONS
BPR
BSC
EFQM
PIP
PMPA
PM system
R&D
ROI
SBU
SME
TQM
Business Process Reengineering
Balanced Scorecard
European Foundation of Quality Model
Project Implementation Profile
Project Management Performance Assessment Model
Performance measurement system
Research and development
Return on Investment
Small business unit
Small and medium sized company
Total Quality Management
16
17
1
INTRODUCTION
1.1
Background
It has been recognised by the government that the economic success in Finland is
linked to the vitality of the SME-sector. The small and medium sized enterprises,
further abbreviated to the SMEs, have been described as the catalysts for the future
economy. Becoming the most competitive and dynamic knowledge-based economy
in the world will ultimately depend on how successful the enterprises, especially the
small and medium sized ones, there are (Observatory of European SMEs 2002, 5).
The huge majority of the companies (99,7 %) in Finland are SMEs, i.e. enterprises
with fewer than 250 employees (Statistics Finland 2002). The SME-sector’s role as
a notable employer has been emphasised during the last years - over 60 % of the
Finnish employees work for the SMEs (Statistics Finland 2002). The SMEs play a
significant role in the national economy. There is a special need to accelerate the
SMEs’ growth and to improve their competitiveness. The need for the SMEs to
remain competitive and to produce the high quality products and services is
important not only at the national employment level, but also at the industry level,
where the SMEs are often the suppliers for the larger companies. On the other
hand, the changes in the large companies may cause significant repercussions in
the SMEs.
The competition for the future is different from the competition for the present.
Today the speed is of the essence: the product life cycles are getting shorter, the
development times are getting tighter, and the customers are expecting almost an
instantaneous service (Hamel & Prahalad 1996, 37). Today, the business is done at
the global level more than ever before. It means that the competition is tightening
also in the local markets (Pasanen 2003, 15). Under the increasing market pressure
the enterprises are forced to improve their competitive position e.g. by discovering
the new potential arenas for the growth, by decreasing the costs, and by improving
the quality and the productivity.
The current literature suggests that the SMEs may differ from the larger companies
by a number of the key characteristics. Some of them are putting the greater
strains on the SMEs inducing that the business development may be more
18
challenging in this context (Hudson, Smart & Bourne 2001, 1105 – 1106; see also
Ghobadian & Gallear 1997; Julien 1993; Storey 2000):
The
resource
limitations
associated
with
the
SMEs
highlights
the
importance of the productivity.
The lack of money may cause the liquidity risk.
The reliance on a small number of the customers means that the SMEs
must ensure the high level of the customer satisfaction and the flexibility to
respond quickly to the changes in the market.
The flatter structure of the SMEs means that the employees have several
job roles and more responsibility. The multi-skilled employees are
necessity to the enterprises.
The enterprises try to strengthen their competitive position by the development
efforts, a business development project as one tool for that. The development
efforts in the organisations have often been examined from the two perspectives:
the
development
work
consists
of
the
continuous,
gradually
progressive
improvements based on Kaizen-philosophy or the development work consists of a
radical, single-shot reform based on the reengineering (cf. Hammer & Champy
1994, 43; Lanning 1996, 15 - 19). It is ordinary that the business development
projects are placed on the middle ground between these two perspectives.
Nowadays it is common that one development project is followed by another
project, forming the continuous development work by a series of the projects. This
means that the distinction between the “conventional” business and the project
activity targeting the business development is not very clear (Lanning 1996, 22;
Salminen 1995, 1). This also means that it is not easy to separate the project
success from the business success, because it is challenging to distinguish, which of
the results are the consequences of the implemented development project and
which are caused by other factors such as the changes in the business
environment, in the competition and in the prices or changes caused by other
projects, etc.
During the 1990s several international studies have emphasised the speed of
change and its radicality. At the same time there were reports of problems in the
implementation of development projects, and of alarming low success rates of
projects (cf. Beer & Nohria 2000, 133; Buchanan & Boddy 1992, 2 – 3; Kotter
1995, 59 - 60; O’Sullivan 2002, 77 – 78; Schaffer & Thomson 1992, 80 - 81). It is
not an easy task to define project success. The simplest way would be to measure
19
whether the goals set for the project are met, but this does not take into account
the possibility of ill-defined goals. Some of the goals may be measurable and some
of them may be not. Furthermore, the different parties involved in the project
perceive success or failure differently. A project is hardly ever a disaster or a failure
for all the stakeholders during all the phases in the project life cycle (de Wit 1988,
164 - 165; Pinto & Slevin 1987, 269). So, the success is also time dependent; a
project may be perceived as a success one day and as a failure the next.
Defining the key success factors of projects is as difficult as defining the project
success. It is difficult to identify whether an individual factor has a direct effect on
to the project success or whether it is a group of factors that affects the project
success. An additional problem is the uniqueness of a project. The success factors
or the failure factors might not be applicable for all kind of projects, and the factors
may vary along the project life cycle. During the recent years, several lists of
success factors or failure factors have been generated. Many authors have
discovered the success factors of projects from the area of project and change
management (cf. Baker, Murphy & Fisher 1983; Lanning 2001; Salminen 2000).
Some researchers have emphasised the importance of linking the projects to the
strategy implementation (cf. Kenny 2003; Pinto & Slevin 1987; Turner 1999).
Shenhar, Dvir, Levy and Maltz (2001) have linked the project success to an
organisation’s effectiveness.
The academic interest in the business development project success has mainly
focused on projects implemented in large organisations rather than in SMEs.
However, nowadays a great number of business development projects are
undertaken in SMEs, where they can pose a great challenge. One unsuccessful
development project may result even in a fatal breakdown of the business in an
SME. There are not very many answers to the question of how the business
development projects launched to improve the performance in SMEs have met
success and what the key factors for the success are. Nor are there answers to the
question of how to discover the business development project success. This study
aims at finding the answers for the above-mentioned questions.
Previous studies on the business success and performance of SMEs have focused on
new business ventures rather than on existing SMEs (Pasanen 2003, 15). This
study focuses on SMEs that have already established their business.
20
1.2
Objectives of the study
The issue in this research is the business development efforts in small and medium
sized enterprises. The development projects seem to fail very often. Many different
sources support the existence of the need to find out the success dimensions and
key factors of business development projects producing improvements in the
performance of SMEs.
The objective is to gain a deep understanding of business development projects in
the SME-context and to identify factors affecting the business development project
success. The more specific research questions are:
1. How to measure or assess the impact of the business development project
on the performance in SMEs?
2. How have the business development projects implemented in SMEs
affected their performance?
3. Which are the success dimensions and key factors of the business
development projects in terms of project success?
The main aim is to structure and model the success dimensions and key success
factors that contribute to and can be used in evaluating the business development
success in SMEs. This study aims at deepening the knowledge in the problem area
by offering both theoretical and empirical insights. This is done by studying
successful and unsuccessful business development projects implemented in SMEs.
Those who can benefit from this research are SMEs and the external partners
collaborating in business development efforts with the SMEs.
1.3
Key definitions and scope of the study
The key concepts of the research need exact definitions and it is also important to
specify the scope explicitly. This chapter defines the scope of the study and under
the same context introduces the key terms. A more extensive list of the definitions
is given in Appendix 1.
This study focuses on the business development success in the SME-context, and is
restricted to examining business development projects aiming at improving the
performance of the performing company. In this study the definition of a business
21
development project has been adopted from Salminen (1995), who defines a
business development project as a project targeting for more effective business
operations, whose goal is better performance from someone’s (interest group’s)
point of view. Typical engineering projects and repeated delivery projects have
been left outside this study, as both of them are characterised by a high extent of
proceduralisation leading to easiness to define the goals and methods for the
project implementation (cf. Turner & Cochrane 1993).
There exist several types of projects that can be classified as business development
projects (cf. Salminen 1995; Turner & Cochrane 1993). Boddy and Buchanan
(1992, 14 and 152) present that project implementation consists of several
aspects,
including
the
context,
content,
process
and
control.
This
study
concentrates on issues connected to the context, process and control. The technical
content is in a minor role. The study focuses on the general features and patterns
of the execution of business development projects, not on the special features and
special content of an individual project type.
There is no universally accepted definition of project success. The common way of
defining the success is to measure whether the goals set for the project are met.
Guimaraes (1997, 199) has defined the project success in three ways: 1) the goals
and objectives accomplished by the project, 2) the benefits derived from the
project and 3) the impact of the project on the company’s performance. In the
present study the definition of project success has been adopted from Guimaraes
(1997). Further, in this study project success covers project efficiency and project
effectiveness. The efficiency is related to achieving the goals on the schedule within
the budget and the effectiveness refers to the ability to create performance
improvements and positive perceptions in the performing company and its
customers (cf. Salminen 2000; Shenhar et al. 2001).
A project is hardly ever a disaster or failure for all the stakeholders, and the impact
of the project may vary along different time perspectives. The project success and
the impact of the business development project on the performance have been
examined from the very short-term to the very long-term perspective. The relevant
time frame for exploring the project success of the very long-term is around 3 – 5
years after the completion of the project (Shenhar et al. 2001, 717). For that
reason, one selection criterion for the studied projects was that they were
completed several years ago. In this study the project success and the performance
22
improvements have mainly been examined from the point of view of the performing
organisation. The empirical data consists of projects perceived afterwards as
successful or as unsuccessful. Due to the central role of the owner-manager in the
SMEs, she or he has been regarded as a primary stakeholder and the key person to
define the project success or the project failure.
The project success and the project success criteria are two separate items. The
success criteria consist of the measures by which the project success or the project
failure will be judged. Measuring the success involves an evaluation of the degree
to which the objectives have been achieved. In this process, the objectives become
the success criteria (de Wit 1988, 168). Cooke-Davies (2002, 185) has defined that
the success factors are those inputs to the system that lead directly or indirectly to
the success of the project. In the present study the definition of the success factors
has been adopted from Cooke-Davies. In the empirical part of the study, some of
the success factors were discovered to be the key success factors. The key success
factor has had a decisive influence on the project success. The decisive influence
was discovered by two means: the informants, the people involved in the project,
assessed the influence of the factors as very important for the successful project
implementation, and rest of the empirical evidence supports that view.
Performance is the company’s ability to produce the targeted output, satisfying the
needs of different interest groups (Laitinen 2003, 366). In the empirical part of this
study, the improvements or the impairments of performance caused by the
implemented business development project are mainly based on subjective
measurement conducted with quasi-perceptual and perceptual measures and
utilising the multi-informant system. The perceptual measures are based on
subjective instruments of performance, e.g. overall performance (cf. Dess &
Robinson Jr. 1984, 271). The quasi-perceptual measures are measurement
instruments in which the content of the measure is defined according to an
operational definition, but the measurement units are defined as perceptual
(Ketokivi & Schroeder 2004, 251). Objective, operationally defined data of the
company’s performance collected from secondary, independent sources are used to
complement the findings (cf. Doty & Glick 1998; Venkatraman & Ramanujam
1986).
23
Further, this study focuses on small and medium sized enterprises what have
already established their business. The definition of the SME has been adopted from
the European Commission (Official Journal of the European Union 2003). So, the
present study focuses on companies that have fewer than 250 employees and
whose annual turnover does not exceed 50 million euros, and/or the annual balance
sheet total does not exceed 43 million euros. However, the enterprises concerned in
the empirical part of this study are much smaller, employing no more than 160
persons. Micro enterprises, with less than 10 employees, have been left outside this
study.
1.4
Structure of the study
This study consists of nine chapters. The first chapter offers a general overview of
the problem area of the study and presents the objectives and scope of the
research. A literature review is given in Chapters 2, 3 and 4, covering the most
relevant theories and concepts for this study. These sections are also used as a
basis for creating a theoretical framework for the business development project
success in the SME-context (Chapter 5). Chapter 6 introduces the research
methods and describes the qualitative case study research, the selection of the
cases and the collection of the empirical data. It also presents the interpretation of
the data. Chapter 7 consists of the analysis of the four cases and cross-case
analysis. The findings based on the analysis are presented in Chapter 8. This
chapter also discusses the effects on the theoretical framework, gives a summary of
the results, presents a contribution, and discusses reliability and validity issues. The
limitations of the study and the directions for future research are also pointed out.
Finally, Chapter 9 provides a short summary of the study. Figure 1.1 illustrates the
structure of the study.
24
Figure 1.1
The structure of the study
25
2
BUSINESS DEVELOPMENT IN SMES
The word enterprise has been used in a range of contexts and meanings (Bridge,
O’Neill & Cromie 2003, 14). For someone, the word enterprise refers to starting,
running and developing a small business. For others, it is a set of the personal
qualities
and
attitudes
of
entrepreneurs
making
it
possible
to
recognise
opportunities instead of problems. The European Commission defines an enterprise
to be an entity engaged in an economic activity, irrespective of its legal form
(Official Journal of the European Union 2003).
Salminen (2000, 41) describes an enterprise as a controlled system consisting of a
detector, a selector and an effector. The detector is the function by which a system
acquires information about its environment, which is then used as the basis of the
selection of a behavioural response by the selector. Finally, the behaviour is
executed by the effector. The measurement system of an enterprise gathers
information about the changes in both the environment and the performance of the
enterprise. This information is then used together with the values and the
preferences of the enterprise and its management to produce decisions about the
required actions. As a result, the outputs of the enterprise – the products, the
services, the operational performance and the financial performance - are changed
(Salminen 2000, 41). Figure 2.1 depicts the system view of the enterprise.
Feedback
Enterprise
Detector
Measurement
system
Selector
Management
decision
Effector
Implementation
of actions
Output
Enterprise
performance
DEVELOPMENT PROJECT
Figure 2.1
Enterprise as a system (Salminen 2000, 41)
This study has adopted the view introduced by Salminen (2000), describing an
enterprise as a system where business development projects are implemented.
26
2.1
Definition of an SME
The definition of small and medium sized enterprise (SME) has varied. Because of
the diversity of small business, every simple definition is subject to criticism. The
ideal definition depends on one’s perspective and the purpose of the research
(Nooteboom 1994, 328). The number of employees and the financial turnover are
commonly used attributes. When categorising enterprises with these attributes, it is
useful to notice the difference between various industries. While a consumer service
firm is considered as big with 50 employees, in manufacturing it may not be
considered as a big firm. According to Nooteboom (1994, 328), the characteristics
of a small firm can also arise in the relatively independent units of large firms.
The Employment and Economic Development Centre (TE-Centre Finland 2002) has
defined the small firm as an enterprise with fewer than 50 employees. Its turnover
is no more than 7 million euros and the total assets are no more than 5 million
euros. A medium sized enterprise has fewer than 250 employees. Its turnover is no
more than 40 million euros and the total assets are no more than 27 million euros.
Further, bigger companies’ share of the ownership is limited. They can hold a share
of the ownership of the SME by no more than 25 %.
The European Commission (Official Journal of the European Union 2003) has
divided the SME-sector into three categories, micro, small and medium-sized
enterprises as follows:
The SME employs fewer than 250 persons, its annual turnover does not
exceed 50 million euros and/or the annual balance sheet total does not
exceed 43 million euros
The small enterprise employs fewer than 50 persons, and its annual
turnover and/or annual balance sheet total do not exceed 10 million euros
The micro enterprise employs fewer than 10 employees, and its annual
turnover and/or annual balance sheet total do not exceed 2 million euros
To gain a better understanding of the real economic position of SMEs and to
remove from that category group such enterprises whose economic power may
exceed that of genuine SMEs, a distinction was drawn between the different types
of enterprises, depending on whether they were autonomous (autonomous
enterprise), whether they had holdings which did not entail a controlling position
(partner enterprises) or whether they were linked to other enterprises (linked
27
enterprises). To be an autonomous enterprise, the general limit of holding is 25 %
(Official Journal of the European Union 2003).
The definition of an SME proposed by the European Commission (Official Journal of
the European Union 2003) has been adopted in this study.
When using the size of personnel, defined by the European Commission as a
criterion for SMEs, 99.7 % of all Finnish companies were small and medium sized
firms in the year 2002 (Statistics Finland, 2002). This means that there are
altogether over 220,000 SMEs in Finland. The employing power of SMEs is high.
About 800,000 people - over 60 % of the total workforce - work for SMEs.
2.2
Characteristics of SMEs
The typical characteristics of SMEs are connected to small scale, personality and
independence (cf. Nooteboom 1994, 327 – 331; Julien 1998, 15 - 17). Hudson et
al. (2001, 1105) summarise a number of key characteristics for SMEs:
Personalised management, with a little devolution of the authority
Severe resource limitations in terms of management and manpower, as
well as finance
Reliance on a small number of customers, and operating in limited markets
Flat, flexible structures
High innovatory potential
Reactive, fire-fighting mentality
Informal, dynamic strategies
According to Messeghem (2003, 199) and Julien (1993, 158), the major
characteristics of SMEs involve simple organisational structures, the prime role
played by the owner-manager as a driving force, an essentially local market,
implicit strategy and a little planning and control. Their resources are limited and
their strategic options are comparatively simplistic and narrow (Robinson Jr. &
Pearce II 1984, 128). However, by using networks, SMEs can compensate for their
lack of resources. The external networks of SMEs are not well-defined and the
companies’ intelligence gathering systems are typically unsophisticated and noncomprehensive (Schindehutte & Morris 2001, 87).
28
As advantages of the small scale, SMEs typically have a motivated, committed
management and labour. They also have the capacity to customise their products
and processes, being able to respond to varying customer requests (Martinsuo &
Karlberg
1998,
7).
SMEs,
with
their
centralised
decision-making,
organic
organisation and relatively non-specialised production factors, are able to change
quickly (Julien 1993, 161).
The personal characteristics of the owner-manager have been under increasing
interest. Some attempts have been made to explain business success or failure in
terms of personality traits of the entrepreneur (cf. Glancey, Greig & Pettigrew
1998; Stewart Jr., Watson, Carland & Carland 1998). Nooteboom (1994, 329 - 330)
highlights that one of the most important characteristics of the small business is its
diversity. The sources that produce diversity lie in the variance of the backgrounds,
motives and goals of the entrepreneurs.
The terms, entrepreneur and small business owner are often used as synonyms.
The most common definition for the entrepreneur or for the small business owner is
that she or he is a person who has started a business. Some researchers (cf.
Stewart Jr. et al. 1998, 204; Carland, Hoy, Boulton & Carland 1984, 358) have
specified a portrait of an entrepreneur and a small business owner. An entrepreneur
is an individual who establishes and manages a business for the principal purposes
of profit and growth. She or he is highly driven for success and characterised
principally
by
innovative
behaviour.
An
entrepreneur
will
employ
strategic
management practices in business and she or he has a high propensity for risktaking. The small business owners are less risk oriented, and they are not as highly
motivated to achieve as the entrepreneurs are. The small business owner
establishes and manages a business for the principle purpose of furthering personal
goals. The business is the primary source of income and will consume the majority
of one’s time and resources. The small business owners do not have the same
degree of preference for innovation and risk-taking. The owner perceives the
business as an extension of her or his personality, intricately bound with family
needs and desires (Carland et al. 1984, 358).
Some researchers have defined the characteristics of SMEs by comparing them with
large companies. Storey (2000, 10 - 12) introduces three central respects in which
small enterprises are different from large companies: uncertainty, innovation and
evolution. Environmental uncertainty has been defined to include absence of
29
sufficient information about changes in the environment and/or inability to predict
external changes and their impact (Duncan 1972, 318; Milliken 1987, 134). Van
Gelderen, Frese and Thurik (2000, 170) have conceptualised uncertainty for three
levels: the industry level, the firm level and the individual level. The industry level
uncertainty
refers
to
the
changes
and
unpredictability
of
the
economic
environment. On the firm level, it refers to resource uncertainty and on the
personal level the uncertainty is connected to the adequacy of entrepreneurial
capabilities.
According to Pasanen (2003, 44), changes in the environment cause more
uncertainty in SMEs than in larger companies, because SMEs’ resources for
acquiring information about the market and changing the course of the enterprise
are more limited. Some researchers (cf. Boynton, Gales & Blackburn 1993;
Sawyerr, McGee & Peterson 2003, 283) have found that managers can respond to
uncertainty by finding information from external sources and by personal
networking, and by doing so they can influence the financial performance of their
firms. Brüderl and Preisendörfer (1998, 224) continue that the network of a founder
improves the survival and growth of newly established businesses.
The second key area of difference between small and large enterprises is their role
in innovation. The conventional role that the small enterprises play in innovation is
their niche role. It is the ability of the smaller enterprise to provide something
marginally different, in terms of a product or a service, which distinguishes it from
the more standardised products or services provided by large enterprises (Storey
2000, 11 - 12). Georgellis, Joyce and Woods (2000, 8) add that the extent the
small businesses will be successful in the innovation depends on whether they
possess the following three competencies: a capacity to innovate, a capacity to plan
ahead and a willingness to take risks.
According to Acs, Morck, Shaver and Yeung (1997, 11), radical innovations are
more likely to take place in small firms than in large firms, because of the
advantages that the small firms offer in protecting the property rights. The
refinement and commercialisation of innovations are more likely to take place in the
larger firms because of the availability of resources. The high rates of innovation
made by SMEs therefore require property rights protection and low entry barriers.
The entry barriers that limit expansion are systemically higher for smaller firms
than for larger firms. Martinsuo and Kalberg (1998, 8) claim that SMEs play an
30
important role in innovation, but they have difficulties accessing new technology,
financing and other resources.
The third area of difference between large and small enterprises is the much
greater likelihood of evolution and change in the smaller enterprise (Storey 2000,
12). The small enterprises that become larger undergo a number of stage changes,
which influence the role and style of the management and the structure of the
organisation (Churchill & Lewis, 1983). The structure and organisation in the small
enterprises are more likely to be in a state of change as the firm moves from one
stage to another.
After defining the core characteristics of small business, Nooteboom (1994, 333 334) continues that much else follows, including small business strengths and
weaknesses. The strengths and weaknesses suggest appropriate core strategies;
innovation yielding new products where scale effects are not yet in force or/and
niche markets with customised products, where scale effects do not appear (Figure
2.2). The small firms tend to be strong where the large firms tend to be weak and
vice versa. An advantage of the smallness is the greater potential flexibility and
closeness to the customer. The disadvantage is a lack of economies of scale, scope
and experience (Nooteboom 1994, 335 - 344).
31
CHARACTERISTICS
STRENGTHS
Intertwined ownership and
management
Motivated management / commitment
Integration of tasks for worker;
variation and improvisation
Motivated labour
Few hierarchical levels; short
communication lines
No bureaucracy; internal flexibility; little
filtering of proposals
Few and simple procedures; personal,
direct, oral internal communication
Low cost and little distortion of internal
communication
Personal and close relations with
customers
Capacity for customisation
Craftsmanship
Unique or scarce competencies
Tacitness of knowledge
Appropriability
Idiosyncratic perception
Originality of initiative
CORE CHARACTERISTICS
Small scale
Personality
Independence
CORE STRATEGIES
Innovation or niche strategies
New and / or customised products
External networks
Idiosyncratic perception
Unopposed misapprehensions
Tacit knowledge
Limited capacity for absorption of new
knowledge / technology
Craftsmanship
Technical myopia
Few products and markets
Little spread of risk, limited synergy
Small volume of production
Diseconomies of small scale
No staff functionaries
Lack of functional expertise
Lack of managerial time
Ad hoc management, short term perspective
Much authority and many
functions in one hand
Vulnerability to discontinuity of
management and staff
Few layers of hierarchy
Limited career opportunities
Low level of abstraction
product – or technique orientation
Errors in marketing and strategy
Possible lack of finance
Lack of means for growth
WEAKNESSES
Figure 2.2
Strengths and weaknesses of small business (Nooteboom 1994, 334)
32
2.3
Business success in SMEs
In general success is related to the achievement of goals and objectives. The
different stakeholders may have different goals and aspirations for the enterprise,
and they may change over time. Because of the central role of the entrepreneur in
a small enterprise, Jennings and Beaver (1997, 67 - 68) suggest that it would be
appropriate to regard an entrepreneur as the primary stakeholder and to consider
how she or he might define success or failure. The entrepreneur’s values and
expectations may affect the main goals of the enterprise greatly.
2.3.1
Elements of business success
Some researchers have argued that success is driven by the entrepreneurial
orientation (cf. Covin & Slevin 1991; Lumpkin & Dess 1996; Wiklund & Shepherd
2004). According to Lumpkin and Dess (2001, 431), the concept of entrepreneurial
orientation consists of five dimensions: autonomy, innovativeness, risk taking, proactiveness,
and
competitive
aggressiveness.
Autonomy
is
defined
as
an
independent action by an individual or a team aimed at bringing forth a business
concept or a vision, and carrying it through to completion. Innovativeness refers to
the willingness to support creativity and experimentation. Risk taking means a
tendency to take bold actions, such as venturing into unknown new markets. Proactiveness is an opportunity-seeking and forward-looking perspective. The fifth
dimension, competitive aggressiveness, reflects the intensity of a firm’s efforts to
outperform the industry rivals. (Lumpkin & Dess 2001, 431).
High performing, entrepreneurial-oriented firms are successful in exploiting
business opportunities. Before opportunities can be exploited, they must be
recognised. According to de Koning and Brown (2001), the entrepreneurial
orientation is positively associated with opportunity alertness. Shane (2000, 465)
has discovered that people recognise the opportunities related to the information
and knowledge, they already possess. He also has noticed that entrepreneurs can
and will discover opportunities through recognition rather than through search.
Small business success has often been classified into three categories of
antecedents:
the
individual
characteristics
of
the
owner-manager,
firm
33
characteristics
and
environmental
characteristics
(cf.
Cragg
&
King
1988;
Rutherford & Oswald 2000). The individual characteristics include attributes like the
age, education, managerial know-how, industry experience and social skills of the
owner/manager. The firm characteristics refer to the strategy, structure, location,
firm-specific policy, etc. The environmental characteristics are connected to the
market conditions.
Glancey et al. (1998, 255) have introduced a model of entrepreneurial dynamics,
revised from that suggested by Cragg and King (1988). The personal attributes of
the entrepreneur determine the motivation and objectives, which in turn determine
the firm’s performance. The process is mediated through the markets in which the
entrepreneur operates and the managerial practices which he or she employs. The
dynamic element is incorporated by the possibility that the business performance
may reinforce or revise the entrepreneur’s motivation and objectives. The
possibility of feedback on the performance and learning from experience as an
important form of entrepreneurial human capital are encompassed in the model
(Figure 2.3).
Markets in which
firms operate
Entrepreneur’s
characteristics
Entrepreneur’s
objectives
Business
performance
Managerial
practices
Figure 2.3
Model of small firm performance (Glancey et al. 1998, 255)
Some authors (Chell 1985; Hofer & Sandberg 1987, 12) have criticised the small
business research for trying to establish a direct relation between the personal
characteristics of the entrepreneurs and the success or failure of their firms. E.g.
Birley and Westhead (1994, 27 - 28) could not find any empirical support for the
strategies of picking the winners solely on the basis of the characteristics of the
owner-manager and the business start-up reasons. Nooteboom (1994, 332)
continues that those characteristics do not determine the outcomes directly. They
are in interaction with contingency factors from the context in which the firm and
the entrepreneur operate and with the strategies they take (Figure 2.4).
34
Characteristics
Entrepreneur / firm
Goals / values
Context / Structure
Market
Life cycle / stage
Institutions
Technology
Conduct
Search
Strategy / Structure
Product
Price, etc.
Performance
Profit
Growth
Potential
Figure 2.4
Structure – conduct – performance (Nooteboom 1994, 332)
In addition to the various characteristics of an entrepreneur, it is necessary to
recognise also the team with which she or he works. The values and goals affect
the preferences. With the context/structure it is necessary to consider not only
items of technology and market, but also institutions. Life cycle refers to the stage
of the development of the product or the market in which the firm is involved and
the developmental stage of the firm. Under conduct are included the strategy, the
organisational structure with procedure and routines, the choice of product, the
search referring to the acquisition of the knowledge and the use of the external
networks to compensate for the internal lack of expertise. (Nooteboom 1994, 332 –
333).
Beal (2000, 28) provides a similar model. He emphasises that both external and
internal alignment influence a firm’s performance. The external alignment means
the alignment between the competitive strategy and the industry life cycle stages,
and its effect on the performance. The internal alignment means the competitive
strategy and the small business manager’s functional experience and its effect on
the performance.
According to Jennings and Beaver (1997, 63), a popular belief is that superior
performance and competitive advantage in the smaller firm is invariably equated
with successful business development culminating in exceptional return on the
35
investment, sales growth, volume, profit and employment. They continue that
contrary to popular belief the owner-managers pursuit of personal financial fortune
is not as significant as the desire for personal involvement, responsibility and
independent style of life. The attainment of these objectives becomes one of the
principal criteria for success.
2.3.2
Growth as a source of business success
Many scientists have shown an increasing interest in the growth of SMEs as a main
source of improvements in the business success. Woodward (1976, 113 – 114)
warns to aspiring for growth just for growth’s sake; it is not a synonym for success.
The huge number of conflicting explanations may reflect the problematic nature of
the phenomenon. The SME growth may be a result of strategic choices made by
entrepreneurs or structural characteristics of the external environment (Eisenhardt
& Schoonhoven 1990, 524 – 526; Hambrick & Mason 1984, 197 - 198). Also
O'Gorman (2001, 60) divides the different kinds of explanations for growth into two
generic
categories
-
strategic
choice
explanations
and
industry
structure
explanations. The strategic choice explanation emphasises the fact that SME growth
is a result of strategic and structural choices made by the entrepreneurs. The
industry structure explanation highlights the fact that the entrepreneur has only a
little influence on the growth, because for many SMEs the principal determinant of
growth is the structural characteristics of the industry. The SMEs grow at different
rates within the environment or the industry context. These differences in the
performance suggest that the strategic choices made by the entrepreneurs impact
on the organisational growth. The organisational growth and change are based on
the assumption that organisations can and do grow and change under managerial
guidance through various stages of industry evolution (O'Gorman 2001, 61).
Rather than keeping the strategic choice and the environmental approaches
separate, it have been suggested that it might be useful to combine these
approaches (Bourgeois III 1984, 593; Roper 1999, 245). Poutziouris (2003, 191)
writes that while the most important factor for business growth is the overall
market demand for products and services, the management capacity and the
attitudes towards change, succession and growth play an equally significant role in
determining the business success. According to Morrison, Breen and Ali (2003,
36
423), a key distinguishing feature of the pro-growth small business is the balanced
alignment of the owner-managers’ intention, the abilities of the business, and the
opportunity environment. Also Barringer and Jones (2004, 84 - 85) highlight the
importance of the managerial capacity and motivation to ensure the successful
growth of the firm. Storey (2000, 122 - 154) argues that the growth of the small
business is driven by the interaction of three key groups of variables:
The calibre of the owner-manager(s) and the entrepreneurial resources;
motivation, education, management expertise, skills, age and family
history
Business profile; age, size, sector (high-tech/low-tech, export intensity),
legal form and ownership regime
Strategic
exporting,
planning;
external
market
positioning,
financing,
human
research
and
development,
resource
management
and
development, succession planning, etc.
According to Storey (2000, 158), the rapidly growing enterprises constitute a tiny
proportion of the small enterprise population. Most of the enterprises, even in ideal
macroeconomic circumstances, do not wish to grow in the employment. Those
enterprises that exhibit low or negative growth have significantly higher death rates
than the fast-growth firms. The SME-enterprise barometer (PK-yritysbarometri
2000, 11) shows that fast growth is not a main target for most Finnish SMEs; less
than a tenth of the small and medium sized enterprises want to gain fast growth.
Half of the SMEs target at growth if they have a chance for it. Only 7 % of the SMEs
do not target at the growth at all. The willingness for expanding is higher, when the
size of the enterprise expands. Also Poutziouris (2003, 202) has found that only a
minority of the small business owner-managers are growth inspired. Growth is
often associated with higher risk-propensity, dilution of control through the
extension of management teams and broadening of the equity ownership base. The
elements that appear to be associated with growth are: motivation, education,
having more than a single owner and middle-aged business owners. Amongst the
strategy variables, the willingness to share the ownership, the ability to identify the
niches, the introduction of the new products and the ability to create teams of
managers, are generally related to growth (Storey 2000, 158).
Beekman and
Robinson (2004, 73) add that the successful growth companies appear to seek a
few or a sole strategic supplier partner and concentrate on making that relationship
work to their advantage.
37
2.3.3
Strategy and planning as a source of business success
The influence of the strategy and planning systems on performance in the SMEs has
been under increasing interest. The previous studies that have examined the
relationship between strategic planning and business performance, have reported
conflicting results - some finding a positive and significant impact (cf. Bracker &
Pearson 1986, 516 – 519; Peel & Bridge 1998, 854 - 855) and others finding no
relationship (cf. Greenley 1986, 108).
Robinson Jr. and Pearce II (1983, 202 –
205; 1984, 129 - 130) argue that formal strategic planning is a conceptual activity
suited solely for large firms, but it has no effect on the financial performance of
small firms. They suggest that the small firms lack the necessary staff and time to
engage in strategic planning or marketing. Instead, the SMEs focus on operational
aspects geared primarily to survival on a day-to-day basis. Kargar’s (1996, 30)
findings support the view that the benefits of strategic planning are more of a
process nature, which may be necessary, but not a sufficient condition for
improving the financial performance. Meanwhile Bracker and Pearson (1986, 516)
write on the basis of their research results that firms with a long planning history
outperform firms with a short planning history. According to them, it takes time,
expertise and experience to develop and to implement a sophisticated strategic
planning system within an organisation. The level of sophistication of the planning
process has an impact on the financial performance, especially on revenue growth
and entrepreneurial compensation growth (Bracker & Pearson 1986, 517). The
most common indicator of the existence of a formal planning process is the
presence of a written long-range plan (Rue & Ibrahim 1998, 25).
In SMEs, the vision and strategy are not necessarily well defined or there is no clear
strategy or vision at all. According to Tenhunen, Rantanen and Ukko (2001), the
most important factor in the implementation process of performance measurement
systems in SMEs are a precise statement of the corporate strategy, and support
and commitment of the top management. Also Dollinger’s (1984, 364) research
results highlight the importance of strategy. According to his results, strategic
action is related to the performance of the firm and the compensation of the
entrepreneurs. In spite of this, the strategic plans and the goal structure can be
implicit. O’Gorman and Doran (1999, 64 - 65) found in their study on Irish SMEs
that high-growth SMEs do not have more comprehensive mission statements than
low-growth SMEs. According to them, expressing the mission in a formal statement
is certainly an option, but with the Irish SMEs it was not clearly critical to the
38
success. An important point is that the company must have a clear sense of
direction. According to Jarvis, Curran, Kitching and Lightfoot (2000, 125) the reality
is that the owner-managers of small firms pursue a range of goals, but the most
important appear to be business survival and stability.
2.4
Challenges of business development in SMEs
According to Storey (2000) and Julien (1998), typical problems in SMEs are a lack
of resources, money, technology and time. Also the SMEs’ short-term perspective
may cause problems. Hannula and Rantanen (1998, 90) found in their research
carried out in the Päijät-Häme and Pirkanmaa regions that the most common
internal obstacles to productivity improvements in SMEs are the lack of time and a
general lack of resources. Workers' shortcomings in knowledge and education were
also found to be significant.
Many authors have recognised the lack of management skills as one main problem
in SMEs (Winch & McDonald 1999, 49; Youssef, Mohamed, Sawyer Jr. & Whaley
2002, 303). While larger firms are likely to have experienced a major change at the
some point in their company history, smaller firms, either because of their newness
or their slow-growth histories, may not have. A SME may easily find itself with
limited indigenous management skills - not only in change management itself, but
also in the new skills that will be necessary to manage the enterprise after a change
has taken place (Winch & McDonald 1999, 49). The SMEs will more likely to engage
in informal management practices than to adopt sophisticated planning and control
techniques (Martin & Staines 1994, 26). Berman, Gordon and Sussman (1997, 1)
add that most small enterprises not only lack sophisticated planning processes, but
also almost any planning processes. The SMEs are susceptible to business failure
primarily due to the poor risk management associated with inadequately informed
decision-making (Barnes, Coulton, Dickinson, Dransfield, Field, Fisher, Saunders &
Shaw 1998).
According to Youssef et al. (2002, 303), many SME-owners have little formal
management training. The limited size of the management team means that the
individuals are often responsible for a number of different functions with either little
or no backup. A small number of de-motivated or uncommitted staff can
disproportionately affect the outcome. The centralisation of the decision-making
39
process within the SMEs means that the manager can either be the main stumbling
block to change or the main catalyst for the change (Ghobadian & Gallear 1997,
127). The lack of extended hierarchy offers the top management the opportunity to
build a strong personal relationship with the employees, but it also increases the
potential for interpersonal conflict (Ghobadian & Gallear 1997, 127 - 129).
The SMEs typically have the less formalised internal and external information and
communication systems. According to Winch and McDonald (1999, 50), the shorter
internal lines of communication and the faster response times allow speedy problem
solving and reorganisation. Martinsuo and Karlberg (1998, 7) continue that the
SMEs’ decision-making process is effective, but disadvantages in SMEs are their
limited capacity for marketing, strategy, acquisition of the new knowledge and
technology, and finally sensitivity to external pressures and risks. Nooteboom
(1994, 344) warns about risks due to the absence of specialised staff and the lack
of outside criticism. Lang, Calantone and Gudmundson (1997, 20) discovered that
when facing a threat or an opportunity, the small firm managers must gather the
data outside of the organisation due to the lack of internal information systems.
The lack of resources causes problems for the SMEs in developing their products
and utilising new technology. It is a potential barrier to innovation and adaptability
(Acs et al. 1997). Hyvärinen (1993, 1) continues that SMEs can manage only one
innovation project at a time. They have to choose the project very carefully so that
it will not turn out to ruin the whole enterprise. Some SMEs never develop a new
product or other innovation, and even small development projects can be
problematic to them. According to Nooteboom (1994, 338), small firms participate
less in R&D projects than large firms, but when they do participate, it happens with
a greater intensity and a greater productivity than in large firms.
An SME is often strongly based on the owner’s know-how and expertise. The role of
the owner is important. SMEs are often subcontractors for large firms and they
operate in a great hurry in tight competition dictated by the markets. In a
hardening and internationalising competition, new skills and knowledge are needed
(Rantanen, Ukko & Rehn 2001). Especially the pursuit of growth requires that the
owner can learn new skills and change from a doer to a manager – he or she must
spend less time doing and more time managing (Churchill & Lewis, 1983, 38).
Pennings, Lee and Van Witteloostuijn (1998, 437 - 438) have discovered that the
industry-specific human capital and the social capital of the owners contribute more
40
to a firm’s survival than those of the employees, but the contribution of a firmspecific human capital to the firm’s survival does not depend on who holds it.
Human capital is defined as the knowledge and skills that can be used to produce
professional services, and social capital refers to the supporting relationships with
other economic actors, the clients as one important group of the actors.
Nooteboom (1994, 337) proposes that particularly in the small business much of
the operating knowledge is tacit, and that is connected to the craftsmanship. By
tacit knowledge he means the knowledge typically acquired in learning by doing.
Often the person is even not aware that she or he has that knowledge.
Furthermore, in the small business the knowledge tends to be shallow, meaning
that there are no functional specialists. The required special knowledge can be
compensated by supplementing it from external sources.
Most small business owners start their own business on their knowledge to produce
something, which they have gained e.g. as production managers. Such persons are
interested in the techniques, and their typical problems lie in the marketing. Also,
taking care of financial matters and accounting is difficult for them. They lack the
skills of interpreting the various calculations and the balance sheet. Also pricing and
making budgets are difficult for them (Hyvärinen 1993, 23).
The most important person in the SME is the owner-manager. She or he
participates in most of the SME’s operations. However, much of her or his time is
spent in solving various everyday business problems. Thus, finding time for
development projects can be a problem.
The SMEs have the best chances with
production development projects, because that is the field they usually know best.
Projects aiming at business not previously known to the small enterprise very
seldom succeed (Hyvärinen 1993, 36). Ghobadian and Gallear (1997, 161 - 162)
warn against becoming over-ambitious with improvement efforts. Unrealistic
objectives lead to a situation, where the expectations start to exceed the
achievements. Hyvärinen (1993, 20) defines a good development project as an
effort harmonious with the SME’s plans and resources, which supports its strengths
and other activities, and helps it to overcome the difficulties arisen, often with the
help of outside specialists.
41
2.5
Summary
In this study the definition of the SME has been adopted from the European
Commission using the size of personnel, the turnover and/or the amount of total
assets as the criteria. An enterprise is seen as a system consisting of a detector, a
selector and an effector as introduced by Salminen (2000). This system describes
the environment where the business development projects are implemented. The
system acquires and receives information about changes in the economic
environment. These changes can be interpreted as new business opportunities or as
problems.
Prior knowledge feeds positive opportunity recognition. The entrepreneur’s values,
beliefs and goals have an effect on which opportunities will be selected to be
important for consideration. Many researchers have emphasised the importance of
connecting the decisions with the strategy. On the other hand, many researchers
have recognised that SMEs do not have a strategy. Anyway, due to the lack of
resources, enterprises need to be very focused in the selection phase and have a
clear sense of direction, written or unwritten.
Many researchers have emphasised the importance of the management skills,
sophistication of the planning practices and the knowledge of the entrepreneur. The
owner-managers’ strength of intention and the opportunity environment have been
found to be sources of the success. The business ability is needed to realise the
owner-manager’s intentions and opportunities. The selected business opportunity
can generate results for the performing organisation, varying between the edges of
success or failure. Both these edges are supposed to have an effect on the
performance of the enterprise. Success is seen to relate to the achievement of
objectives. Because the entrepreneur’s values and beliefs affect the objectives, she
or he is seen to be in the main role in defining the success or failure (cf. Jennings &
Beaver 1997).
Often growth is seen as the main source of improvements in the business success,
but as described above, growth, especially growth in the employment, is not an
objective for many entrepreneurs. They are targeting at survival in the long run.
42
This chapter highlighted the enterprise as a system, describing the environment
where
business
development
projects
are
implemented.
This
chapter
also
introduced the characteristics of business development in the SME-context. It
explained that the essential aspects of successful business development connected
to the industry evolution and the characteristics of the owner-managers can be
summarised under three central issues:
1.
The strength of the intention
2.
The richness of the opportunity arena
3.
The business ability to realise the recognised opportunities
These three issues constitute a compact whole for examining the business
development success in SMEs, later called the entrepreneurial success dimension.
This chapter also displayed some essential aspects to be considered before
management decisions. Due to the lack of resources SMEs have to choose their
projects very carefully. They need to be well focused and have a clear sense of
direction. In order to avoid over-ambitious projects leading to project failure, the
balance between project goals and resources need to be rated well. Prior knowledge
gives a good pillar for successful business development project implementation.
These aspects can be summarised under three issues:
1.
Clarity of the business impact
2.
Balance between project goals and resources
3.
Prior knowledge
These issues constitute a domain later called the project preparation success
dimension.
43
3
PROJECT AS A TOOL OF BUSINESS DEVELOPMENT
Under the increasing market pressure the enterprises are forced to improve their
competitive position. It means that the organisations are continually involved in a
variety of development efforts, e.g. new product development, productivity
improvements, quality system implementation, etc. The development projects are
in a central role when implementing the organisational objectives. King (1983, 155)
describes projects and programs as vehicles through which the strategy is
implemented.
The development efforts in organisations have often been examined from two
perspectives: the development work consists of continuous, gradually progressive
improvements based on the Kaizen-philosophy or the development work consists of
radical, single-shot reform based on reengineering (cf. Hammer & Champy 1994,
43; Lanning 1996, 15 - 19). It is common that business development projects are
placed in the middle ground between these two perspectives. Nowadays it is
common that one development project is followed by another project, forming a
continuous development work by a series of projects. This means that the
distinction between “conventional” business and project activity targeting at
business development is not very clear (Lanning 1996, 22; Salminen 1995, 1).
3.1
Project and project management
When project theories were developed, a project was defined as an undertaking
that accomplishes a set goal within a designated budget and a specified time frame.
The project work, an undertaking carried out in the form of a project, has always
been characterised by a short implementation period. Projects are limited by time.
Nowadays the term project is defined in a broader meaning. According to Turner
(1999, 3), a project is an endeavour in which human, material and financial
resources are organised in a novel way to undertake an unique scope of work, of
given specification, within the constraints of cost and time, so as to achieve a
beneficial change defined by quantitative and qualitative objectives.
Turner's (1999, 3) definition presents the five basic goals of a project: purpose,
time, cost, quality and organisation. Later on, Turner and Müller (2003, 2) have
44
extended this definition by indicating a range of features shared by the projects
(Table 3.1).
Table 3.1
Features of projects (Turner & Müller 2003, 2)
Aim
Features
Pressures
Processes
To deliver
Unique
Uncertainty
Flexible
Beneficial
Novel
Integration
Goal Oriented
Change
Transient
Transience
Staged
A project is undertaken to deliver beneficial change and thus has three essential
features (Turner & Müller 2003, 1):
It is unique: no project before or after will be exactly the same
It is an undertaking using novel processes: no project before or after will
use exactly the same approach
It is transient: it has a beginning and an end
These features create three pressures:
Projects are subject to uncertainty: we cannot be certain that our plans will
deliver the required project outcomes or the desired beneficial change.
They create a need for integration: of the resources to do the project,
between the different parts of the projects, and of the project into the
business.
They are undertaken subject to urgency: of delivering the desired
outcomes within desired timescales.
Also Riis and Mikkelsen (1997, 19) have recognised what will make the project
difficult to carry out. They add two characteristics to Turner’s and Müller’s (2003, 1)
list of pressures. A high degree of complexity and sensitivity to conflicts of the
interests among the stakeholders may cause difficulties in the project planning and
implementation.
The project management approach is used in many areas of commercial and human
life. PMBOK (2000, 6) defines project management as an application of the
knowledge, skills, tools and techniques of project activities to meet or to exceed the
stakeholders’ needs and expectations from a project. Turner (1999, 4 - 6) claims
that project management is about managing the people to deliver the results, not
managing the work. The project has not been carried out for its own sake, but to
45
achieve some output. Turner (1996) as cited in Atkinson (1999, 338) has defined
project management in a new economy so that it captures the essence of the
discipline, stating that project management is “art and science of converting vision
into reality”. Many projects are undertaken today in small companies, where the
project team is involved in all the business aspects, and there is no distinction
between the project success and the product success. The projects in the future will
no longer be just operational tools for executing the strategy. They will become
engines that drive the strategy into new directions (Shenhar et al. 2001, 703).
The areas where projects are implemented are wide. It is difficult to find a
comprehensive model that suites every project. In the project management
literature, two major observations have been made. First, projects have been
divided into many subcategories. The categorisation varies a lot from author to
author. Second, the project lifecycle and the tasks that should be done in the
different stages vary a lot in the literature. The stages depend on the type of
project (PMBOK 2000), but there are some common issues that seem to form the
core of the project management discipline.
Table 3.2 presents four different models, their phases and the corresponding
activities of each phase. The most common is the four-phase model, but the names
of the phases change from author to author. In general, the project life cycle
contains four phases. The project begins with the feasibility phase, when the need
for the project is identified, preliminary analysis is carried out, and preliminary
plans and vision are presented to the top management in order to gain their
commitment. In the planning phase project plan, recourses, costs, schedule and
organisation are defined. The realisation of the project takes place in the
implementation phase.
The project management needs to motivate, control and lead the people during the
implementation. In the finalising phase the results are delivered to the customer,
the responsibilities are transferred to the organisation and the project is evaluated.
46
Table 3.2
Different versions of projects and their tasks
Adams & Barndt
1983
Füller
1997
Salminen
2000
Turner
1999
Conceptual
Identify needs
Establish feasibility
Identify alternatives
Prepare proposal
Develop basic
budget and schedule
Identify project
team
Preparing the project
Define the project
Rapid development
Obtain sponsorship
Consult aspects
Plan infrastructure
Proposal and initiation
Conceptual
Develop proposals
Identify and
Gather information
communicate need for
Conduct feasibility
change
Estimate design
Carry out analysis
Estimate available
resources
Sell the project to key
personnel
Ensure management
support
Planning
Implement schedule
Conduct studies and
analyses
Design systems
Build and test
prototypes
Analyse results
Obtain approval for
production
Planning the project
Develop work
breakdown structure
Do schedule
estimation
Define schedule
dependencies
Estimate schedule
resourcing
Conduct risk analysis
and contingency
planning
Planning
Define organization
Define vision and
goals
Define and allocate
tasks and resources
Build project team
Communicate plans
Train in change and
project issues
Execution
Procure materials
Build and test
tooling
Develop support
requirements
Produce system
Verify performance
Modify as required
Implementing the plan
Vendor management
Manage the project
Conclude the project
Change
Execution and control
Ensure participation
Do detail design
Motivate people
Baseline estimates
Implement changes in
Do work
different subsystems
Control progress
Coordinate and
monitor progress
Train in content
issues
Communicate
changes
Termination
Train functional
personnel
Transfer materials
Transfer
responsibility
Release resources
Reassign project
team members
Completion
Consolidate changes
Transfer
responsibilities
Ensure follow-up
Close up the project
Evaluate the project
Communicate results
Reward personnel
Feedback
Design and appraisal
Develop design
Estimate costs and
returns
Assess viability
Obtain funding
Finalisation and closeout
Finish work
Commission facility
Disband team
Review achievement
Turner and Cochrane (1993, 93) have divided projects to four categories according
to the clarity of the goals and the methods used (Figure 3.1).
47
Greater chance
of failure
No
Methods
well
defined
Yes
Type 2
Type 4
Product
development
Research &
organisational
change
Type 1
Type 3
Engineering
Systems
development
Yes
Greater chance
of success
Figure 3.1
Goals well
defined
No
Goals-and-methods matrix (Turner & Cochrane 1993, 95)
Turner and Payne Esq (1997, 16) describe the different types of projects as follows:
Type 1
Engineering projects have well-defined goals and methods of achieving
those goals. The projects have a long history of proceduralisation in
engineering construction and building industries. These projects have a
greater chance of success.
Type 2
Product development projects have well-understood goals, but identifying
the method for achieving the goals is the main point of the project.
Type 3
Systems development projects usually have well-defined methods, but
the goals are poorly defined.
Type 4
The projects of Type 4 are the ones with a greater chance of failure,
being characterised by poorly defined goals and methods.
When dealing with changes in the organisation, the working practices and
processes, the goals, and the working methods are not necessarily known. The
complexity of the change project is caused by the ill-defined goals and methods, as
it is not always clear what the actual outcome of the project will be and how it will
be attained.
48
3.2
Development projects
Organisations seem to stand on four pillars: strategy, structure, processes and
projects, which influence one another in this era of rapid deployment. Business
developments involve bringing the business processes, strategy, any change and
restructuring into being or modifying the existing internal aspects of the
organisation. Project management of business development requires insight on how
the strategy, structure, processes and projects interact with one another (Van Der
Merwe 2002, 402 - 409). Most projects conceived with a business perspective and
goal focused on better results and organisational performance. However, project
managers and project teams are engaged in day-to-day project execution. There
the attention is operational and they are typically not focused on the business
aspects (Shenhar et al. 2001, 701).
The development projects are the place to start changing, when the employees and
the managers continually seek to advance their own knowledge and that of the
whole company. The development projects are no longer nominated by issues like
the product concept, market plans, and budgets. The learning objectives need to be
outlined by asking: "What lessons learned in the previous projects can we apply to
this on?" (Bowen, Clark, Holloway & Wheelwright 1994, 120).
Salminen (1995) defines the business development project as a project targeting at
more effective business operations. The goal of the business development project is
a better performance from someone’s (interest group’s) point of view. Clear R&D–
projects,
hardware
and
software
–projects
are
limited
outside
business
development projects. Those projects can be considered as business development
projects only if they are part of the project whose main purpose is to develop a new
mode of operation. Levene and Braganza (1996, 331) have divided projects into
two major portfolios –development projects and change projects. Development
projects arise from business area strategies, such as delivering new products and
services, creating new facilities or satisfying legislation requirements. Change
projects arise from the need to improve the implementation of processes, such as
process change or new organisational forms.
Mikkelsen, Olsen and Riis (1991, 77) have studied the specific nature of internal
projects.
Internal
development
projects,
such
as
systems
planning
and
implementation, the introduction of new manufacturing technology or quality
49
improvement,
are
characterised
by
organisational
development
and
strong
competition for the internal personnel and management attention. The most
significant feature distinguishing internal projects from external projects is the fact
that the members of the organisation are both the suppliers and the customers of
the project. This can lead to difficulties for instance in determining the project's
success or customer satisfaction and makes the responsibilities somewhat unclear
(Salminen & Lanning 1999, 52). The lack of a contract is reality in many change
projects. In addition to this, many change projects are initiated without evaluation
of the different proposals or project opportunities, especially those not including
high investment costs. Mikkelsen et al. (1991, 78) have found three major
differences between internal and external projects:
Weak initial foundation of internal projects. Internal projects are not based
on a clear contract and there are conflicting ideas and ambitions about the
project inside the organisation.
Organisational development content. The development of the organisation,
the personnel and learning are among the most important tasks in internal
projects.
More competition for resources with the day-to-day operations in internal
projects.
Bowen et al. (1994, 111) indicate several reasons why development projects
provide the best opportunities for a manufacturing company to renew itself
constantly so that it can attain and then retain a leadership position. The most
obvious reason is that the development projects are used where new products and
processes are created. But equally important, a company can, by wisely selecting
the projects it undertakes, use them to develop new skills, new knowledge, and
new systems. Why is the development project such a good place for this? The
development project is a microcosm of the whole organisation. A project team is
made up of people from many areas of the company. The team's success is
determined by the integrated outcome of everyone's work. Development projects
are typically conducted under intense time and budget pressure. They usually
magnify the strengths and weaknesses of the company, including its people,
systems, and culture (Bowen et al. 1994, 111). Similar results are introduced by
Beer, Eisenstat and Spector (1990, 159 - 160). According to their research, the
most effective senior managers have recognised their limited power to mandate the
corporate renewal from the top. Instead, they have defined their roles as creating a
climate for change.
50
The traditional project management methodology concentrates on the project life
cycle and the hard dimensions of project management, such as budgeting and
scheduling. Change project management emphasises the human, organisational
and political aspects of change (Boddy & Buchanan 1992, 6 - 9). According to
Mikkelsen et al. (1991, 79 - 80), a clear vision, strong management support,
participative planning and implementation are the key success factors of internal
projects. McCalman and Paton (1992, 18 – 19 and 81 - 82) emphasise that the
more complex and people oriented the project is, the more it requires the use of
organisational
development
tools
and
techniques
instead
of
hard
project
management tools. Complexity means the ambiguity of objectives, a large number
of activities, unclear activity boundaries and sequences, indefinite durations, as well
as the required resources of the activities, non-technical orientation and activity
success largely dependent upon motivating the people. Similar results are shown in
the study conducted by Salminen (1995, 75). He highlights that both project
management and change management are needed in the implementation to ensure
success. The management of business development projects are placed between
change management and project management (Figure 3.2).
Change
management
Figure 3.2
!
Project
management
Management of business development projects (Salminen 1995, 75)
Gosling and Mintzberg (2003, 54) warn that the separation of management from
leadership is dangerous. Management without leadership encourages an uninspired
style that deadens the activities, and leadership without management encourages a
disconnected style, which promotes hubris. The management of businesses consists
of processes, which keep a complex system going – a combination of people and
techniques. The most important management areas are the planning, budgeting,
organising, staffing, supervision and problem solving. The leadership of people
consists of processes that are used to create organisations and to change them in
order to correspond to the present circumstances. It is important to define the
vision of the future, to sell the vision to the people and to encourage them to make
it happen. The success of change projects requires a set of skills of managers
51
consisting of 70 - 90 % leadership skills and 10 - 30 % management skills (Kotter
1996, 23).
According to Buchanan and Boddy (1992), the distinctive features characterising
the management of internal change projects include the lack of earlier experience
from similar projects and difficulties in determining the resources and time
required. Sometimes there are difficulties even in determining the results of the
projects. It is commonly shared belief that there is not a single approach or a
method to project management applicable in every situation (Riis & Mikkelsen
1997, 18). Project management methods should rather be selected in accordance
with the specific characteristics of the project at hand.
3.3
Change in organisations
According to Turner and Müller (2003, 3), traditional organisations adopt projects
as a vehicle for change. They create a temporary organisation to deliver a coherent
set of change objectives, because projects are better suited for managing change
than functional organisation. Companies all over the world struggle with big reengineering
and
organisational
restructuring
efforts:
they
restructure
their
management, rationalise and down-size, introduce changes in their systems and try
to apply flexible work practices, and make attempts to implement total quality
management. The list is never-ending. It is believed that the entire future of these
organisations depends on the success of the change projects.
Change means that the new state of things is different from the old state (Lanning
2001, 9). The organisational development theory views the management of change
as management of people, motivating them and solving conflicts between them
(McCalman & Paton 1992, 93 - 113).
According to Turner (1999, 53), the change introduced by a project will be of two
types:
Technical change, i.e. change of technology or the physical environment of
the organisation. This may be a result of engineering work or IT work.
Cultural change, i.e. change in the culture of the organisation itself. This
may involve changes in the people of the organisation, management
processes and systems or the structure of the organisation itself.
52
Some projects result in a purely technical change, others in a purely cultural
change. However, the vast majority result in a mixture. Turner (1999, 53 - 54)
gives the term PSO-projects (people, systems and organisation) to them (Figure
3.3).
Purely technical projects
Purely cultural projects
Quantitative objectives
Qualitative objectives
Construct a bridge
Build a ship
Build a road
Organisational development
Management development
Introduce redundancy
PSO-projects
Mixed objectives
Move to a new factory
Introduce new technology
Implement a computer system
Create a corporate budget
Devise the long-range plan
Figure 3.3
The spectrum of PSO-projects (Turner 1999, 54)
Salminen and Lanning (1999, 50) provide a similar classification for change. The
change in organisations has largely been viewed from two different angles, namely
changing the organisation and the human behaviour, and changing the operations
and the mechanisms of the technical system. In the beginning of the century, most
of the research concentrated on organisations as purely technical systems, leading
to simplistic and mechanistic assumptions about change. As the shortcomings of
the mechanistic approach started to become obvious, an opposite school started to
conquer the field of organisational research. It was recognised that organisations
are collections of people, and changing how the organisations work is thus
fundamentally about changing how the people work. All changes in organisations
require changes in the way people work (Salminen & Lanning 1999, 50 - 51).
Salminen (2000, 11) defines organisational change as changes in the organisational
structures, roles, values, culture, and other clearly people related issues.
Operational change is changes in operational procedures and processes, such as
the manufacturing process, logistics, and customer service process. Organisational
and operational change projects require a combination of knowledge and skills
rooted in project management and change management.
53
Kenny (2003, 47) stresses that projects are about implementing strategy. Within
an organisation, the implementation of a new strategy can involve a very complex
change process, and the change in an organisation produces uncertainty. The more
radical a strategy is, the more uncertainty is associated with it. Also Englund and
Graham (1999, 52) emphasise the importance of linking the projects to the
strategy. Growth in the organisations typically results from successful projects that
generate new products, services or procedures. The managers are increasingly
concerned about getting better results from their projects. Shenhar et al. (2001,
699) continue that defining and assessing the project success is a strategic
management concept, which should help to align the project efforts with the shortand long-term goals of the organisation. de Wit and Meyer (1999, 140 - 146) have
identified two types of strategic change – evolutionary and revolutionary. The
proponents of the revolutionary or radical change point to the inherent inertia in the
organisations and propose that a rapidly executed radical change is needed to
overcome this inertia and achieve the desired strategic outcomes.
Although every business's change initiative is unique, Beer and Nohria (2000, 134)
have recognised that there are two archetypes or theories of change. Theory E is a
change based on the economic value. It is the hard approach to change. The
shareholder value is the only legitimate measure of corporate success. Theory O is
a change based on the organisational capability. This is the soft approach, whose
goal is to develop a culture and a human capability through an individual and
organisational learning-process of changing, obtaining feedback, reflecting and
making further changes. Few companies subscribe to just one theory, but a mix of
both. The obvious way to combine is to sequence them. Then it will be better to
start by Theory E. According to the writers, it is highly unlikely that Theory E would
successfully follow Theory O, because the sense of betrayal that it would involve.
(Beer & Nohria 2000, 134 - 138).
The need for change may originate from several different sources, both from inside
and outside the organisation (Boddy & Buchanan 1992, 16 – 17; McCalman & Paton
1992, 6 - 7). The external forces include e.g. regulators, competitors, customers
and technology, whereas the internal pressure may come from obsolete services
and products, new market opportunities, new strategic directions, and increasingly
diverse workforce. Organisations change primarily because of an external pressure
rather than an internal desire to change (Goodstein & Burke 1997, 5). Also Scherr
(1989, 407 - 408) and Miles, Coleman Jr. and Creed (1995, 142 - 143) address that
54
organisational change is triggered with the perception or experience of either
environmental threat, loss or opportunity. A change is needed, when the current
performance and the way of the operation of the business is no longer on a par with
the requirements from inside the company or with the environment and the
competitive situation (Lanning 2001, 9).
Beer et al. (1990, 161 – 164) have defined six steps to effective change in
organisations:
Mobile commitment to change through joint diagnosis of business problems
Developing a shared vision of how to organise and manage for
competitiveness
Fostering consensus for the new vision, competence to enact it, and
cohesion to move it along
Spreading revitalisation to all departments without pushing it from the top
Institutionalising revitalisation through formal policies, systems, and
structures
Monitoring and adjusting strategies in response to problems in the
revitalisation process
Kotter (1995, 61) introduces similar research results to produce change. For
transforming the organisation, it is necessary to establish a sense of urgency and to
form a powerful guiding coalition. In order to clarify the direction in which the
organisation needs to move, it is important to create a vision and to communicate
it. Empowering the others to act on the vision and creating short-term wins
establish a transformation and increase the confidence on it. A real transformation
takes time. Declaring the victory too soon is a risk. It is necessary to consolidate
the improvements and finally institutionalise the new approaches.
3.4
Project success and success factors
The definition of success is not an easy task to do. The simplest way of defining
success would be to measure whether the goals set for the project are met, but it
does not take into account the possibility of ill-defined goals. Furthermore, some of
the goals may be measurable and some of them may be not. According to de Wit
(1988, 169), measuring success is complex and a project is hardly ever a disaster
or a failure for all the stakeholders during all the phases in the project life cycle.
55
Success is also time dependent; a project may be perceived as a success one day
and as a failure the next. Baker et al. (1983, 684) have introduced the term
perceived success as meeting the project’s technical specifications and/or the
project mission to be performed and attaining high levels of satisfaction from the
parent organisation, the client, the users and the project team itself. All the people
in the development process need to be satisfied at the outcome of the project.
Salminen (2000, 15) defines success with two dimensions: efficiency and
effectiveness. Efficiency is related to achieving the goals on the schedule within the
budget, and effectiveness refers to the ability to create performance improvements
and positive perceptions among the organisational members. The basic purpose
behind the project is that the company can achieve a more effective and efficient
way of doing business. The project should result in an improved capability to
generate more profit. But it is very difficult to distinguish, which of the results are
consequences of the development project and which are caused by other factors
such as changes in competition, prices, other projects, etc. An additional problem is
the issue of the degree of success. The traditional approach to project success has
been criticised for classifying projects to successful or unsuccessful ones. In reality
all projects can be placed somewhere between those extreme positions (Salminen
2000, 15).
It is important to draw a distinction between project success and project success
criteria. The success criteria consist of the measures by which the success or failure
of the project will be judged. Success factors are those inputs to the management
system that lead directly or indirectly to the success of the project (Cooke-Davies
2002, 185). Measuring the success involves an evaluation of the degree to which
the objectives have been achieved. In this process, the objectives become the
success criteria (de Wit 1988, 168).
The project management success is not the same as the project success. Delivering
the project success is more difficult than delivering the project management
success (Cooke-Davies 2002, 186 - 187). Projects that meet the budget and
schedule constraints may be considered successful even though they do not meet
the customer needs and requirements (Dvir, Lipovetsky, Shenhar & Tishler 1998,
917 - 918). Atkinson (1999, 338 – 341) introduces a similar conclusion.
Traditionally, it has been said that projects are successful if they are completed on
56
time, within the budget and to the quality, often referred to as The Iron Triangle
(Figure 3.4).
Cost
Quality
Figure 3.4
Time
The Iron Triangle of project management (Atkinson, 1999, 338).
The Iron Triangle is based on short-term thinking. However, projects continue to be
described as failing despite successful project management. Atkinson (1999, 341)
argues that also the resultant system and the benefits of it need to be measured.
Shenhar et al. (2001, 699) have identified four major distinct success categories:
project efficiency, the impact on customer, direct business / organisational success
and preparing for the future. They have compiled a list of thirteen specific measures
for project success assessment (Table 3.3).
Table 3.3
Four success categories (Shenhar et al. 2001, 712)
Success Dimension
Measures
Project efficiency
Meeting schedule goal
Meeting budget goal
Impact on customer
Meeting functional performance
Meeting technical specifications
Fulfilling customer needs
Solving a customer’s problem
The customer is using the product
Customer satisfaction
Business success
Commercial success
Creating a large market share
Preparing for the future
Creating a new market
Creating a new product line
Developing a new technology
The different dimensions are more important at different times with respect to the
moment of project completion. Project efficiency can be assessed only in the very
short-term, during the project’s execution and immediately after its completion.
The impact on the customer can be assessed after a short time, when the project
has been delivered to the customer and the customer is using it. Customer
57
satisfaction can be assessed within a few months of the moment of the purchase.
Business success can only be assessed after a significant level of sales has been
achieved, usually after one or two years. The last dimension, preparing for the
future, can be recognised and assessed after a longer time, in probably three to
five years (Shenhar et al. 2001, 716). Figure 3.5 illustrates the time frame of the
success categories.
SUCCESS
DIMENSION
Prepare
the future
Business
success
Impact on
customer
Project
efficiency
Very
short
Figure 3.5
Short
Long
Very
long
TIME
FRAME
Time frame of success categories (Shenhar et al. 2001, 716)
Rouhiainen (1997, 34 – 36) introduces a similar list of project success domains
grouping them to:
Commercial success; meeting the expectations set at the beginning of the
project
Technical success; composed of better performance and client satisfaction
Classic project management success; the project is executed on the
schedule, within the budget and its results meet the expectations
Learning over time; the improved knowledge of the project members.
Several authors have developed lists of critical success factors (cf. Baker et al.
1983; Pinto & Slevin 1987; Salminen, Rintala & Korpi-Filppula 2000). Pinto and
Prescott (1990, 307) criticise that most of this work is based on theoretical
conceptualisations rather than be empirically derived. As a solution to this problem
Pinto and Slevin (1987) have designed a project management and analysis tool,
Project Implementation Profile (PIP), to help managers in their every day work. PIP
58
is a questionnaire booklet and expected to be filled by the project team members.
Project Implementation Profile consists of an empirically derived set of critical
success factors, which according to its developers are general enough to be applied
across a variety of organisations and project types. Finch (2003, 32) has expressed
a concern regarding the applicability of the PIP methodology to different business
cultures.
PIP consists of ten critical success factors of project implementation: project
mission, top management support, project schedule/plans, client consultation,
personnel,
technical
tasks,
client
acceptance,
monitoring
and
feedback,
communication and troubleshooting. These factors are divided into strategic and
tactical ones. The strategic factors involve early planning, policies and general
objective setting. The tactical factors deal with the resources deployment and the
implementation of the specific tasks (Schultz, Slevin & Pinto 1987). The ten project
implementation success factors are introduced in Figure 3.6.
Communication
Client
consultation
Project
mission
Top
management
support
Project
Schedule/
Plan
Personnel,
Recruitment
Selection
Training
Client
Acceptance
Technical
tasks
Monitoring and
feedback
Troubleshooting
Figure 3.6
Ten key factors of the project implementation profile (Schultz et al. 1987, 42)
Slevin and Pinto (1987, 34) studied over 400 projects when developing the
instrument (PIP profile) to measure a project’s scores on each of the ten factors.
The participants’ critical success factors are ranked in comparison with the database
of these projects. PIP comprises a self-assessment methodology, which requires the
59
participants to indicate their degree of agreement on a 7-point Likert scale to a
series of 50 statements covering ten critical factors (Pinto & Prescott 1990, 311).
Each factor is comprised of five sub-items. The produced PIP-profile provides the
project managers with a quantitative way of quickly profiling a project on the
critical factors and identifies the areas of concern (Slevin & Pinto 1987, 34; see also
Slevin 1989, 303 - 321). It also gives information about the organisation’s ability to
carry out the project through to full implementation (Pinto & Mantel Jr. 1990, 270).
Salminen (2000, 95) has conducted a study on operational change and introduces
eleven potential success factors of change management. The factors, defined on
the operative level from the project manager’s point of view, are introduced in
Table 3.4. According to Salminen (2000, 96 - 98), the success factors can be used
as a basis for analysing the actions and conditions of change projects. These
success factors are present throughout the change project.
Table 3.4
Success factors of change management (Adopted from Salminen 2000, 97)
Success factor
Definition
Leadership
The behaviour and actions of the person or persons leading the
change
Management support
The role and actions of managers, who have authority over issues
and resources critical for the project
Need for change
Identifying and communicating the reasons for the change
Participation
Involving those affected by the changes in planning and
implementation
Defining roles
Defining roles and organisation during the change process
Planning
Planning the change process in terms of what is to be done by
whom and when
Goal setting
Defining a vision and goals for the change
Control
Monitoring and controlling the progress
Training
Training and educating the people
Communication
Distributing information about the changes and gathering feedback
from the people
Motivation
Getting people motivated and committed to changes through active
motivational efforts
According to a study on Finnish SMEs (Salminen & Perkiömäki 1998, 23 – 42;
Salminen 2000, 8) that have carried out a productivity improvement project, 20 %
of the companies reported that the project had failed to produce the targeted
productivity improvements. But there was no statistically significant correlation
between the perceived success and the actual productivity improvement in the
60
companies. Only 35 % of the companies succeeded in improving their total
productivity by 5 % or more. In 42 % of the cases the total productivity actually
decreased during the project. According to Salminen and Perkiömäki (1998, 25),
the project success was based on the following factors:
The project was started based on the clear business requirements
The staff was supported by development training
Monitoring and efficient corrective actions
Working out of a written project plan and final report
Pinto and Prescott (1988, 17) highlight the temporal nature of the critical success
factors of the project. The relative importance of various critical factors is subject to
change at different phases of the project implementation process. The planning
factors seem to be of a greater relative importance for the project success across
all the stages of the project life cycle (Pinto & Prescott 1990, 319). Dvir et al.
(1998, 931) argue that the project success factors are contingent upon the specific
type of project and that the list of project success factors is far from universal.
3.5
Project failure
Many international studies have pointed out the speed of radical change. At the
same
time
there
have
been
reports
about
problems
when
implementing
development projects and about alarming low success rates of projects (Kotter
1996; Beer & Nohria 2000; Schaffer & Thomson 1992). Hartman and Ashrafi (2004,
500) argue that the overall project success rate is no more than 40 %, and for
information technology and construction projects the rate of success is even lower.
It is difficult to define exactly what constitutes a failed project. The causes of failure
may vary by the type of the project, and they may be contingent on the stage of
the life cycle in which the project resides. The reasons a project might be viewed as
a failure early in its life may be quite different than those seen to cause failure at
some later point (Pinto & Mantel Jr. 1990, 269).
According to Boddy and Macbeth (2000, 298), the process implementation matters
as much as the content and substance of the change. The changes that affect how
the people work, who they work with, their status, interests and future prospects
are inherently different from those that involve isolated physical changes.
61
Schultz et al. (1987, 34 - 35) describe project implementation as a two-stage
process, consisting of an initial goal setting and planning stage followed by an
action-oriented, operational stage. The process contains the strategic and tactical
activities. The strategic issues are the most important at the beginning of the
project implementation and the tactical issues gain importance toward the end
(Slevin 1989, 312). This two-stage process has further implications for the project
performance introduced in the project implementation effectiveness matrix (Figure
3.7). It consists of four possible combinations of strategy and tactics, indicating
four possible errors taking place in project implementation (Schultz et al. 1987, 43;
Slevin 1989, 313):
Type 1
Error occurs when an action that should have been taken was not taken
Type 2
Error happens if an action is taken when it should not have been taken
Type 3
The error is taking the wrong action or solving the wrong problem
Type 4
The action taken does solve the right problem, but the solution is not
used
High
High acceptance:
misuse
High potential for
implementation
success
Potential for type 2
and type 3 errors
Effectiveness
of
tactics
Low
High potential for
implementation
failure
Low acceptance:
low use
Potential for type 1
and type 4 errors
Low
Figure 3.7
Effectiveness
of
strategy
High
Strategy-tactics effectiveness matrix (Schultz et al. 1987, 43)
Beer and Nohria (2000, 133) emphasise that the reason for project failures is a
rush to change the organisation, and the managers end up immersing themselves
in an alphabet soup of initiatives. They lose the focus and become mesmerised by
all the advice available in print and on-line about why companies should change,
what they should try to accomplish, and how they should do it. Schaffer and
Thomson (1992, 82) criticise the activity-centred improvement programs. They
argue that in many companies new activities have been launched that sound good,
62
look good, and allow the managers to feel good - but in fact contribute little or
nothing to the bottom-line performance. Many of these activities parade under the
banner of total quality or continuous improvements. The companies introduce their
programs under the false assumption that if they carry out enough of the right
improvement activities, the actual performance improvements will inevitably
materialise.
Instead of the activity-centred programs, Schaffer and Thomson (1992, 85),
recommend the launching of result-driven programs. According to them, successful
change programs begin with results. In the result-driven transformation, the
management begins by identifying the performance improvements that are most
urgently needed and then, instead of studying and preparing and gearing up and
delaying, sets about at once to achieve some measurable progress in a short time.
Successful companies introduce managerial and process innovations only when they
are needed. The results-driven projects require the managers to prioritise carefully
the innovations they want to employ to achieve the targeted goals. The frequent
successes are a powerful motivator and energise the improvement process.
Both the activity-centred and the results-driven programs are ultimately aimed at
producing fundamental shifts in the performance of the organisation. The activitycentred programs focus on sweeping cultural changes, large-scale training
programs and massive process innovations. The results-driven programs start by
identifying the most urgently needed performance improvements and carving out
the incremental goals to be achieved quickly. The management creates a
continuous learning process by building on the lessons of the previous phases in
designing the next phase of the program (Schaffer & Thomson 1992, 85 - 86).
Many managers have been eager to adopt the model of the manager portrayed by
a loving, understanding and supportive father figure. The managers who demand
better results and have higher expectations for the performance, feel concern for
the increasing risk of resistance from their subordinates (Schaffer 1991, 143).
According Beer et al. (1990, 159), most change programs do not work, because
they are guided by a theory of change that is fundamentally flawed. The common
belief is that the place to begin is with the knowledge and the attitudes of
individuals. The individual behaviour is powerfully shaped by the organisational
roles that the people play. The most effective way to change behaviour is to put
people into a new organisational context, which imposes new roles, responsibilities
63
and relationships on them. This creates a situation forcing new attitudes and
behaviour on the people.
According to Kotter (1995, 59), only a few corporate change efforts have been
successful, a few have been utter failures and most fall somewhere between. He
argues that the change process goes through a series of phases that in total require
a considerable length of time. Skipping the steps creates only an illusion of speed
and never produces a satisfying result. Kotter's (1995, 61) eight steps to successful
transformation and the common errors for these steps are introduced in Table 3.5
below.
Table 3.5
Eight steps to successful change efforts (Kotter 1995, 61)
Eight steps to transform
an organisation
Common errors done in transformation efforts
Establishing a sense of
urgency
Managers underestimate how hard it can be to drive people out
of their comfort zones
Lack of patience
Too many managers and not enough leaders - change requires
real leaders
The majority of the managers is not convinced about the need of
change
Forming a powerful
guiding coalition
Renewal programs start with few people and the minimum mass
is not achieved early in the effort
Managers underestimate the difficulties of producing change and
thus the importance of a powerful guiding coalition.
Lack of teamwork at the top
Creating a vision
The company does not create a sensible vision
Without a sensible vision a transformation effort can dissolve into
confusing and incompatible projects
Plenty of plans, directives and programs without a vision or with
unclear vision
Communicating the vision
Inadequate communication through wrong or inadequate
channels
Senior executives do not behave in accordance with new vision
People do not understand the new approach and vision
Empowering others to act
on the vision
Not removing obstacles to the new vision, the blocker could be
organisational structure, wrong reward systems, individuals, ...
Planning for and creating
short-term wins
Instead of creating short-term wins, only passively hoping for
them
Consolidating
improvements and
producing still more
change
Declaring victory too soon; first clear performance improvement
does not mean that the change has been rooted very deeply
Institutionalising new
approaches
Not anchoring changes in the corporate culture
People are left on their own to guess the connections between
the new behaviour and improved performance
Insufficient time to make sure that the next generation top
management really does personify the new approach
64
3.6
Summary
As Salminen (1995) has defined, a business development project is a project
targeting at more effective business operations. Many authors emphasise the
importance of linking the projects to the strategy. The business development
projects need to be built around the business objectives for success: improving the
quality, achieving high productivity, decreasing the cycle time, utilising the
resources effectively, etc. The basic purpose behind the project is that the company
can achieve a more effective and efficient way of doing the business.
The business development projects have the nature of a change project
characterised by a difficulty to define the methods and/or the goals for the project
implementation. Because of this nature, a combination of project management and
change management are needed in the project implementation to ensure the
success. Project management means the technical project management including
the planning, documentation, monitoring, training, etc. Change management
means the human leadership targeting at a well-communicated need for change,
high level of motivation and commitment, low change resistance, efficient
communication, etc.
It is not easy to define project success. The success is time dependent and
stakeholder dependent. A project is hardly ever perceived as a failure for all the
stakeholders during all the phases in the project life cycle. Furthermore, it may be
perceived as a success one day and as a failure the next. Traditionally the project
success has been measured based on the project efficiency – cost, time and quality.
Nowadays this short-term thinking about project success has been enlarged to
project effectiveness. It covers the customer and business perspectives and also
the impact of the project on delivering future benefits to the organisation.
Several authors have produced lists of critical success factors. These factors have
mainly been categorised according to project and change management perspectives
or strategic and tactical perspectives. Some authors have generated universal
success factors, when others highlight that the factors are contingent upon the
specific type of project. A third group of authors emphasise that the factors are
subject to change at the different phases of a project. The literature does not show
unanimity about the success factors, but it shows unanimity about the alarmingly
low success rates of business development projects.
65
This Chapter 3 has displayed the characteristics and challenges of business
development projects. The prior research in the area of project and change
management emphasise the connection of a project to the company’s strategy.
Because a business development project has the nature of a change project,
sophisticated management and leadership skills and practices are needed.
The implementation of business development project needs a combination of ‘hard’
project management and ‘soft’ change management. Project management can be
summarised under five central issues:
1.
Purposeful planning and documentation
2.
Project organisation and identifying the key persons
3.
Control and feedback on the progress
4.
Risk management and problem solving
5.
Training provided to the employees
These factors constitute a compact entity to evaluate the success of a business
development project later called the project management success dimension.
Also the change management can be summarised under five essential issues:
1.
Human leadership
2.
Communicated need for change
3.
Participation of the people
4.
Communication
5.
Motivation of the people
These factors constitute a compact whole, later called the change management
success dimension.
This chapter has also displayed the multi-dimensional phenomenon of the result of
the project (project success). The project success has been defined with two
domains: project efficiency and project effectiveness. Project efficiency is related to
achieving the project goals on the schedule and within the budget. Project
effectiveness is related to performance improvements, to the impact on the
customer and to future benefits as a result of the project. In this study the project
success consists of four categories:
66
1.
Project efficiency
2.
Impact on customer
3.
Business success
4.
Future potentiality
These four categories constitute a general view of results of the business
development project, later called the project success dimension.
67
4
BUSINESS SUCCESS AND PERFORMANCE
The firm’s performance is often referred to as the success or failure of the firm
(Guimaraes & Armstrong 1998). Success is in general related to the achievement of
the goals and objectives. The success may depend on the time frame. One
profitable month can be interpreted as a success, or long-term existence is a
success to the firm targeting at long-term business survival. In business studies the
concept of success is often used to refer to a firm’s financial performance (Pasanen
2003, 25). However, there is no universally accepted definition of success, or of
failure, either. Business failure has been connected to the words bankruptcy,
insolvency, liquidation, death, closure and exit (Storey 2000, 78 – 81).
A revolution in business performance measurement is taking place: thousands of
articles have been published about performance measurement during the last
years, customer satisfaction questionnaires are ubiquitous, the data collection
processes have been automated, companies have real time access to customers’
views and the annual reports are bubbling with information about financial and nonfinancial performance (Neely 1999, 207 - 208). Why have so many companies
become interested in the business performance? According to Neely (1999, 210)
there are several reasons for the interest, e.g. the increasing competition, the
power of information technology and the changes in the nature of work, in the
environment and in the external demands. McAdam and Bailie (2002, 974) add that
the increasing competition forces the organisations to consider the quality,
customer service, response and other such attributes to improve their efficiency in
the market.
4.1
The concept of performance
Guimaraes and Armstrong (1998) define the company’s performance or the
business success as the company’s ability to achieve its objectives in terms of
customer satisfaction, the market share, revenues and profits. Laitinen (2002, 66;
2003, 366) provides a similar definition for business performance. It is the
company’s capability to produce the targeted output satisfying the needs of the
interest groups. Thus it is necessary to have an object whose performance is to be
considered, a dimension that one is interested in and a set target for the result
(Laitinen 2002, 66). The business performance varies according to which interests
68
group’s needs are preferred. Rantanen and Holtari (2000, 3) have recognised that
the maximisation of the owners’ benefits directs the business more and more often.
There exists a wide array of schemes for conceptualising performance. Miller,
Besser, Gaskill and Sapp (2003, 216) have conceptualised business performance
involving two separate constructs: financial performance generated from objective
measures and perceptual performance generated from subjective measures of the
concepts identified as important to the individual business owner. Financial
performance was considered as a critical indicator of perceptual performance.
Venkatraman and Ramanujam (1986, 803) have divided business performance into
three domains: financial performance, business performance, and organisational
effectiveness (Figure 4.1).
Financial performance
Business performance
Organisational effectiveness
Figure 4.1
Three domains of performance (Adopted from Venkatraman & Ramanujam
1986, 803)
The financial performance based on financial indicators, reflects the fulfilment of the
economic goals of the firm. In addition to the financial performance, the business
performance includes emphasis on the indicators of the operational performance
like the market-share, new product introduction and product quality. The multiple
and conflicting nature of organisational goals and the influence of multiple
stakeholders may give a reason to move towards organisational effectiveness. The
organisational effectiveness is a highly subjective variable that depends on who is
defining
the
effectiveness
(Cameron
&
Whetten
1981).
The
organisational
effectiveness represents the outcome of the organisational activities. Venkatraman
and Ramanujam (1986, 804) highlight that most studies have been restricted to
business
performance
consisting
of
financial
performance
and
operational
performance.
Many researchers (e.g. Pasanen 2003, 28; Rantanen 2001, 5) have divided the
company’s performance into two categories: internal and external performance.
69
Traditionally, analysing the external performance means the analysis of the
financial statement. The key indicators for the external performance are the
profitability, the liquidity, the solvency ratio and the extent of the business. The
analysis of the internal performance is assessment of the company’s own functions.
The required reliable and accurate information is not available for outsiders. The
internal performance indicators measure for example productivity, adaptability, cost
efficiency, quality, lead-time, the time of delivery, and capacity (Rantanen & Holtari
2000, 5 – 8).
Performance, productivity and profitability are terms often confusingly used with
the same meaning. Grünberg (2004, 63) has described them as a hierarchal view
Level of detail
(Figure 4.2).
Overall
business
objectives
Performance
Total
productivity
Partial
productivity
Productivity
Profit
ratios
Profitability
Figure 4.2
Performance, productivity and profitability (Grünberg 2004, 63)
Productivity
and
profitability
are
concepts
and
measures
to
describe
the
performance and successfulness of a firm (Rantanen 1995, 11). Productivity is
often defined as the output/input -ratio (Grünberg 2004, 59; Rantanen 1995, 15).
The measures of productivity are a subset of performance measurements.
Profitability is a result that can be defined as the ratio of revenues and costs. A
company can increase its profits and at the same time decrease the productivity
because of monetary effects, such as price changes and currency effects (Grünberg
2004, 59 - 61). In the long run, profitability is a prerequisite for the continuation of
a company’s functioning (Rantanen 1995, 34).
70
4.2
Performance measurement
The old adage “What you measure is what you get” or the other way around, “You
can’t manage, what you can’t measure”, contains an important message. It is
believed that the performance measurement strongly affects the behaviour of the
managers and employees. People in the organisations respond to the measures
(Kaplan & Norton 1992, 71; Neely & Adams 2001).
Marshall, Wray, Epstein and Grifel (1999, 13) define performance measurement as
the development of indicators and the collection of data to describe, to report on
and to analyse the performance. Neely, Gregory and Platts (1995, 80 – 81) define
performance measurement as the process of quantifying the efficiency and the
effectiveness of the action. Effectiveness refers to the extent to which the customer
requirements are met and efficiency is the measure of how economically the
organisation’s resources are utilised, while providing a given level of customer
satisfaction. The performance measure is a metric used to quantify the efficiency
and/or the effectiveness of the action. The performance measurement system is a
set of metrics used to quantify both the efficiency and the effectiveness. Thus the
performance measurement system consists of a number of individual performance
measures. Lockamy III and Smith (1997, 143 - 144) define the performance
measurement system as a systematic way of evaluating the inputs, outputs,
transformation, and productivity. The system includes the performance criteria,
standards and measures. The criterion is a relative element to evaluate the
performance. The performance standard is an accepted satisfactory level of
measurement and the performance measure is an actual value of the performance
criterion.
Neely et al. (1995, 81) summarise that the performance measurement system can
be
examined
at
three
different
levels:
individual
performance
measures,
performance measurement system as an entity and relationship between the
performance measurement system and the environment within which it operates
(Figure 4.3).
71
The
environment
Performance
measurement
system
Individual
measures
Individual
measures
Individual
measures
Individual
measures
Figure 4.3
Levels able to examine the performance measurement system (Neely et al.
1995, 81)
Grünberg (2004, 57) emphasises that measuring the performance has two main
aims, first to connect the company goals and objectives to the improvements, and
secondly to set the targets for the improvement activity. A linkage between the
performance objectives and the improvement objectives can raise the impact of the
improvement work, which in turn helps fulfil the performance objectives (Figure
4.4). This also helps to clarify the development work and to ensure that all the
participants are working in the same direction. To support the improvement work, it
is vital to find the performance factors that support the performance strategy set by
the company.
Performance
objectives
Improvement
objectives
Figure 4.4
The linkage between performance objectives and improvement objectives
(Grünberg 2004, 57)
Lockamy III and Smith (1997, 143 - 144) have recognised that an integrated
performance
organisational
measurement
coordination.
systems
They
provides
highlight
a
the
mechanism
importance
for
of
improved
linking
the
performance measurement system to the firm’s strategy. Also Kennerley and Neely
(2003, 218) emphasise that to be effective, the performance measurement systems
must be managed to reflect the organisation’s context and strategies. The main
72
task of performance measurement and analysis is to support the decision-making
by producing information of the desired estimation and measuring the targets
(Kennerly & Neely 2003, 227). Neely, Adams and Kennerley (2002, 14) state that
the organisation needs to develop an intelligence gathering systems allowing the
managers to answer quickly to the critical questions they have to answer in order
to successfully manage a business in the 21st century. The measurement of the
performance may focus not only on verifying the past, but it has to direct the firm
to better performance in the future (Rantanen et al. 2001).
The use of performance measurement systems usually occurs in one or several of
the following areas or subsystems (Hvolby & Thorstenson 2000, 324):
Planning and control of current operations / production
Financial and management accounting
Business process benchmarking and improvement programs
Establishment and maintenance of incentive schemes
There are a large number of performance measurement systems and frameworks
available for companies - such as Balanced Scorecard, Business Excellence Model,
Activity Based Costing, Quick Response Manufacturing, etc. Maybe the best known
is the Balanced Scorecard -concept (BSC) presented by Kaplan and Norton (1992,
1996). The BSC is a set of measures that gives a comprehensive view of the
business and introduces the strategy of the company. The BSC allows the managers
to look at the business from four perspectives:
Financial perspective
Customer perspective
Internal business perspective
Innovation and learning perspective
According to Kaplan and Norton (1996, 8 – 10), the BSC emphasises the idea that
financial and non-financial measures must be a part of the information system for
the employees at all levels of the organisation. The objectives and measures are
derived from a top-down process driven by the mission and the strategy. The
measures represent a balance between external measures for the shareholders and
customers, and internal measures of the critical business processes, innovation,
learning and growth. The measures are balanced between outcome measures –
results of the past effort – and measures that drive the future performance. The
scorecard is balanced between the objectives, easily quantified outcome measures,
73
and the subjective, somewhat judgmental, performance drivers of the outcome
measures (Kaplan & Norton 1996, 10).
One set of measurement methodologies is the self-assessment models, such as the
Business Excellence Model and the Baldrige Award. The EFQM Excellence Model is a
well-known framework in European organisations and has become the basis for a
majority of national quality awards, and is also used in Finland as well. The EFQM is
based on nine key criteria, five of which are enablers and four results. The enablercriteria cover what the organisation does, and the result-criteria cover what the
organisation achieves. The results are caused by the enablers. The feedback from
the results helps to improve the enablers. Innovation and learning help to improve
the enablers, which will lead to improved results. The results with respect to
performance, people, customers and society are achieved through leadership
driving policy and strategy, that is delivered through people, partnerships,
resources and processes (Kontio 2001).
4.3
Performance measures
Traditionally the measures of business performance have been derived from the
financial data alone, but the reliance on financial measures
in analysing
performance is now under serious challenge. By the 1980s there was a growing
realisation that the traditional performance measures were not any more sufficient
to manage the organisations competing in the modern markets. Neely et al. (2002,
16) point out that it is generally accepted that the level of financial performance
achieved today is a function of decisions made 6 – 18 months earlier or even earlier
as that. The choices made by today’s executives will affect the financial
performance of tomorrow. The focus on financial measures satisfies the regulatory
and accounting reporting requirements, but largely ignores the needs of the
operational issues inside the organisation. With the more demanding customers and
more competitive markets, a need for greater responsiveness and external focus for
the activities has arisen. It has been realised that whilst the traditional financial
accounting systems indicate the performance that results from the activities of an
organisation, they provide a little indication of how that performance is achieved or
how it can be improved (Kennerley & Neely 2003, 214).
74
Companies are changing their performance measurement to track non-financial
measures as well. Quality, customer satisfaction, innovation and market share
indicators reflect the company’s economic condition and the future prospects better
than its reported earnings do (Eccles 1991, 131). Kaplan and Norton (1996, 3)
argue that the ability of the company to mobilise and exploit its tangible or invisible
assets has become more decisive than investing and managing the physical,
tangible assets. Sveiby (1997, 12) has categorised the company’s tangible and
intangible assets. He says that the total market value of the company consists of its
visible equity and three kinds of intangible assets (Table 4.1).
Table 4.1
Total market value of the company (Sveiby 1997, 12)
Visible equity
Intangible assets
(Book value)
(Stock price premium)
Tangible assets
External structure
Internal structure
Individual
minus visible debt
(brands, customer
(the organisation:
competence
and supplier
management, legal
(education,
relations)
structure, manual
experience)
systems, attitudes,
R&D, software)
The internal structure includes the patents, concepts, models, administrative
systems, etc. These are created by the employees and are generally owned by the
organisation. The external structure includes relationships with the customers and
suppliers. It also encompasses the brand names, trademarks and the company’s
image. The individual competence involves the capacity to act in a wide variety of
situations to create both tangible and intangible assets (Sveiby 1997, 10 – 11).
Several authors have divided the performance measures into two categories:
objective measures reflecting the financial performance and subjective measures
reflecting the perceptual operational performance (cf. Miller et al. 2003, 216;
Venkatraman & Ramanujam 1986, 803 - 804). Examples of objective measures are
the sales growth, profitability, and the earning per share. Examples of subjective
measures are the market share, new product introduction and product quality
(Venkatraman & Ramanujam 1986, 803 - 804). Miller et al. (2003, 221 - 226) have
noticed that the financial performance is positively associated with the business
owner’s perceptual performance. Ketokivi and Schroeder (2004, 261) augment that
for research purposes the usable measurement instruments are quasi-perceptual
75
measures, which are operationally defined, but the measurement is done as
perceptual.
Dess and Robinson Jr. (1984) explain that performance is a complex and
multidimensional phenomenon that is difficult to operationalise without using a
combination of objective and subjective measures. Venkatraman and Ramanujam
(1986, 804 - 805) continue that a further issue in the operationalisation of business
performance is the source of the data, which can be primary or secondary. Primary
data is collected directly from organisations, and secondary data is collected from
publicly available records. According to Venkatraman and Ramanujam (1986, 807),
operationalising the business performance using only financial or operational
measures collected exclusively from one data source should be avoided as far as
possible.
Performance has to be measured from different dimensions covering all the aspects
of business: financial results, operating performance, the way the company is
perceived externally, and cultural aspects of the working environment. Hudson et
al. (2001, 1102) have found six important dimensions from the literature: quality,
time, flexibility, finance, customer satisfaction, and human resources.
Table 4.2
illustrates the dimensions more detailed.
Table 4.2
Dimensions of performance (Hudson et al. 2001, 1102)
Quality
Time
Flexibility
Finance
Customer
satisfaction
Human
resources
Product
performance
Lead time
Manufacturing
effectiveness
Cash flow
Market share
Employee
relationships
Market share
Service
Delivery
reliability
Waste
Delivery
reliability
Process
throughput
time
Resource
utilisation
Volume
flexibility
Dependability
Process time
Innovation
New product
introduction
Productivity
Cycle time
Delivery
speed
Labour
efficiency
Resource
utilisation
Computer
systems
Overhead cost Image
reduction
Integration with
customers
Inventory
performance
Competitiveness
Cost control
Innovation
Sales
Delivery
reliability
Profitability
Employee
involvement
Workforce
Employee
skills
Learning
Labour
efficiency
Future growth
Efficiency
Product
innovation
Product cost
reduction
Quality of
work life
Resource
utilisation
Productivity
76
To be able to improve performance effectively, it is important to identify those
factors of performance that should be particularly addressed, either because they
are key to the success or because they identify under-performance (Grünberg
2004, 53). According to Hudson et al. (2001, 1100 – 1102), characteristic for
performance measures is that they are derived from the strategy and clearly
defined with an explicit purpose. The measures are relevant and easy to maintain.
They are simple to understand and use. The measures provide a fast and accurate
feedback and there is a link from the operations to the strategic goals, and finally
the measures stimulate continuous improvement.
Gupta and Govindarajan (1984, 34) have validated 12 performance dimensions
when conducting a study about the effects of linking the managerial characteristics
to small business unit (SBU) strategy. The validated dimensions are: sales growth
rate, market share, operating profits, cash flow from operations, return on
investments, new product development, market development, R&D-activities, cost
reduction programs, personnel development and political/public affairs.
Kaplan and Norton (1996, 149 - 150) emphasise that the strategy is a set of
hypotheses about the cause and effect. The cause and effect relationships can be
expressed by a sequence of if-then statements by utilising outcome measures and
performance drivers. The outcome measures tend to be lag indicators, such as
profitability, market share, customer satisfaction and employee skills. The
performance drivers, the lead indicators, are ones that tend to be unique for a
particular business unit. The outcome measures without performance drivers do not
communicate how the outcomes have been achieved. Neely et al. (2002, 79)
continue that a good measurement system has a right balance of leading and
lagging indicators, but it is not easy to say what is a leading and what a lagging
indicator. They provide an example about customer satisfaction, which is said to be
a lagging indicator of employee satisfaction. It is commonly said that dissatisfied
employees result in a dissatisfied customer. This means that customer satisfaction
is both a leading indicator of financial performance and a lagging indicator of
employee satisfaction.
77
4.4
Business performance and project success
Performance measurement plays an important role in ensuring project success and
its further usefulness to the sponsoring organisation. The performance is known to
be sensitive to the metrics of measurement (Pillai, Joshi & Rao 2002, 165).
It is necessary to make a difference between project performance and project
management performance. Project management success is measured against
traditional measures of performance like cost, time and quality. Project success is
measured against the overall objectives of the project (Cooke-Davies 2002, 185; de
Wit 1988, 164). These two are interlinked, but different. A project that is
considered to be a success by the customer, might be considered a failure by the
top management, if the project outcome does not meet the top management’s
specifications, even though it might satisfy the customer (Belassi & Tukel 1996,
141). A project can be viewed as successful despite poor project management and
vice versa. A good project management can contribute towards the project success,
but is unlikely to be able to prevent project failure (de Wit 1988, 165). The project
management might focus on delivering the project within the budget, even if the
overriding success criterion or the key performance indicator for the project is to
deliver future benefit to the organisation (Bryde 2003, 229). Shenhar et al. (2001,
701) continue that most projects are conceived with the business perspective in the
mind, focusing on achieving better results and business performance. If the
organisation is planning to achieve better business performance as a result of the
project, it should incorporate these expectations as the predetermined measures to
assess the project success. The project success is strongly linked to the
organisation’s effectiveness and its success in a long run. The project success or
failure must be assessed on the basis of several criteria (Pinto & Mantel Jr. 1990,
274).
Guimaraes (1997, 201) defines the Business Process Reengineering (BPR) –project
success in three different ways: the extent to which the project reached its goals
and objectives, provided specific benefits, and improved the specific dimensions of
the performance. Pillai et al. (2002, 165 - 168) highlight the importance of
integrated performance measurement during the project lifecycle. The project
performance measurement needs to be done not only during the project execution
phase, but also during the project selection and the project implementation phases.
78
The performance in each phase is essential, but not a sufficient condition for the
project success.
Pillai et al. (2002, 168) have summarised their requirements for performance
measurement systems in R&D-projects to three categories as follows:
1. Reflect the needs and expectations of all stakeholders
2. Continuously revalidate the assumptions made during the past, in the light
of the knowledge gained about the course of its execution and consider the
requirements for the future success. This means an integrated approach
linking the various phases of the project lifecycle.
3. Predict the project success/failure well in advance to prevent further drain
of the resources.
de Wit (1988, 167) emphasises that the project objectives need to have linkage to
the organisation’s objectives and strategy. Cooke-Davies (2002) and Turner (1999)
highlight the need to develop metrics for project performance to have a clear link
between project success and corporate success. Stewart (2001, 38 - 39)
emphasises that the company vision drives the projects that take place within the
organisation, aligns them to the organisation’s overarching business strategy and
reveals their success. The projects can be considered as “mini-organisations”
requiring the same clarification and benchmarks of the parent organisation. Also
Pillai et al. (2002, 165) emphasise the importance of devising an appropriate
performance measurement system to suite the project and the organisational
environment. The balanced scorecard approach helps to target the success criteria
at the front end of the project and ensure that the projects deliver value for the
business and the benefits needed in the organisation.
Stewart (2001, 43 - 45) has designed an example of the BSC-concept for a project,
consisting of four perspectives:
The customer perspective looks at the market value of the project
deliverable as well as the stakeholder satisfaction in the project outcome.
The
project
internal
business
perspective
incorporates
the
quality
management plan that is developed during the planning phase, and it
utilises all the processes that take place within the project life cycle in
delivering the project’s end product. It evaluates the scope, the timelines,
the performance and the cost.
79
The financial perspective examines whether or not the project is
contributing to the organisation’s bottom line. Does the project outcome
generate expected revenue or are the costs what were expected?
The innovative and learning culture perspective reflects the ability of the
organisation/project to be innovative and to learn throughout the life cycle
of the project. This reflects the organisation’s ability to keep its vision in
the focus.
Bryde (2003, 232 - 233) has modified the EFQM model to the Project Management
Performance Assessment Model (PMPA). He considers the PMPA-model to be
possible to use as a framework for identifying the characteristics of high performing
and low performing project management performance. The basic differences
between the EFQM and PMPA models are introduced in Table 4.3.
Table 4.3
The EFQM and PMPA models
EFQM Model
PMPA Model
Enabling criteria
Enabling criteria
Leadership
Project management and leadership
People
Project management staff
Policy and strategy
Project management policy and strategy
Partnerships and resources
Project management partnerships and
resources
Processes
Project life cycle management processes
Result criteria
Result criteria
Key performance results
People results
Customer results
Project management key performance
indicators
Society results
The BSC approach to projects allows decision-making based on standardised
information familiar to the managers and it establishes an objective framework for
continuous assessment (Stewart 2001, 47). The same advantages can be realised
by utilising the EFQM model as the project performance measurement.
80
4.5
Challenges of performance measurement in SMEs
The SMEs pursue a range of goals and this means that there is a need to use a
variety of indicators to assess both financial and non-financial performance.
According to Hudson et al. (2001, 1105), the resource limitations associated with
SMEs, indicate that quality and time are critical to ensure that the waste levels are
kept low and a high level of productivity performance is attained. The reliance on a
small number of customers means that customer satisfaction needs to be on a high
level. The flat structure means that multi-skilled employees with several job roles
have more responsibility. In these circumstances, a well-trained and motivated
workforce is paramount. This emphasises the importance of monitoring the human
resource dimension. Finally, the lack of monetary safety highlights the importance
of financial performance.
Jarvis et al. (2000, 127 – 130) argue on the basis of their research results that
because of the survival goal, the most common measures in SMEs are the cash flow
indicators. The non-financial measures used by the small firm owner-managers are
intuitive and informal measures, such as busyness (knowing if he or she is busy),
hearing the phones ringing or trusting his/her own assessment rather than any
formal standard. The profits and loss figures tend to be available only on an annual
or a monthly basis. The measures are not proactive and do not highlight the
improvements. According to Jarvis et al. (2000, 129), this reflects the fact that the
business is often centred around survival and maintenance, rather than maximising
the growth or profit. Also Welsh and White (1981, 26) highlight the importance of
liquidity as a measure in the SME-context. According to them, a small business can
survive a surprisingly long time without profit, but it fails on the day it cannot meet
a critical payment. The priority is to maintain liquidity, but of course profit is
necessary on a longer term.
In spite of the necessity of performance measurement from different dimensions,
the latest research indicates that SMEs practices for measurement are poor. It is
ordinary to monitor the financial performance, but monitoring other dimensions is
not so common (Forsman 2001, 64 – 65; Rantanen 2001, 13). Rantanen (2001,
23) continues that the dimensions SMEs monitor are different from those they
consider as very important.
It is common that SMEs monitor liquidity and other
financial indicators, but as the most important measures they regard delivery
81
reliability, quality and customer perspective. A reason for this could be lack of
resources and knowledge. Measuring the quality and customer dimensions is more
difficult than measuring the financial figures. In addition to this, one important
reason could be that SMEs have usually rather undeveloped accounting systems.
Hudson et al. (2001, 1107 - 1112) found that the most significant flaw in the
measures is a lack of reference to the strategy. Although there was a widespread
acceptance of the value of strategic performance measurement evident among
SMEs, they had not taken steps to redesign or update their current performance
measurement systems. Furthermore, according to Hudson et al. (2001, 1107),
SMEs complained that the measures produce an overload of data that was either
too complex or outdated, and therefore unusable. Even where the data was usable,
the SMEs did not have formal feedback systems. Hvolby and Thorstenson (2000,
328) explain that in SMEs there are not resources available for performance
measurement systems containing a large number of performance measures.
Therefore, in order to be manageable, the choice of indicators for performance
measurement in SMEs has to be highly prioritised. Neely et al. (2002, 27) argue
that the fundamental problem today is not that people measure the wrong things,
but that they try to measure too much.
The existing tools for performance analysis, like the Balanced Scorecard, EFQM, etc.
have been mainly developed to be used in the large company context. The systems
are often too complicated and too heavy to serve the needs of SMEs (Rantanen et
al. 2001). Hudson et al. (2001, 1109) have identified several gaps between the
theoretical models the performance measurement and the practices in the SMEs in
terms of how the performance measures are developed and what the measures are
(Table 4.4).
82
Table 4.4
SME performance measurement against the topology (adopted from Hudson
et al. 2001, 1109)
Theoretical model
SMEs’ performance
measurement system
characteristics
The strategic PM development
process should:
Performance measures in SMEs are
developed:
Evaluate existing PM systems
With little reference to any existing
measures in place
X
Enable strategic objective
identification
With no reference to strategy
X
Enable performance measure
development
In an ad hoc fashion by individual
managers/staff
X
Provide a maintenance structure
Without deleting obsolete measures
X
Involve key users
By managers, occasionally staff and
customers
Have top management support
With management support
Have full employee support
With lack of employee
understanding of new measures
Gaps
X
Have clear and explicit objectives
X
Have set time-scales
X
Measures in a strategic PM system
should:
SME performance measures:
Be derived from strategy
Are not strategic
X
Have a clearly defined/explicit
purpose
Are often unclear with complex or
obsolete data produced
X
Relevant and easy to maintain
Are historically focused with some
outdated measures
X
Simple to understand and use
Have small numbers of simple
practical measures
Provide fast, accurate feedback
Have no formal feedback with nonspecific informal feedback
X
Link operations to strategic goals
X
Stimulate continuous improvement
X
A strategic PM system should
measure
SME PM systems measure:
Quality
Quality
Flexibility
X
Time
Time
Finance
Finance
Customer satisfaction
Customer satisfaction
Human resource
Human resource (v. limited)
X
83
4.6
Summary
Performance is the company’s ability to produce the targeted output, satisfying the
needs of different interest groups (Laitinen 2003, 366). This means that it is
necessary to have an object, whose performance is to be considered, a dimension,
in which one is interested and a set target for the result. The basic targets of
performance in SMEs are liquidity in the short run and survival in the long run.
A measure or indicator is a metric used to quantify performance. Traditionally the
measures of business performance have been derived from financial data alone, but
during the last years companies have started to track also non-financial measures.
Some
researchers
have
conceptualised
business
performance
to
financial
performance and perceptual performance. Financial performance is generated from
objective
measures
and
perceptual
performance
from
subjective
measures
identified as important to the individual business owner. Financial performance has
been recognised to be positively associated with the business-owner’s perceptual
performance. A combination of objective and subjective measures is needed to
operationalise such a complex and multi-dimensional phenomenon as performance
is.
The source of data is another issue in the operationalisation of business
performance. The source of data can be primary or secondary. The data from the
primary source is collected directly from the organisation, and the data from the
secondary source is collected from an independent source, like publicly available
records. When operationalising the business performance for research purposes, it
is recommended to use both objective and subjective measures and utilise the data
collected from primary and secondary sources.
Performance needs to be measured from different perspectives covering all the
aspects of business. The best known measurement system, the Balanced
Scorecard, translates strategy into objectives and measures, organised into four
perspectives of performance measurement: the financial perspective, the customer
perspective, the internal business perspective, and the innovation and learning
perspective. The importance of linking performance measurement to the firm’s
strategy has been recognised by several researchers.
84
The business development work must be connected to the performance objectives
set by the company. This helps to ensure the clarity of the development work and
also to ensure that all the participants are working in the same direction. In turn, if
all the levels of the company understand the goals of the development work, the
resources can be more easily directed to the same targets. The linkage between the
performance objectives and development objectives can raise the impact of the
development work, which in turn helps to fulfil the performance objectives
(Grünberg 2004, 57).
Performance measurement is essential in ensuring project success and its benefits
to the sponsoring organisation. The project objectives need to have linkage to the
company objectives. Further, the metrics for the project performance need to have
a clear link between the project success and the business success. The project
performance and business performance are in close interaction. Some authors have
conducted studies adapting the same performance measurement systems for both
performance
measurement
measurement
system
with
levels.
the
The
use
projects
of
allows
the
familiar
performance
decision-making
based
on
information familiar to the managers.
SMEs have many characteristics that make performance measurement very
important, but the fact is that the latest research conducted in this area reports
about poor practices in measurement, lack of the knowledge, and shortage of
resources. It is common that SMEs monitor financial indicators in spite of the fact
that they consider delivery reliability, quality and the customer perspective as more
important. The existing tools for performance measurement seem to be too
complicated to serve the needs of SMEs. Several gaps can be found between the
theoretical models and SMEs’ performance measurement systems.
This Chapter 4 has consolidated the importance of the aspects of entrepreneurial
and project preparation success dimensions. It also has highlighted the necessity to
connect
performance
measurement
to
business
development
project
implementation. The chapter has provided sets of performance measures to be
used as a basis for displaying the project success. It has also provided tools and
ideas
for
subjective
performance
measurement,
which
is
necessary
circumstances where there is lack of objective measurement information.
in
85
5
THEORETICAL FRAMEWORK FOR BUSINESS DEVELOPMENT
PROJECT SUCCESS IN THE SME CONTEXT
The purpose of this section is to derive a synthesis of the contribution of the prior
research introduced in the previous chapters (2, 3 and 4). In the following a
framework,
the
possible
success
dimensions
and
the
factors
of
business
development projects for performance measurement are formulated.
5.1
Characteristics of a business development project
As Salminen (2000) has described in his study, an enterprise is a system where the
detector is the function acquiring information about its environment which is then
used in management decisions. The effector is the function executing the decisions
(Figure 5.1). A development project can be seen as a microcosm of this system.
Also it needs information about the environment in order to be able to recognise
the opportunities and the threats. The selector is needed to make decisions about
the project; to set the obtainable goals and the required resources. The effector is
the action to make it happen.
Feedback
Enterprise
Detector
Measurement
system
Selector
Management
decision
Detector
Figure 5.1
Selector
Effector
Effector
Implementation
of actions
DEVELOPMENT
PROJECT
Output
Enterprise
performance
Development project as microcosm of an enterprise system (adapted from
Salminen 2000)
Characteristic to a business development project is that it affects the processes and
procedures, and changes the way of working. It has the features of a change
project. It belongs to categories where it is ordinary that methods and/or goals are
not well defined.
86
In the Goals-and-Methods Matrix introduced by Turner and Cochrane (1993),
business development projects are located in the corners with a greater chance of
failure – the grey-colored area in Figure 5.2. This advocates the view, where the
reasoning of project success in the SME-context needs to cover extensively the
entrepreneurial aspects, clarity of vision and goals, strategy connection, planning
sophistication, change management and project management, including the project
life cycle concept.
Greater chance
of failure
No
Methods
well
defined
Yes
Type 2
Type 4
Product
development
Research &
organisational
change
Type 1
Type 3
Engineering
Systems
development
Yes
Greater chance
of success
Figure 5.2
5.2
Goals well
defined
No
The business development project in goals-and-methods matrix (Adapted
from Turner and Cochrane 1993)
Construction of the framework
The components connected to project success have been categorised into five
dimensions on the basis of prior research, the nature of the business development
project and a pilot case study with two cases:
Entrepreneurial success
Project preparation success
Change management success
Project management success
Project success
The first four-mentioned success dimensions are by nature the contributors for the
project success. The project success is the result. Figure 5.3 summarises the
87
framework. Its aim is to suggest a construct of the dimensions and factors that
affect the business development success, to develop a construct of the indicators
used for the development project success and performance measurement, and to
link the business development project success and the performance improvements
together in a framework.
Feedback
Enterprise
Detector
Measurement
system
Selector
Management
decision
Effector
Implementation
of actions
Output
Enterprise
performance
DEVELOPMENT PROJECT
Entrepreneurial
success
Figure 5.3
Project
preparation
success
Change
management
success
Project
management
success
Project success
-
Project efficiency
Impact on customer
Business success
Future potentiality
Success dimensions of a development project
The following sub-chapters explain the content of the success dimensions and give
choices for the potential success factors and indicators.
5.2.1
Entrepreneurial success dimension
Entrepreneurial success refers to three words; intention, ability and opportunity.
The entrepreneur’s / owner-manager’s know-how and expertise is in an emphasised
role. Especially when a development project is launched to pursuit growth, the
owner-manager’s intention, business ability and the opportunity environment are
highlighted (Morrison et al. 2003; Churchill & Lewis 1983). This dimension includes
also the connection of the development project to the strategy of the enterprise.
The strategic choices made by the owner-manager impact the growth and
performance. The written or the unwritten strategy is a part of the attribute
intention. The ability to identify the niches and recognise favourable industry
evolution makes the opportunity arena more promising.
88
The factors of the entrepreneurial success dimension show the richness of
opportunities in the environment, the ability to recognise the opportunities and the
sense of direction to capitalise them. The three factors are the strength of the
intention, the business ability and the richness of the opportunity arena (Table 5.1)
Table 5.1
Success factors of the entrepreneurial dimension
Potential success factor
Indicator or focus of the assessment
Entrepreneurial dimension
5.2.2
Strength of intention
Existence of crystallised strategy for a company
Existence of vision and overall goals for the project
Strength of owner-manager’s intention to achieve
strategy and/or goals
Project’s connection to strategy
Company’s willingness to grow
Richness of opportunity
arena
Status of industry evolution
Promising niche markets
Business ability
Managerial skills of owner-manager
Know-how and expertise of owner-manager
Ability to capitalise the opportunity arena
Project preparation success dimension
Typical problems in SMEs are a lack of resources, money, technology, skills and
time. Maybe the lack of resources is not the basic problem in the development
projects, but the under-estimated resources for the set project goals. A good
development project is harmonious with the SME’s plans and resources. Many
researchers warn about over-ambitiousness with the improvement efforts. Projects
aiming at business not previously known very seldom succeed (Ghobadian & Gallear
1997; Hyvärinen 1993; Storey 2000).
Project preparation success refers to the balance between the project goal and the
required resources; how well the SME has defined the realistic and viable target for
the project and identified the required resources for successful implementation.
This dimension also includes how clearly the anticipated business impact has been
defined. Table 5.2 introduces the factors of the project preparation dimension.
89
Table 5.2
Success factors of the project preparation dimension
Potential success factor
Project preparation
dimension
Indicator or focus of the assessment
Clarity of business impact
Clarity of identified business impact
Balance between project
goals and resources
Realistic project goal
Realistic allocation of resources
Knowledge from the area of
project
Level of prior knowledge from the area of project
The project preparation dimension consists of the factors showing the balance
between the set goals and the allocated resources, the clarity of the business
impact and the previous knowledge in the area of the project.
5.2.3
Change management success dimension
The business development project has almost always the nature of a change
project.
Successful
leadership,
communicated
need
of
change,
widespread
participation of the employees, efficient communication and highly motivated
managers and employees are important for good performance (Kotter 1996;
Lanning 2001; Salminen 2000). The change management success dimension
consists of factors showing how well the change is led in the SME, how clearly the
need for the change has been identified and communicated, whether the people
affected
by
the
change
are
participating
in
the
solution
planning
and
implementation, how well the information about the changes is distributed and
feedback from the people gathered, and finally, whether the managers and
employees are motivated and committed to the change effort. Table 5.3 describes
the success factors for the change management dimension.
90
Table 5.3
5.2.4
Success factors of the change management dimension
Potential success factor
Change management
dimension
Indicator or focus of the assessment
Leadership
Behaviour and actions of the persons leading the change
Need of change
Identification about the reasons for the change and
effectiveness of communicating about them
Participation of employees
Level of involvement in planning and implementation by
those whose work the change will affect
Communication
Effectiveness of information distribution about the changes
and feedback gathering
Motivation
Level of motivation and commitment to change efforts
Project management success dimension
The project management success concentrates on the project life cycle and the
hard dimensions of project management, such as planning, documentation,
budgeting and scheduling (Boddy & Buchanan 1992; Turner 1999). The project
management success dimension refers to the technical project management,
including the factors showing how well the project organisation and the roles of the
project members are defined, how sophisticated the planning and documentation
are, whether risk analysis is done, how relevant the monitoring practices are, and
what the level of the adequacy and sufficiency of the training provided to the
employees affected by the project is (Table 5.4).
Table 5.4
Success factors of the project management dimension
Potential success factor
Project management
dimension
Indicator or focus of the assessment
Purposeful planning and
documentation
Sophistication of planning and documentation
Project organisation and
identifying the key persons
Existence of project organisation conducive to the
objectives of the project
Level of defined responsibilities and authorities between
key persons
Control and feedback on
progress
Activity of monitoring the plans and performance tracing
during the implementation
Risk management and
problem solving
Identification of risks
Management of risks
Sophistication of the problem solving practices
Training
Sufficiency, practicality and level of the timing of training
in new processes and operating procedures
91
5.2.5
Project success dimension
Project efficiency includes the Iron Triangle of project management; cost, time and
quality (Atkinson 1999). Project efficiency can be measured or assessed during the
implementation and immediately after its completion. It shows how well the
schedule and the budget goals are met. In addition it shows how well the other
project goals that can be measured or assessed immediately after the completion
are met, for instance meeting the technical specifications and the functional
performance.
Project effectiveness refers to the results and benefits that can be measured or
assessed after a longer period, when the project has been delivered to the
customer or the project sponsor, internal or external, and the customer or the
project sponsor is using it. This success area includes three categories: the impact
on customer, business success and future potentiality. The impact on customer, for
example customer satisfaction, can be measured or assessed within a few months
after the project delivery. Business success can usually be measured after one or
two years. The future potentiality can be measured or assessed after 3 – 5 years
(Shenhar et al. 2001). The details of project success are illustrated in Table 5.5.
The indicators for measuring or assessing success have been adopted from the
ones validated by Gupta and Govindarajan (1984) and Shenhar et al. (2001).
Measuring success involves also the evaluation of the degree to which the
objectives have been achieved. Because projects have different kind of objectives,
the list of indicators is not considered as all-inclusive, but as a basis for
consideration that can be enhanced by the case companies (cf. Jennings & Beaver
1997).
92
Table 5.5
Success categories of project success
Potential success category
Indicator or focus of the assessment
Project success dimension
5.3
Technical efficiency
Cost and time
- Meeting budget goal
- Meeting schedule goal
Quality
- Meeting direct goals
- Meeting technical specification
- Meeting functional performance
Impact on customer
Customer satisfaction
Fulfilling the customer’s needs
Solving a customer’s problem
The customer is using the product
Business success
Commercial success
- Sales growth rate
- Market share
- Operating profits
- Cash flow from operations
- Return on investments
- Cost reduction
- Personnel development
Future potentiality
Creating a new opportunity
- Creating a new market
- Creating a new product line
- Developing a new technology
- Learning over time
Summary
The framework suggests that in the SME context the business development project
success has five success dimensions: the entrepreneurial, project preparation,
change management, project management, and project success dimensions.
Further, the framework suggests that the success of a business development
project depends on the mix of these success dimensions. Good performance of one
success dimension affects the others. Good performance with entrepreneurial and
project preparation success gives a basis for a successful business development
project. Good performance with change management and project management
ensures a successful planning and implementation of the project. Project success
indicates changes in the performance and benefits for the enterprise and its
customers in different timeframes, and it also has an impact on further
development work.
93
6
METHODOLOGY AND RESEARCH STRATEGY
This chapter presents the methodology, the research process and the methods that
have been used to achieve the objectives of the study. Choosing the appropriate
methods is a key element in any research work, and even more so in industrial
management research, where the choice of methods and strategies is wide.
6.1
Research methodology
When conducting a scientific research and reading scientific literature, one may face
a philosophical discussion about such terms as the paradigm, methodology and
methods. The scientific paradigm comprises the basic values and the ways of
perceiving the world (Kasanen, Lukka & Siitonen 1991, 313). Gummesson (2000,
18 - 19) defines the paradigm more detailed as a world view representing people's
value judgements, norms, standards, frames of reference, perspectives, ideologies,
myths, theories and approved procedures that govern their thinking and action.
According to Silverman (1993, 2) methodology is a general approach to studying a
research topic. It establishes how one will go about studying the phenomenon. The
chosen methodology guides the techniques for the data gathering and data
analysis. Positivism, which seeks to discover laws by quantitative methods, is an
example of a methodology. Methods are the specific research techniques. These
include quantitative techniques like statistical correlations, as well as qualitative
techniques like observations and interviewing (Silverman 1993, 2).
6.1.1
Qualitative or quantitative research?
The traditional approach of natural sciences is the positivist paradigm. The main
assumptions of positivism are that the reality is external and objective. Knowledge
is significant only if it is based on observations of this external reality (EasterbySmith,
Thorpe
&
Lowe
1991,
22).
The
aim
is
to
produce
context-free
generalisations and cause-effect laws by discovering the true state of affairs.
In the end of the 1970's, it was commonly claimed that the science of the
organisations was at a crisis since the outcomes of the research had become less
and less useful for solving the practical problems in organisations. All this has led to
94
the separation of theory and practice (cf. Kasanen, Lukka & Siitonen 1993). It is
claimed that the crisis had risen because the organisational researchers had
adopted a positivist way of conducting and judging the research and thus
implementing value-free, logical and empirical methods and procedures. However,
the most important prerequisites for this science (objectivity and generalisability)
are probably not the most suitable for applied research and the research of
organisational behaviour.
The hermeneutic paradigm has been suggested as an answer to the abovementioned problem. Positivism is typically related to quantitative methods,
eliminating the subjective values of science and a large amount of data, whereas
hermeneutics tolerates subjectivity and considers it as a natural and unavoidable
part of conducting research. It is the tolerance of subjectivity that is maybe the
most relevant feature in hermeneutics and other interpreting science, distinguishing
it from the positivistic paradigm (Kasanen et. al. 1991, 313). Easterby-Smith et al.
(1991, 32) continue that the strengths associated with qualitative methods are the
ability to look at the change processes over time, to understand people’s meanings,
to adjust to new issues and ideas as they emerge, and to contribute to the
evolution of new theories.
According to Gummesson (1993, 13), the subjective nature of hermeneutics takes
many different forms in the research. For instance, while in the research process of
the positivist paradigm the data collection and the analysis are two clearly separate
activities, in the hermeneutic paradigm they can take place simultaneously. There
is no clear line and distinction between description and explanation. The problems
associated with the hermeneutic paradigm are the subjectivity of the research, the
limited extent of evidence and the generalisability of the results.
The positivist and hermeneutic paradigms seem to be antithesis for each other in
the literature. Although hermeneutics has a qualitative label on it, the combination
of quantitative and qualitative data may be highly productive. On the one hand, the
quantitative evidence may reveal factors and relationships that are not evident to
the researcher, whereas on the other hand the qualitative data helps the researcher
to understand the rationale and the reasons for the relationship revealed by the
quantitative data (Eisenhardt 1989, 538).
95
Qualitative research is defined as research in which qualitative, e.g. descriptive
data is used, and quantitative research as research in which numerical data is used.
Stake (1995, 37) suggests that one of the most characterising differences between
quantitative and qualitative research is the knowledge that is searched for. The
difference is not directly related to the nature of the qualitative or quantitative
data, but to the purpose of the research. The quantitative researcher relies on the
explanation and control, when the qualitative researcher emphasises understanding
the complex interrelationships of phenomena.
Stake (1995, 37) points out three major differences between quantitative and
qualitative research:
1.
The distinction between explanation and understanding as the purpose of
the inquiry
2.
The distinction between a personal and an impersonal role for the
researcher
3.
The distinction between the knowledge discovered and the knowledge
constructed
The weaknesses of qualitative research involve problems in gaining access to the
data and problems of analysing the overwhelming amounts of data. According to
Stake (1995), interpretation and subjectivity is an essential part of ensuring useful
and reliable results in qualitative research.
Several authors have mentioned how common it is to use both qualitative and
quantitative features in research (Alasuutari 1999, 32; Eisenhardt 1989, 534 - 535;
Stake 1995, 36). Qualitative data deals with meanings and quantitative data deals
with numbers, but they are better thought of as mutually dependent (Figure 6.1).
The meanings cannot be ignored when we are dealing with numbers, and the
numbers cannot be ignored when we are dealing with meanings. Each complements
the other. The measurement at all levels embraces both the qualitative and
quantitative aspect (Dey 1998, 28).
96
Number
Meaning
Figure 6.1
Dynamic balance between qualitative and quantitative data (Dey 1998, 28)
Research strategy refers to the basic approach of generating new knowledge and
theories, selected on the basis of the methodological considerations. What is the
best research strategy? According to Yin (1994, 4), there are three conditions that
determine the applicability of a certain research strategy. They are:
The type of research question posed
The extent of control the investigator has over the actual behavioural
events
The degree of the focus on contemporary as opposed to historical events.
Table 6.1 displays these three conditions and shows how each is related to five
major research strategies.
Table 6.1
Relevant situations for different research strategies (Yin 1994, 6)
Requires control
over behavioural
events?
Focuses on
contemporary
events?
Strategy
Form of research
question
Experiment
How, Why
Yes
Yes
Survey
Who, What, Where,
How many, How much
No
Yes
Archival analysis
Who, What, Where,
How many, How much
No
Yes/No
History
How, Why
No
No
Case study
How, Why
No
Yes
Stake (1995, 41) highlights that the qualitative-quantitative difference is linked to
two kinds of questions. In quantitative studies the research question seeks out a
relationship between a small number of variables, when in qualitative studies the
research questions typically orient to cases of phenomena, seeking patterns of
unanticipated as well as expected relationships.
97
6.1.2
Case study research
The case study is a research strategy focusing on understanding the dynamics
present within single settings (Eisenhardt 1989, 534). It is often used in the field of
business economics, administration sciences and technical sciences. The research
objects often include administrative, independent entities or units, such as
companies and other administrative organisations. Gummesson (2000, 83) argues
that the use of a case study for research purposes is becoming increasingly
widespread in management. According to Yin (1994, 2 - 3), case studies are
especially suitable for attempts to understand variable social phenomena in real life
environments, such as in the situation of business management. Case study can be
chosen for the research strategy when the goal is (Eisenhardt 1989; Gummesson
2000):
To explain and answer to the questions How and Why
To formulate a universal understanding of the process
To construct ideas, models and concepts
To build a deep understanding about the case
Yin (1994, 4 - 6) distinguishes three types of uses for case study research:
exploratory, descriptive and explanatory. The researchers in business-related
subjects traditionally limit case studies to exploratory use: a pilot study that can be
used as a basis for formulating more precise questions or testable hypotheses. A
descriptive case study is an attempt to describe for instance what happens when a
new product is developed and launched. The third use of case studies, as
explanatory research, is looked on with scepticism by some researchers.
What is a case? According to Gummesson (1993, 9) and Yin (1994, 22), it could be
a phenomenon, an event, an organisation or a part of it, a process or a person. Yin
(1994, 22) writes that case studies have been done about decisions, programs,
implementation processes, and organisational change. The definition of the unit of
analysis is related to the way the initial research questions have been defined.
The process of building theory from case study research is an iterative one. While
an investigator may focus on one part of the process at a time, the process itself
involves constant iteration backward and forward between the steps (Eisenhardt
1989, 546). Eisenhardt has defined steps along the process of building theory from
case study research (Table 6.2)
98
Table 6.2
Process of building theory from case study research (Eisenhardt 1989, 533)
Step
Activity
Getting started
Definition of research question
Possibly a priori constructs
Selecting cases
Neither theory nor hypotheses
Specified population
Crafting instruments and
protocols
Multiple data collection methods
Qualitative and quantitative data combined
Multiple investigators
Entering the field
Overlap data collection and analysis, including field notes
Flexible and opportunistic data collection methods
Analysing data
Within-case analysis
Cross-case pattern search using divergent techniques
Shaping hypotheses
Iterative tabulations of evidence for each construct
Replications, not sampling, logic across cases
Search evidence for "why" behind relationships
Enfolding literature
Comparison with conflicting literature
Comparison with similar literature
Reaching closure
Theoretical saturation when possible
A case study may involve either single or multiple cases and numerous levels of
analysis. The strength of a multiple case study is that it allows replication and
comparison across several cases, which increases the validity of the research
(Eisenhardt 1989, 534). Yin (1994, 45) argues that multiple-case designs should
follow the replication logic, not the sampling logic.
The case data can be either longitudinal or cross-sectional (Table 6.3). Longitudinal
data is collected in a forward direction over time, and cross-sectional data is
collected at one point in time. If there are several cases, the setting for the
research can be a comparison of these units on the selected dimensions. (AaltioMarjosola 2003)
Table 6.3
Application possibilities of case study (adapted from Aaltio-Marjosola 2003)
One Case
Several Cases
Cross-Sectional
Data
Internal tension in the setting
for research; compared
dimensions as a research
object
Comparing cases on selected
dimension
Longitudinal
Data
Studying the change on
selected dimensions
Comparing the changes between
cases on selected dimensions
99
If the data consists of several cases, a winding approach, which moves from one
case to another, may be the best one. In this approach the researcher gathers the
data from one case, interprets it and asks the new questions based on the
interpretation, and then moves on to another case in order to find the answers to
these questions or to deepen his interpretations. It is possible to move on to a third
case, to a fourth case, etc. until the most crucial and essential questions of the
study have been answered (Aaltio-Marjosola 2003).
According to Eisenhardt (1989, 537), the cases may be chosen to replicate previous
cases or to extend the emergent theory, or they may be chosen to fill theoretical
categories and provide examples of polar types. Multiple cases within each category
allow the findings to be replicated within the categories. Eisenhardt (1989, 537)
gives an example of research aiming to build theories of success and failure. The
cases of each category consist of one case of clearly successful firm performance
and another of unsuccessful one.
Yin (1994, 49) illustrates the replication approach to multiple-case studies as shown
in Figure 6.2. It indicates that the initial step in designing a study must consist of
theory development, case selection and data collection process. Each individual
case study consists of a “whole” study, in which convergent evidence is sought
regarding the facts and the conclusions for the case. Each case’s conclusions are
considered to be the information needed to replication by the other individual
cases.
Conduct 1st
case study
Write
individual
case report
Conduct 2nd
case study
Write
individual
case report
Select
cases
Develop
theory
Design data
collection
protocol
Conduct
remaining
case studies
Write
individual
case reports
Draw
cross-case
conclusions
Modify
theory
Develop
policy
implications
Write
cross-case
report
Figure 6.2
Replication approach in multiple-case study (Yin 1994, 49)
100
Case studies typically combine data collection methods, such as archives,
interviews, questionnaires and observations. The evidence may be qualitative,
quantitative or both (Eisenhardt 1989, 534 - 535). Using several different methods
enables also triangulation. The information received from different data can be
compared with each other, which increases the validity of the research (Silverman
1993, 156).
The criticism of case study as a scientific method can be summarised as follows
(Gummesson 2000, 88):
Case studies lack statistical reliability and validity
Case studies can be used to generate hypotheses but not to test them
Generalisations cannot be made on the basis of case studies
The case study research has been criticised for poor generalisation. Stake (1995,
39) emphasises that the qualitative researcher treats the uniqueness of the
individual cases and the contexts important to understand. Particularisation is an
important aim, coming to know the particularity of the case. Understanding is more
essential for the case study than generalisation. According to Gummesson (2000,
88), it no longer seems so "obvious" that a limited number of observations cannot
be used as a basis for generalisation. Generalisation is closely related to validity.
Validity means in essence that theory, model, concept, or category describes the
reality with a good fit (Gummesson 2000, 93). Yin (1994, 31) continues that the
logic of generalisation from case studies is replication, and the generalisations are
analytic generalisations by nature, not statistical.
Another problem connected to case study is the access to information. What
information people might want to give to the external researcher? Gummesson
(2000, 30) writes that 80 % of the information would be obtained through a limited
input of effort, whereas the remaining 20 % would require huge resources. The
researcher needs to have access to the system and she or he needs to have access
to the individuals in the system, as well.
Qualitative case study is a highly personal research. The researches are encouraged
to include their own personal perspectives in the interpretation. The way the case
and the researcher interact is unique and not necessarily reproducible for other
cases and researchers (Stake 1995, 135).
101
6.1.3
Methodological choices in this study
The aim of this research is to understand how implemented business development
projects have affected the performing company and its performance, and what are
the success dimensions and success factors of the projects. The objective is to
reach a deep understanding about the development work in the SME-context.
Creating such a profound understanding seems difficult without a very close
interaction between the researcher and the phenomenon under the study, leading
to a certain level of subjectivity and interpretation. Quantitative operationalisation
of the concepts would restrict the possibilities to understand the diversified
interrelations and the complexities involved.
Based on the above reasons, the paradigm advocated in this study is a qualitative
one. The definition of the paradigm was adopted from Gummesson (2000, 18 - 19),
who defines the paradigm as a world view representing people's value judgements,
norms, standards, frames of reference, perspectives, ideologies, myths, theories
and approved procedures that govern their thinking and action. The main
assumptions of this study are that:
The reality is subjective and multiple, and the participants in the study may
see it in different ways. The perceptions are important, because they are
the basis for the individuals’ actions.
The world can be understood only from the point of view of the individuals
directly involved in the activities in question. That’s why the people
involved in the business development efforts of the SMEs are regarded as
the most appropriate informants.
The selection of methods and approaches offers several traditions, e.g. the case
study, action research and constructive research. According to Gummesson (1993,
6), the general reason for doing case study research is to better understand
complex phenomena, such as change processes. The innumerable factors and the
entangled interconnections between them do not allow simple quantifications. This
research represents a case study, aiming at a deep understanding of the
phenomenon and generating new knowledge. In this study “how” and “why”
questions are important for solving the research problem and they are asked about
sets of events over which the researcher has no control. In this situation, as Yin
(1994, 6) has stated, the case study method has a distinct advantage. Lindell
(1988), as cited in Saravirta (2001, 101), argues that the development projects
102
must be studied against the background of the whole organisation and the case
studies are the most applicable strategy to clarify complex interrelationships and to
generate new concepts.
So, the qualitative research method has been selected for this study. However,
quantitative methods are included within the qualitative analysis. The research
strategy is a case study and the cases are the SMEs, where the development
projects have been carried out. This study utilises multiple case studies, following
the replication approach introduced by Yin (1994, 49).
6.2
Research design
According to Yin (1984, 19), research design is an action plan for getting from here
to there, where here refers to the initial set of the research questions and there
represents the set of conclusions or answers to these questions. The main purpose
of it is to ensure that the data and methods used are applicable for answering the
research questions.
6.2.1
Research process
This study aims at deepening the knowledge of business development efforts in the
SME-context by offering both theoretical and empirical insights. The primary
objective of this research is to figure out how the business development projects
have affected the performance and to structure the dimensions and factors that
contribute to, and can be used to assess the impact of business development
projects on performance in the SME-context. The research process illustrated by
Figure 6.3 shows how the objectives of this study have been approached.
Pre-understanding
Prior
experience
and
research
Figure 6.3
Planning and action
Research
problem
Literature
review
Fact-finding and analysis
Proposal for
framework
Pilot
case study
(2 cases)
Theory building
Actual
case study
(4 cases)
Results
and
discussion
The main phases of the research process
Pre-understanding refers to such things as people's knowledge, insights, and
experience before they engage in a research program or a consulting assignment.
Understanding refers to the improved insights emerging during the program or the
103
assignment (Gummesson 2000, 58). Stake (1995, 49) emphasises that one of the
principal qualifications of the qualitative researcher is experience. The experience of
the
qualitative
researcher
is
one
of
knowing
what
leads
to
significant
understanding, and it helps in recognising the good sources of data. According to
Gummesson (2000, 58) the lack of pre-understanding will make the researcher
spend considerable time gathering basic information (e.g. about an industry or a
decision-making process). Most of this information will not be obtainable outside
the company. Thus, the researcher will have to become familiar with the actual
processes of the decision-making, the implementation, and the change within a
specific organisation.
In the present study the researcher’s pre-understanding has been developed in
both theoretical and empirical fields. The researcher has several years’ experience,
in the role of the project manager and in the role of the project team member, of
supporting business development efforts conducted in SMEs as well as in large
organisations. Further, the researcher has conducted some previous research in the
field of business development efforts in SMEs.
After the loosely defined research problem, the literature review phase started,
giving a more accurate picture to crystallise the research problem and helping the
researcher to produce a general tentative framework for the study. The framework
was produced as a result of an iterative process connected to the literature review
and an empirical pilot study including two pilot cases. The aim of the pilot study
was to refine the research, regarding both the contents and the procedure. Further,
the aim of the pilot study was to test the applicability of the data collection and the
analysis tools. After the pilot study, the general framework and the case study
protocol were refined.
The actual case study consists of four cases, later called as case A, case B, case C
and, case D. The cases are the SMEs where the business development projects
were carried out. The cases are introduced in Table 6.4. The case study was
performed by using the following procedure:
1. A discussion with the owner-manager started the case study. This helped
to agree on the objectives of the study and to clarify the present state of
the business. It also gave an overall view about the development project
carried out – its goals, connection to strategy, main results, degree of
104
overall success and short description about the development project life
cycle.
2. Interviews were carried out with 2 - 4 persons. Semi-structured and
structured interviews (questionnaire) were used to produce the patterns of
business development project success and factor ratings for the analysis.
3. Observation during the visits provided a general and comprehensive
understanding of the company and the development project carried out.
4. Document analysis was used to gain the company data. It was also used as
complementary evidence about changes in the performance reflected by
the development project. The documents included the financial statements,
annual reports, articles written about the companies, and the key figures of
the industry.
5. Extensive case descriptions and analysis were produced. Preliminary crosscase analysis was done. The package was sent to the case companies for
reading and for giving feedback.
6. The main results were discussed with the interviewees during meetings and
telephone discussions, or by e-mail. The interviewees’ feedback and
complements to the analysis were collected.
7. The within-case analyses and the cross case-analysis were finalised.
After the cross-case analysis, the research results were crystallised and the
research report was finalised.
6.2.2
Case selection and data collection
The vital criteria for selecting cases are convenience, access and geographical
proximity (Yin 1994). The case selection was done through purposive sampling,
which is a criterion-based selection method. The following criteria were vital for the
selection of the cases:
105
The organisation represents the SME-sector and has more than ten
employees
Willingness to participate in the research
A business development project has been completed and its impact can be
assessed or measured from the short-term to long-term perspective
Projects afterwards perceived as successful or as unsuccessful were
selected
A summary of the backgrounds of the cases is presented in Table 6.4.
Table 6.4
Summary of the cases
Perceived
project
success
Turnover/
Balance
sheet total
Case company
Type of business
development
project
Case A
Paper converting
unit
The empowerment
of employees
(Nature of TQMproject)
Successful
53
3.5 M€/
2.8 M€
20
Case B
Subcontractor of
the construction
business
Integrated service
package
development
Successful
42
3.5 M€/
1.1 M€
29
Case C
Printing house
Targeting rapid
growth by
internationalisation
Unsuccessful
82
9.0 M€/
5.0 M€
109
Case D
Publishing house
New business
venture with a new
business concept
Unsuccessful
130
Age
18.5 M€/
3.2 M€
No. of
employees
159
The owner-manager of the case company was the key informant. The selection of
the other informants was done together with her or him. The selection criteria for
the other informants were that they had been involved in the business development
project in the role of the project manager or a project team member.
Case studies typically combine such data collection methods as archives,
interviews, questionnaires and observations (Eisenhardt 1989, 534 - 535). In this
study the research data consisted of:
Interviews of the key persons from the case company
Financial statements and annual reports of the case company
Financial statements and annual reports of 1 – 3 competitors
Comparison key figures of the industry provided by Finnvera (Special
financing company owned by the State of Finland)
106
Public information about the companies, e.g. articles in magazines and
books
Observation during the visits
Much of the collected information is based on subjective understandings and
interpretations made by the interviewees involved in the development efforts of the
case companies. When using perceptual measures and self-reporting, relying on a
single-informant system is not recommended to avoid bias and errors. As better
alternatives have been introduced the use of a multi-informant system, the use of
data collected from different sources or the use of a combination of perceptual and
operationally defined data in the same study (cf. Doty & Glick 1998; Ketokivi &
Schroeder 2004; Venkatraman & Ramanujam 1986). This study utilises all these
alternatives; the multi-informant system as a source of primary data collected
directly from the case company and objective, operationally defined data collected
from secondary, independent sources.
In most of the case companies the interviews were conducted with three
informants: a person responsible for the general management (owner-manager), a
person responsible for the project implementation (project manager) and a person
participating in the project implementation in the role of a project team member. In
Case B, also a member from the supplier partner organisation was interviewed due
to his central role in the project implementation. In case D only two persons were
interviewed due to the small number of people involved in the development work.
Each of these on-site interviews took from one to two hours. The interviews were
taped and transcribed. The companies and the informants are kept anonymous. A
summary of the research data is introduced in Appendix 2.
The interviews were conducted in three parts: an interviewee’s open, narrative
story about the project and its implementation, a semistructured interview about
the success dimensions and a structured interview (questionnaire) based on
positive claims with 1 to 7 Likert type scale, where number one meant that the
interviewee fully disagreed with the claim presented and number seven meant that
the interviewee fully agreed with the claim presented. The researcher introduced
the questions and wrote down the answers. The interview guidelines are introduced
in Appendix 3 and the structured interview (questionnaire) is in Appendix 4.
107
6.2.3
Analysis and interpretation of data
Data analysis is central in building theory from case studies.
In this study the
analysis together with the data collection formed an iterative process, moving
among the data, the literature and the emerging theory. The within-case analysis of
the information obtained through the interviews was guided by the themes of the
interview guidelines. The qualitative analysis followed the instructions by Miles and
Huberman (1994, 10 - 12) through the phases of data reduction, data display and
conclusion drawing. The collected data was managed and gradually condensed into
tables and matrices. By focusing on the success dimensions, the data was
transformed through selection and summarising to larger patterns. This brought out
fresh views, which helped in reaching the conclusions. The literature was consulted
again to refine the findings proposed by the field studies. A brief summary of the
case comparisons based on the semi-structured interviews is introduced in
Appendix 5.
The answers of the structured interviews (questionnaire) have been categorised to
factors followed by the introduced framework of the success dimensions. Each
factor was given a quality rating in order to describe the status of the factor. The
quality rating is based on the mean values and the unanimity in the interviewees’
assessments. The mean value has been counted to each factor based on the
interviewee’s assessments (Likert scale 1 – 7), called later as an informant’s mean
value. The company mean value is summarised based on the interviewees’
assessments from this case company. The quality rating of the factor is based on
the rate of the company mean value and on the unanimity in the informants’
assessments as illustrated in Table 6.5. For example to have the quality rating of
very good, the company mean value needs to be more than 6.0 and all the
individual informants of that case company need to have the mean value at least as
high as 5.0. A summary of the case companies’ and informants’ mean values based
on the structured interview (questionnaire) have been introduced in Appendix 6, as
well as the quality ratings.
108
Table 6.5
Coding principles of categorisation
Quality rating
Every informants mean
value
Company mean value
Excellent
> 6.5
AND
> 6.0
Very good
> 6.0
AND
> 5.0
Good
> 5.0
AND
> 4.5
Satisfactory
> 4.5
AND
> 4.0
Neutral
> 4.0
AND
> 3.0
Fair
> 3.0
AND
> 2.0
Poor
> 2.0
Very poor
< 2.0
This study focuses on the success dimensions and success factors of business
development projects implemented in SMEs. For that reason, it is important to
clearly figure out the factors perceived as very successful by most of the
informants. In order to distinguish these factors from others, the scale of the
categorisation of the quality ratings is eight despite the fact that the assessment
was done by using the scale from 1 to 7. For the same reason, one of the coding
principles is unanimity in the informants’ answers, but that principle is also meant
to prevent overrated answers from biasing the results.
The structured interview includes a set of questions based on the Project
Implementation Profile (PIP) analysis tool. It is a tool developed by Pinto and Slevin
(1987) to help project managers in their everyday work. PIP is a questionnaire
booklet expected to be filled in by the project team members. It is based on the ten
critical project implementation success factors introduced in Chapter 3.4. The
questionnaire includes five statements per each of ten success factors (Pinto &
Prescott 1990, 323 – 325). The person who is answering the questionnaire
expresses his agreement or disagreement with each statement using the scale from
1 to 7, where one means strong disagreement and seven means strong agreement.
In the end, the sum of the scores of each factor is calculated separately to form a
value for the factor. According to the PIP systematic the value of each factor is
compared to a reference table, which is based on a database of 408 studied
projects (Slevin 1989, 329). If the value of the factor is below 50 %, the situation
is considered as critical and some actions concerning the factor are recommended.
The example value 50 % means that within the reference projects 50 % of the
persons have ranked her or his factor higher in their own project.
109
In the present study PIP was used as a quantitative analysis tool to support the
interviews and the analysis. The main advantage of this analysis tool is that it
illustrates the status of the strategic and tactical success factors of the projects.
According to Pinto and Slevin (1987), the PIP-tool is practicable in different phases
of the project. In this research it was used as a tool to assess the project success
afterwards. Some of the statements concerning two critical factors, client
consultation and client acceptance, were difficult to answer. Due to the deficient
answers, these two factors were dropped from the analysis. Instead, the customer
perspective was analysed connected to the project success inside the category of
the project’s impact on the customer.
The business performance was viewed on the basis of both objective financial
measures and subjective perceptual measures. The data of the objective measures
was collected from secondary sources (annual accounts, publicly available from The
National Board of Patents and Registration). The data of the subjective measures
was collected directly from the case companies. According to Venkatraman and
Ramanujam
(1986,
806),
this
approach
is
appropriate
when
a
broader
conceptualisation of the business performance is needed for addressing a specific
research question, but the data of the financial performance may not be
forthcoming from the primary sources due to reasons of confidentiality and
sensitivity. Ward, Leong and Boyer (1994, 345) have observed that the informants
appear
more
reluctant
to
disclose
objective
information
than
perceptual
information. The informants of the present study were aware of the fact that the
objective data would be collected from independent, secondary sources.
Further, in this kind of situation, Venkatraman and Ramanujam (1986, 811)
recommend to address the dimensionality issue both theoretically and empirically.
The model of the project success is modified from the one introduced by Shenhar et
al.
(2001).
It
consists
of
categories
important
for
project
performance
measurement and business performance measurement. In addition to this, the 12
measures validated by Gupta and Govindarajan (1984, 34) were chosen to belong
to the body of the measures reflecting the business performance. The factors of the
project efficiency follow the Iron Triangle of the project management introduced by
Atkinson (1999), measuring cost, time and quality. The informants were asked to
add more measures to the list, which they considered as important for the
implemented business development project.
110
In some cases the content of the subjective measures are defined according to an
operational definition, but the measurement is done as perceptual, called as quasiperceptual measures. According to Ketokivi and Schroeder (2004, 261), the
measurement instrument that uses quasi-perceptual data may be less affected as it
defines the content of the measurement exactly. In this study, for instance, asking
what has been the average sales growth of an individual new product category,
defines the content of the sales growth exactly, but leaves the measurement to the
informant’s discretion, as well as the option not to answer truthfully.
The number of informants was three per case company. During the coding phase
one of the coding principles was unanimity of the informants’ answers. Further, the
informants’ answers of the business performance were based on perceptual and
quasi-perceptual measures, and the answers were compared with objective
financial data. The researcher considered the perceived project performance as
plausible if all the three informants gave similar answers and the objective data
supported this united answer.
Finally, the qualitative and the quantitative analyses were documented as a
process. Feedback from the informants was used. The feedback was acquired at
least from one key informant from each case company when the first drafts were
available. The details about the informant feedback are introduced in Appendix 2.
In this study both qualitative and quantitative evidence has been used, forming a
dynamic balance for the analysing process (cf. Dey 1998; Eisenhardt 1989; Stake
1995). The researcher’s role has been an independent outsider.
111
7
CASE STUDIES
7.1
Introduction
The aim of this chapter is to enhance the prior knowledge and provide empirical
evidence to complement the framework. In this section the cases are described
according to the theoretical framework introduced in Chapter 5. The individual case
reports are structured as follows:
A short introduction of the company and of the implemented business
development project based on the interviews and on the data from the
secondary sources
Description and analysis of the success dimensions based on data from the
semistructured and structured interviews. First a short summary of the
success dimension of the project is given, based on the semistructured
interviews. After that the status of the success dimension is displayed as
figures
based
on
the
quality
ratings
formed
from
the
structured
questioning. The coding principles of the quality ratings have been
introduced in Chapter 6.2.3.
Description and analysis of the project success based on data from the
semistructured and structured interviews. The annual accounts of the case
company, financial information of competitors and comparison key figures
of the industry have been used as complementary evidence, providing a
general insight into the changes of the objective performance of the
company
Project Implementation Profile (PIP) analysis
A summary including the results of the individual case and comparisons
with conflicting and similar literature. Also a general view of the success
dimensions has been displayed. The values of the general view have been
counted by summarising the factors’ quality ratings for each dimension
(see Appendix 6).
The cross-case analysis is introduced in the end of this chapter.
112
7.2
Case A: Employee motivation as a source of productivity
improvements
Case A, which is specialised in paper converting, has been in the business for over
50 years. A generation change was conducted in 1985, when the daughter of the
founder took responsibility for the company. It was a turning point in the change of
management style - from authoritative leadership to a more conversational and
empowermental style. The company employs 20 persons. Its turnover was about
3.5 million euros in 2002. The company’s financial status is excellent. It is very
profitable and free from debt. The main customers represent the confectionery
industry, flourmills and franchising groups. In case A, a large program with several
subprojects has been carried out, aiming at improvements to the total quality and
productivity, and having the features of a TQM-project. The main idea was to
empower the employees to take total responsibility for their own work and its
development. The company emphasises the importance of the employees’
knowledge, job satisfaction and good working conditions. The owner-manager
believes that only highly motivated employees are willing to develop their own work
and to find solutions on how to improve the quality and productivity. The business
performance will improve as a result of that development. In this case company the
large program with its subprojects was examined as an entity. The examination
period started in the beginning of the 90’s and the results could be discovered after
the middle of the 1990’s. During the period of 1990 - 2000, the case company
received two quality certificates. The owner-manager perceived the business
development project as very successful.
7.2.1
Entrepreneurial dimension
Case A had a written strategy, but according to the interviewees, more
crystallisation should be done. The owner-manager had a strong intention to carry
out the vision and business objectives. She also had a strong will to gain the
business success. According to the interviewees, all the business development work
was closely connected to the general business objectives. The company was
targeting at controllable, moderate growth. Its capabilities to utilise business
opportunities were on a good level, but lack of resources was a problem. According
to the managing director, the business success has been a result of well-focused
development work, not of a rich opportunity arena in the industry. The opportunity
113
arena has been fairly good in some small customer segments. Table 7.1
summarises the entrepreneurial dimension in case A based on the semistructured
interviews.
Table 7.1
Summary of the entrepreneurial dimension in Case A
Factor
Description
Business ability
Business ability was perceived as good, but lack of resources
was a problem.
More aggressiveness in customer contacts could improve the
results.
Strength of intention
The company had a vision and a strategy, but crystallisation
was needed.
The owner-manager had a strong will to gain business
success.
The company was targeting at controllable, moderate growth.
The business development was closely connected to the
general business objectives.
Opportunity arena
The company had recognised possibilities to expand business
to the European markets.
Confidence in entrepreneurship in Finland was wobbly due to
governmental actions.
The business ability and the strength of intention were on a high level. The case
company assessed these two factors as very important for the successful
implementation of the business development project. The interviewees perceived
the opportunity arena as not very promising. According to the interviewees its
impact on the business success had been low. Figure 7.1 illustrates the status of
the entrepreneurial dimension based on the structured interviews and the quality
ratings.
4
Excellent
3
Very good
2
Good
Satisfactory
1
Neutral
-1Fair
Business ability
Strength of
intention
Opportunity arena
-2
Poor
Very-3poor
Figure 7.1
Status of the entrepreneurial dimension in case A
114
7.2.2
Project preparation dimension
According to one interviewee the project goals and the resources were not always
clearly in balance. Sometimes the goals were set too high, even impossible to
achieve. The interviewee acknowledged that the earlier mentioned lack of resources
could be a result of the inability to set realistic, achievable goals. According to the
other interviewees the balance between the project goals and the realistic allocation
of the resources had been well-rated. The business impact was loosely defined. The
interviewees told that they never discussed money in the project preparation
phase, because the financial result is not a primary target, it is a consequence of
the development work. Case A launched the project without having much prior
knowledge on the project area, but they had established an efficient knowledge
creation system to produce the required knowledge and skills. Table 7.2
summarises
the
project
preparation
dimension
in
case
A,
based
on
the
semistructured interviews.
Table 7.2
Summary of the project preparation dimension in case A
Factor
Description
Balance between
goals and resources
Sometimes the goals were set too high, even impossible to
achieve. Lack of resources could be a result of inability to set
realistic goals.
Part of the development efforts had been terminated due to
lack of resources or the needs had changed.
The controllability of the projects had become more difficult.
Clarity of business
impact
The business impact was not defined in numbers.
The financial result was not a primary target. It was seen as a
result but could not be defined exactly.
Prior knowledge
The company did not have much prior knowledge on the
project area, but the required knowledge had been created
during the project implementation.
According to the structured interview the balance between the goals and the
resources were on a good level. The clarity of the business impact and the prior
knowledge were neutral. In case A the interviewees did not mention any of the
factors of the project preparation dimension as being very important for successful
project implementation. Figure 7.2 illustrates the status of the project preparation
dimension based on the structured interviews and the quality ratings.
115
4
Excellent
3
Very good
2
Good
Satisfactory
1
Neutral
-1Fair
-2
Poor
Balance between
C larity of
goals and
business impact
resources
Prior knowledge
Very-3
poor
Figure 7.2
7.2.3
Status of the project preparation dimension in case A
Change management dimension
In case A resistance for change appeared in the beginning of the project kick-off,
but did not exist any more. The need for change was communicated in daily cooperation and regular meetings. Decisions were made after careful collective
discussion. The interviewees believed that thorough discussion with employees
about the problem and about the possible solutions gave time to the people to
understand, and commit themselves to the implementation of the development
efforts. After the decision, the employees were given the power and responsibility
for the project planning and implementation. The top management support was
strong and visible. The employees’ motivation and participation in the development
work were on a high level. The motivation increased when the first concrete results
and performance improvements of the project could be observed. The project
success – achieving the milestones and performance improvements - during the
implementation phase fed the motivation and the commitment of the project
participants.
According to the interviewees, one important tool to increase the commitment was
a knowledge card –system. Every employee had a personal development plan,
including the targets for acquiring new knowledge. The development project
provided a challenge for that. Case A appreciated multi-skilled employees and
utilised a job rotation system in the knowledge creation and knowledge sharing.
Table 7.3 summarises the change management dimension in case A, based on the
semistructured interviews.
116
Table 7.3
Summary of the change management dimension in case A
Factor
Description
Leadership
The company had established an empowermental and
conversational leadership style.
The leadership was perceived to be motivating and supportive.
Need for change
Continuous daily communication ensured the communicated
need for change.
Profound discussions gave time to people to understand and
to commit themselves for the development efforts.
Participation of
employees
The employees participated 100 % in the development work.
Motivation
The motivation and commitment to the development work
were on a very high level.
The project success fed the motivation.
Communication
Communication was perceived to be open and efficient.
The main tools were daily and weekly meetings and
discussions.
In urgent cases the key person –system was a communication
channel.
The factors of the change management dimension indicated steady satisfaction.
Communication was rated to be on a good level. The rest of the factors were
perceived to be on a very good level. Case A assessed the participation of the
employees and the high level of motivation as very important for successful project
implementation. Figure 7.3 illustrates the status of the change management
dimension, based on the structured interviews and the quality ratings.
4
Excellent
3
Very good
2
Good
1
Satisfactory
Neutral
-1Fair
Leadership
Need for change
Participation
Motivation
-2
Poor
Very-3
poor
Figure 7.3
Status of the change management dimension in case A
Communication
117
7.2.4
Project management dimension
In case A, the project organisation was not specified, but the company was
targeting at 100 % participation of the employees. The quality manager
orchestrated the development work, which was closely linked to the employees'
daily
responsibilities.
The
project
plan
and
the
documentation
fitted
the
requirements of the quality system. Case A did not have a budget or a risk analysis
for the project. The monitoring was interlinked into the normal co-operation, the
daily and weekly meetings. The managing director concentrated on monitoring that
the trend was as expected. The quality manager was monitoring the progress of the
development work in detail. According to the quality manager, the timing of the
training was a little bit in arrears. Table 7.4 summarises the project management
dimension in case A, based on the semistructured interviews.
Table 7.4
Summary of the project management dimension in case A
Factor
Description
Project organisation
The quality manager was responsible for the development
work.
The company was targeting at 100 % participation of the
employees and the project implementation was linked to the
employees’ daily responsibilities.
Control and feedback
The progress was controlled in daily and weekly meetings.
The managing director concentrated on monitoring that the
trend was as expected, and the quality manager was
monitoring the progress of the development work in detail.
Risk analysis and
problem solving
Risk analysis was not done, but managers had discussed the
risks before bigger investments.
The company was targeting at having the employees involved
in problem solving.
Training
Training was provided to the employees, but the timing was a
little bit in arrears.
The company utilised a knowledge-card –system linked to jobrotation targeting at new knowledge creation and efficient
knowledge sharing.
Planning and
documentation
The planning and documentation fitted to the procedures
specified in the quality system.
The status of the project management dimension was slightly on a lower level
compared to the change management dimension. The interviewees did not consider
the project management dimension as very important for the project success, with
the exception of training, which was considered as a significant factor. The project
management and the project implementation were conducted as integrated to the
employees’ daily responsibilities. The planning and the documentation resembled
118
more business planning than project planning. Figure 7.4 illustrates the status of
the project management dimension, based on the structured interview and the
quality ratings.
4
Excellent
3
Very good
2
Good
1
Satisfactory
Neutral
-1Fair
Project
organisation
Control and
feedback
Risk analysis and
problem solving
Training
Planning and
documentation
-2
Poor
Very-3
poor
Figure 7.4
7.2.5
Status of the project management dimension in case A
Project success and impact on performance
In case A, the project was finished behind the schedule, but afterwards all the
interviewees were satisfied with the project efficiency. The project outcome met the
expected quality. The interviewees assessed the project efficiency as being on a
very good level.
According to the interviewees, the customers gained benefits from the project
through improved quality and delivery reliability. Customer satisfaction was on a
high level. As a result of the project the customers regarded the company as a
reliable and skilful supplier. The satisfaction was monitored in connection with
continuous weekly and monthly interaction with the customers. The business
success has been notable. The company utilises order specific cost accounting. It
gave information about the contribution margin, the wastage, the condition of
machines and the motivation of the staff. According to the interviewees, there has
been a vital change in terms of profitability and productivity as a result of the
development project in case A. The company’s delivery reliability is 100 %, the
turnover has more than doubled and the operating profits are top-class compared
to the competitors. The improvements in the business success can also be figured
out from the company’s financial statements. The project creates new potential
ideas all the time and the process improvements are expected to generate new
revenues and better performance in the future.
119
According to the interviewees the project success surpassed the expectations. The
project effectiveness, consisting of the business success, the impact on the
customer and the future potentiality, was on a very high level. Figure 7.5 illustrates
the level of the perceived project success, based on the structured interviews and
the quality ratings.
4
Excellent
3
Very good
2
Good
Satisfactory
1
Neutral
-1Fair
Future
potentiality
Business success
Impact on
customer
Project efficiency
-2
Poor
Very-3poor
Figure 7.5
Perceived project success in case A
Case A was satisfied with the project outcome. It met the technical specifications.
The impact on the customer was recognised in terms of improvements with
customer satisfaction, delivery reliability and appreciation as a supplier. These
improvements were considered as imperative for survival, not as an acquired
special competitive advantage. The improvements in the business success and in
the future potentiality –categories were widespread. Case A launched the project,
targeting at improvements in productivity and quality as the results of the
increased employee motivation. The business development project has affected the
company’s performance widely also for factors not mentioned as project goals.
Table 7.5 summarises the perceptual performance affected by the business
development project. It also displays the changes of the objective performance of
the case company.
120
Table 7.5
Perceived project success in case A
Perceptual performance affected
by the business development
project
Changes in objective
performance of the company
PROJECT EFFICIENCY
Time
Behind schedule, but afterwards
satisfied
Cost
No budget, satisfied
Quality of outcome
Surpassed the expectations
PROJECT EFFECTIVENESS
Impact on customer
Customer satisfaction
Increased, assessed on the basis of
continuous interaction with
customers
Appreciation in the eyes of the
customers
Appreciation as a reliable supplier
has increased
Delivery reliability (Quality)
Delivery reliability 100 %, based on
information provided by orderspecific cost accounting system
Business success
Sales have increased
Annual growth not above the
competitors. Sales:
1993 1.9 M€
1996 2.8 M€
2000 3.0 M€
Costs have decreased as a result of
improved productivity.
Production cost ratio 4 - 10
percentage units below the
competitors. Material costs (%):
1993 44.9 %
1996 44.5 %
2000 37.3 %
Operating profit ratio
Improved
Better than competitors 5 - 13
percentage units. Operating
profit/sales (%):
1993 10.3 %
1996 14.3 %
2000 21.9 %
Productivity
Productiveness of labour improved
based on information provided by
order-specific cost accounting
system
Sales/salaries 20 - 40 % better than
competitors:
1993 4.2
1996 5.5
2000 5.9
Improved
10 - 15 percentage units better than
competitors. Operating profit/total
assets (%):
1993 18.8
1996 30.3
2000 30.8
Sales growth
Cost reduction
Return on investment
Future potentiality
Market development
New markets innovated for present
products (purpose of use)
Learning over time
Improved knowledge and multiskilled employees
Working atmosphere and level of Improved motivation and
motivation
commitment
New ideas
New potential ideas and process
improvements
121
According to the interviewees, in case A the most important factors for successful
project implementation were the highly-motivated employees, the high level of
participation, the provided training, the business ability and the entrepreneur’s
strong intention and commitment to the development work. The improvement in
the working atmosphere was seen as the most important result for the company,
perceived as a performance driver. Case A started the project targeting at
improvements in productivity and quality as the results of the increased employee
motivation.
7.2.6
PIP-profile
According to the PIP-profile, two of the three strategic factors, the project mission
and the top management support, were on a high level. Instead the project
planning and the schedule indicated low performance. Within the tactical factors,
one of the five factors indicated low performance. The technical tasks -factor was
ranked below the critical 50 % -level. Problem solving, communication and
personnel –factors indicated high values. Also, the control and feedback –factor
achieved the critical 50 %. The PIP-profile indicates that in case A, both strategic
factors and tactical factors were recognised. Only two factors were skipped –project
planning and technical tasks. There was a notable deviation between the
interviewees’ answers concerning the project mission and the technical tasks. The
project success was on a high level. 90 % of the 408 companies from the reference
database have lower scores. Figure 7.6 illustrates the PIP-profile and its factors.
In general, the strategic and tactical factors are rated as effective. Most projects in
this kind of a situation are successful. Poor planning is the feature that Pinto &
Prescott (1990, 319) feel concerned about. According to them the planning
conducted in all the phases of the project has a greater relative importance for the
project success. The evidence from case A is contradictory with this. Despite the
poor planning, the project success was perceived as excellent.
122
! = Interviewees have dissenting
PIP-Profile - Case A
judgments
!
Project mission
Strategic
factors
Top management support
Project planning and schule
Problem solving
Communication
Tactical
factors
Conrol and feedback
!
Technical tasks
Personnel
Project success
-
Figure 7.6
7.2.7
20
40
60
80
100
PIP-profile in case A
Summary of case A
In case A, the strength of the intention and the business ability were on a high
level. As also Storey (2000) has discovered to be ordinary in SMEs, growth was a
secondary target to the case company. It was targeting at business success and
survival in the long run, being happy with controlled and moderate growth.
Morrison et al. (2003) found in their research that the distinguishing feature of progrowth business is a balanced alignment of the owner-manager’s intention, the
business abilities and the opportunity environment. In case A the strength of the
intention and the business ability were perceived to be on a high level, but the
opportunity arena was seen as not very promising. Its impact on the business
success was perceived to be low. Hyvärinen (1993) and Shane (2000) have
emphasised the importance of prior knowledge for successful development efforts.
Contradictory to this, case A seems to have met success without having prior
knowledge on the project area. Instead of this, case A had established an efficient
knowledge creation system to produce the required knowledge and skills. It utilised
the job-rotation system, leading to the situation introduced by Beer et al. (1990)
where putting the employees into a new context which imposes new roles,
responsibilities and relationships on them force new attitudes and behaviours on
the employees.
123
As many researchers have noticed before (cf. Lanning 2001, Salminen 2000), case
A highlighted the training, participation and motivation of the employees as
important factors for successful project implementation. In case A the leadership
style was conversational, giving power and responsibility to the employees. As
Winch and McDonald (1999) have recognised to be characteristics for SMEs, also in
case A the communication practices were less formalised, based on daily meetings
and co-operation.
In case A, the interviewees did not consider the project management dimension as
very important for the project success, with the exception of training. In the case
company, there did not exist evidence about sophisticated planning, consistent to
the research results of Martin and Steines (1994). The planning was more like
business planning than project planning. In spite of the thin project management,
the project success was perceived as high by the interviewees. This is contradictory
with the research results introduced in the area of project and change management
highlighting the importance of project management practices (cf. Pinto & Prescott
1990, Salminen 2000, Turner 1999). The project management and project
implementation
were
conducted
as
integrated
to
the
employees’
daily
responsibilities, leading to difficulties of drawing a distinction between project
success and business success (cf. Shenhar et al. 2001; Salminen 2000).
The interviewees of the case company were very satisfied with the project
efficiency. Afterwards the project efficiency was not an important success category,
being a feature also Shenhar et al. (2001) have discovered. The impact on the
customer was recognised in terms of increased appreciation as a notable supplier
and in terms of improvements in customer satisfaction. The improvements in
business success and future potentiality were widespread. The project success
during the implementation phase fed the motivation and commitment of the project
participants. Case A started the project by targeting at improvements in
productivity and quality as the results of increased employee motivation. The
business development project was perceived to have a wide effect on the
company’s performance, also for areas not mentioned as project goals. This is in
accordance with Bobby and Buchanan (1992) and Forsman (2001), who have
discovered that development projects tend to spread out and cause changes also to
functions not initially targeted.
124
According to the interviewees, in case A the most important factors for successful
project implementation were the highly-motivated employees, the high level of the
participation, the provided training, the business ability and the owner-manager’s
strong
intention
and
commitment
to
the
development
work
(Table
7.6).
Improvement in the working atmosphere was seen as the most important result for
the company, perceived as a performance driver.
Table 7.6
Important factors for project implementation in case A
Success dimension
Perceived important success
factor
Entrepreneurial dimension
Strength of intention
Business ability
Project preparation dimension
Change management dimension
Participation
Motivation
Project management dimension
Training
The interviewees classified the project as successful. The objective and subjective
performance indicators give support to this view. Also the PIP-profile indicates
project success. Case A has high performance rates both with strategic and tactical
success factors, giving a basis for high potential in project implementation success
(Schultz et al. 1987, Slevin 1989).
As a conclusion, Figure 7.7 illustrates a general view of the status of the success
dimensions and the project performance in case A. The values of the general view
have been counted by summarising the quality ratings of the factors in each
dimension (see Appendix 6). The entrepreneurial, change management and project
management dimensions have quite high quality ratings. On the other hand, the
project preparation dimension is on a satisfactory level.
125
Project
performance
Entrepreneurial
dimension
Project management
dimension
Change management
dimension
Project preparation
dimension
Excellent
Neutral
Very poor
Figure 7.7
A general view of success dimensions in case A
The general view shows quite a balanced status, indicating quality ratings above
the neutral with all the dimensions.
7.3
Case B: Integrated service package development
Case B is an over 40-year-old company specialised in finishing projects for the
construction business. It employs 29 persons and its turnover was 3.5 million euros
in 2003. Change of generation was going on and the succession process was
unfinished. The founder of the company worked as a chairman of the board of
directors, but was still participating in the operative work. The founder’s son had
started as the managing director two years ago. The founder and his son made the
important
business
decisions
together.
Case
B
had
conducted
a
product
development project targeting at designing a comprehensive service package for
construction business customers. The main target was that the new service
package would strengthen the company’s competitive position, improve the
productivity and increase its sales. The project was carried out in close
collaboration with one supplier-partner and a few competitors. The ownermanagers perceived the project as successful. The project started in 1997 and the
service package was finished in 2001.
126
7.3.1
Entrepreneurial dimension
Case B did not have a written strategy, but the entrepreneurs had a strong vision
about the company’s future and goals. They also had a strong intention to
implement the goals. Growth, leading to an increased number of employees, was
not a target for this company. The owner-managers had a strong will to gain the
business success. As a result of the business development project, the case
company had better opportunities to get new contracts. The company’s business
ability to utilise these opportunities was on a good level. Table 7.7 summarises the
entrepreneurial dimension in case B, based on the semistructured interviews.
Table 7.7
Summary of the entrepreneurial dimension in case B
Factor
Description
Strength of intention
Company did not have a written strategy, but it had a strong
vision about the future and its business goals.
The owner-managers had a strong intention to gain business
success.
The company had no intention to grow in terms of the number
of employees.
Experiments were appreciated as important for the future of
the company.
Business ability
The business ability was perceived to be good.
Richness of
opportunity arena
The project started based on customer needs.
The project made it possible to improve the competitive
position of the company by differentiation.
In case B the strength of the intention was on a high level. The case company
assessed two factors, the strength of the intention and the business ability, as very
important for the successful implementation of the business development project.
Further, the case company considered the opportunity arena as customary,
meaning that they would have to be very competitive in order to get new contracts.
Figure 7.8 illustrates the status of the entrepreneurial dimension, based on the
structured interviews and the quality ratings.
127
4
Excellent
3
Very good
2
Good
Satisfactory
1
Neutral
-1Fair
Strength of
intention
Business ability
Opportunity arena
-2
Poor
Very-3poor
Figure 7.8
7.3.2
Status of the entrepreneurial dimension in case B
Project preparation dimension
In case B the project goals were realistic and the resources for achieving them were
adequate. The business impact was not specified in numbers. The expected impact
was defined as a better competitive position. Both the founder and his son
emphasised the importance of experimental development work to improve the
future potentiality. This project was considered as a kind of experiment. Table 7.8
summarises
the
project
preparation
dimension
in
case
B,
based
on
the
semistructured interviews.
Table 7.8
Summary of the project preparation dimension in case B
Factor
Description
Prior knowledge
The company had more than 20 years experience and a lot of
prior knowledge in the project area.
Balance between
goals and resources
The balance between project goals and resources were wellrated.
Clarity of business
impact
The business impact was not defined in numbers. The
managers expected to improve the company’s competitive
position.
The project was considered also as an experiment producing
new knowledge.
Case B had a lot of prior experience and technical knowledge in the project area.
The interviewees assessed the prior knowledge as a very important factor for
successful project implementation. It was assessed to be on an excellent level. The
balance between the goals and the required resources were well-rated. The clarity
of the business impact was fair. Figure 7.9 illustrates the status of the project
preparation dimension, based on the structured interviews and the quality ratings.
128
4
Excellent
3
Very good
2
Good
Clarity of
business
impact
Satisfactory
1
Neutral
-1Fair
Prior
knowledge
-2
Poor
Balance between
goals and
resources
Very-3poor
Figure 7.9
7.3.3
Status of the project preparation dimension in case B
Change management dimension
Change resistance had not arisen in case B. The development project affected the
working practices of three employees and the owner-managers. The first year after
the project kick-off was passed without any visible results from the case company’s
point of view. During that time the partner-supplier built the network of project
participants, and arranged common discussions targeting at shared vision of the
project. The interviewees told that this slow progress decreased their motivation.
During the second year the project got into full speed. The willingness to participate
and motivation of participants increased when the concrete results of the project
could be noticed. After that, the commitment, motivation and participation were on
a high level.
Communication inside the case company B was not efficient. Also the need for
change was loosely communicated. The experiments were carried out on the job
site, with all the project partners and the employees in attendance. Problems arose
on these situations and they could be solved immediately in good collaboration with
the other project partners. The leadership was assessed to be on a good level.
Table 7.9 summarises the change management dimension in case B, based on the
semistructured interviews.
129
Table 7.9
Summary of the change management dimension in case B
Factor
Description
Participation of
employees
The key persons participated actively in the project
implementation.
Motivation
Slow progress at the beginning of the project affected
motivation negatively
In general, the motivation and commitment of the key
persons were on a high level.
Leadership
The owner-managers had a conversational leadership style.
Leadership was perceived as good.
Need for change
No change resistance occurred, but some suspicions existed
mainly in a form that did not generate problems.
Communication
Communication was not efficient inside the case company.
Communication inside the project was felt to be trouble-free
because a small number of people were involved in the
project.
The pilot projects were conducted with all the participants in
attendance, facilitating fluent communication.
Case B assessed the participation of the employees as a very important factor for
the
successful
participation
project
positively.
implementation.
Figure
7.10
The
high
illustrates
the
motivation
status
affected
of
the
the
change
management dimension based, on the structured interviews and the quality ratings.
4
Excellent
3
Very good
2
Good
1
Satisfactory
Neutral
-1Fair
Participation
Motivation
Leadership
Need for change
Communication
-2
Poor
Very-3
poor
Figure 7.10
7.3.4
Status of the change management dimension in case B
Project management dimension
Case B did not have a written plan for the project. The interviewees did not see any
advantage in having a plan. The supplier-partner was responsible for the technical
development work of the raw material. They had a plan for the commercialisation,
and case B could benefit from it. The owner-managers had crystallised the starting
130
point, the goal of the project and the required time for themselves. So, they had
defined the target, but not the methods of how to get there. Case B did not have a
budget, nor had it done a risk analysis, but the owner-managers were aware of the
technical risks. The supplier-partner was financially responsible for the failures of
the pilot projects, but case B was aware of the fact that in the eyes of the
customers it would be responsible in the event of failure, causing damage to the
company image. Systematic monitoring was not done during the project, but single
experiments were monitored interlinked to the cost accounting of the contracts. The
project
organisation
was
defined
loosely:
the
owner-managers
and
three
employees. According to the interviewees the training, mostly offered by the
partner-supplier, was sufficient and well-timed. In some cases the employees
regarded it as impractical. Table 7.10 summarises the project management
dimension in case B, based on the semistructured interviews.
Table 7.10
Summary of the project management dimension in case B
Factor
Description
Control and feedback
The company did not have a systematic control during the
project implementation, but individual pilot projects were
monitored in connection to contract-based cost accounting.
Risk analysis and
problem solving
Risk analysis was not done, but the owner-managers were
aware of the technical risks.
The pilot projects were conducted with all the participants in
attendance and if problems occurred, they were solved on site
in co-operation with other project partners.
Training
Training was provided by the partner supplier.
The training was mainly assessed as being well-timed and
sufficient, but in some cases the employees regarded it as
impractical.
Project organisation
The number of project participants in the case company was
five: owner-managers (2) and three employees.
The managing director was in the role of the project manager.
Planning and
documentation
The company did not have a written plan, and the ownermanagers did not see any advantage in a written plan.
The supplier partner had a plan for the commercialisation and
the case company could benefit from it.
In case B, the status of the project management dimension was slightly on a lower
level than the change management dimension. The interviewees did not consider
the factors of the project management dimension as very important for the project
success, with the exception of training. There did not exist evidence of
sophisticated
planning
implementation
were
in
case
conducted
B.
as
The
project
integrated
management
to
the
and
employees’
project
daily
131
responsibilities. Figure 7.11 illustrates the status of the project management
dimension, based on the structured interviews and the quality ratings.
4
Excellent
3
Very good
2
Good
1
Satisfactory
Neutral
-1Fair
C ontrol and
feedback
Risk analysis and
problem solving
Training
Project
organisation
Planning and
documentation
-2
Poor
Very -3
poor
Figure 7.11
7.3.5
Status of the project management dimension in case B
Project success and impact on performance
In case B the project outcome met the technical requirements set for it. In terms of
time and money they did not experience any surprises. The customers benefited
from the project outcome. Now the customers have one responsible supplier for the
finishing project of construction. The price is a little bit higher, but the transaction
costs lower. Customer satisfaction is on a high level. In order to track customer
satisfaction, the company monitored the amount of re-purchasing. The competitive
position is perceived as being better; the customers’ price sensitivity is on a lower
level and the number of competitors is smaller. The required delivery time of
contracts has decreased.
As a result of the project, a new product development
project has been launched (an option to the developed service package). The
company’s reputation is better and the interviewees believed that in the future the
company could concentrate on special orders, where pricing can be higher. Figure
7.12 gives a general view of the perceived project success in case B, based on the
structured interviews and the quality ratings.
132
4
Excellent
3
Very good
2
Good
Satisfactory
1
Neutral
-1Fair
Future
potentiality
Business success
Impact on
customer
Project efficiency
-2
Poor
Very-3poor
Figure 7.12
Perceived project success in case B
Case B was satisfied with the project outcome. It met the technical specifications,
and the interviewees were not disappointed with time or costs. The afterwards
assessed project efficiency was not an important success category. Its importance
was emphasised during the implementation phase up to the project completion. The
impact on the customer was recognised in terms of improvements in customer
satisfaction and being acknowledged as a competent supplier. This was considered
as imperative for survival, not as an acquired special competitive advantage. The
perceived improvements in the business success and in the future potentiality –
categories were widespread. Case B launched the project targeting at a better
competitive position, improved productivity and sales growth. Table 7.11 illustrates
the changes in the factors of the project success categories based on the
interviews, the annual accounts of the case company and the annual accounts of its
competitors. As can be noticed from Table 7.11, the business development project
has affected the company’s perceived performance widely also in areas not
mentioned as project goals.
133
Table 7.11
Perceived project success in case B
Perceptual performance
affected by the business
development project
Changes of objective
performance of the
company
PROJECT EFFICIENCY
Time
On schedule
Cost
No budget, satisfied
Quality
Satisfied
PROJECT EFFECTIVENESS
Impact on customer
Customer satisfaction
Increased, measured based on the
amount of re-purchasing
Appreciation in the eyes of the
customers
Acknowledged as a supplier
Business success
Sales growth
The annual sales growth of the
new product area 9 - 28 %,
information provided by contractbased cost accounting
The growth rate 5 - 10 %
above the competitors
Sales:
1997 1.6 M€
2002 4.2 M€
2003 3.5 M€
(The reason for the decline of
the sales in 2003 was the
billing cycle of the one big
contract)
Market share
Has had impact on sales within
other product areas
Operating profit ratio
Below the competitors
Improved in the new product area;
Operating profit (%):
customers’ sensitivity to prices has
1997 4.4 %
decreased in the new product
2002 4.3 %
area.
2003 0.7 %
Delivery time
(Quality)
Delivery time of contracts has
decreased
Future potentiality
New product development
New supplementary product
development has started
Learning over time
The employees technical
knowledge was improved
Partnerships
Strengthened partnership with the
major supplier
Other competitive advantages
Differentiation, the number of
competitors has decreased
In case B the interviewees assessed as most important factors for the successful
project implementation the prior knowledge in the project area, the high level of
participation, the training provided to the employees, the business ability and the
entrepreneurs’ strong intention to carry out the project.
134
The most important performance improvement for case B was the sales growth in
the product area of the new service package. Also the better competitive position
was appreciated as a source of improved potentiality in the future. The ownermanagers expected the new developed service package to benefit the case
company during the next ten years.
7.3.6
PIP-profile
In case B, the strategic factors were on a low level, but the tactical factors indicated
a better performance. Both the project mission and project planning and schedule
were under the critical 50 % -level. The top management support was on a higher
level. From the tactical factors the technical tasks, the personnel and the problem
solving were on a high level, whereas the control and feedback and communication
indicated a lower performance. The project performance indicated success. 60 % of
the 408 companies in the reference database had lower scores. Figure 7.13
illustrates the PIP-profile and its factors in case B.
!
PIP-Profile Case B
= Interviewees have dissenting
judgments
Project mission
!
Top management support
Strategic
factors
Project planning and schedule
Problem solving
Communication
Tactical
factors
!
Control and feedback
Technical tasks
Personnel
Project succes
-
Figure 7.13
20
40
60
80
100
PIP-profile in case B
The project mission was poorly communicated and the project planning was poorly
done, but the tactical implementation was quite well managed. The managerial
attitude, trusting the vision, was “go ahead and do it”. According to the PIP-analysis
tool developers (Slevin & Pinto 1987, 37), this kind of situation easily leads to
errors of action. According to the empirical evidence this did not take place in case
135
B. One reason could be the supplier-partner’s directive role during the project
implementation. Pinto and Prescott (1988, 15) have highlighted the importance of
project mission and the necessity to keep it in the forefront during all the phases of
the project life cycle. This is contradictory with the evidence from case B. In spite of
the poor performance of the project mission, the project success was rated above
the critical 50 %.
7.3.7
Summary of case B
The strength of the intention and the business ability were on a high level. Case B
was not targeting at growth in terms of number of employees. It was targeting at
business success and survival in the long run. This finding is in line with Storey
(2000). The opportunity arena was perceived as not very promising, characterised
by rigid competition and price sensitive customers. So, the opportunity arena was
seen more as creating pressure by competitors and legislation than providing new
opportunities (cf. Morrison et al. 2003). Shane (2000) highlights the connection
between prior knowledge and opportunity discovery. People will more likely
discover opportunities in sectors they know well. Consistent with Shane (2000),
based on their prior knowledge of the markets and customer problems, case B had
recognised an opportunity to improve their competitive position by differentiation to
comprehensive solutions. The interviewees assessed also the company’s technical
knowledge, related to knowledge about the product and production, as excellent.
This is in accordance with Hyvärinen (1993) who has recognised that SMEs have
the best chances with the production development projects because that is the field
they mostly know best.
Case B highlighted the participation of the employees as an important factor for the
successful project implementation (cf. Lanning 2001 and Salminen 2000). The
leadership style was empowermental, giving power and responsibility to the
employees. The need for change was not communicated very efficiently. The
communication was on a satisfactory level, emphasising more tactical than strategic
issues.
The
loosely
defined
business
impact
and
the
missing
planning
refer
to
unsophisticated planning practices. Case B did not have a written plan for the
project and the interviewees did not see any advantage in a plan. This is in
136
accordance with Martin and Steines (1994) and (Rantanen 2001), who have
discovered SMEs’ lack of sophisticated planning practices. In spite of the thin
project management and the missing written plans, the project success was
perceived as quite high. This is contradictory with the research results introduced in
the area of project and change management highlighting the importance of project
management practices (cf. Pinto & Prescott 1990, Salminen 2000, Turner 1999).
The interviewees in case B did not consider the project management dimension as
very important for the project success, with the exception of training. The project
management and project implementation were conducted as integrated to the
employees’ daily responsibilities, similar to the findings of Shenhar et al. (2001)
and Salminen (2000).
The interviewees of the case company were satisfied with the project efficiency.
Afterwards the project efficiency was not an important success category, as also
Shenhar et al. (2001) have discovered. The impact on the customer was recognised
in terms of improved customer satisfaction and appreciation as a supplier. These
were considered as imperative for survival, not as an acquired special competitive
advantage. The perceived improvements in the business success and future
potentiality were widespread. The concrete results and the project success during
the implementation phase affected the motivation of the employees positively.
Case B was targeting at a better competitive position, improved productivity and
sales growth, but the business development project affected the perceived
performance widely also in areas not mentioned as project goals. This finding is in
accordance with Bobby and Buchanan (1992) and Forsman (2001).
According to the interviewees, the most important factors for the successful project
implementation were the prior knowledge, the business ability, the high level of
participation, the training and the owner-managers’ strong intention to carry out
the project successfully. Table 7.12 summarises the perceived important factors for
the success. The most important performance improvements for case B were the
sales growth and the better competitive position, expected to generate revenues
and improve profitability in the future.
137
Table 7.12
Important factors for project implementation in case B
Success dimension
Perceived important success
factor
Entrepreneurial dimension
Strength of intention
Business ability
Project preparation dimension
Prior knowledge
Change management dimension
Participation
Project management dimension
Training
All the interviewees classified the project as successful. The perceptual performance
gave support to that view, but from the objective performance only the sales
growth could be figured out. Also the PIP-profile indicated quite a high project
success rate. 60 % of the companies of the reference database had lower success
scores. Case B had better performance with tactical factors than with strategic
factors, a situation that easily leads to errors in the action (Slevin & Pinto 1987).
Due to the directive role of the supplier-partner and the owner-managers’ strong
intention to gain success, this did not happen.
Figure 7.14 illustrates a general view of the status of the success dimensions in
case B. All the dimensions are balanced near the quality rating good. The
entrepreneurial, change management and project preparation dimensions have
been rated as good. The project management dimension is slightly on a lower level.
As in case A, also in case B the general view gives a balanced status, indicating
high quality ratings with all the dimensions.
138
Project
performance
Entrepreneurial
dimension
Change management
dimension
Project management
dimension
Project preparation
dimension
Excellent
Neutral
Very poor
Figure 7.14
7.4
A general view of the success dimensions in case B
Case C: Targeting at rapid growth and internationalisation
Case C is a medium-sized family-owned company in the publishing sector. It
employs 109 persons. Case C is a market leader in Finland with a turnover of about
9 million euros in 2002. It has export to the Baltic countries. The products are
distributed to the end customers through a chain of stores and retail shops. Case C
has an over 80 years history under the same owner-family. At the moment, the
company has a hired managing director and the owner of the company is working
as the chairman of the board of directors. He is also involved in the operative
business, by focusing on special development tasks.
Case C has conducted a development program targeting at rapid growth. They
started objective-oriented development work in the end of the 1980’s. In 1997 the
company faced a financial crisis. The examination period in this research is from
1994 to 1997. During that time case C started its rapid internationalisation process
and tried to move from an owner-management to a hired-management system.
The outcome of the development project was perceived as unsuccessful by the
owner of the company.
139
7.4.1
Entrepreneurial dimension
In the beginning of the 1990’s case C had a clear strategy and goals for the
business. The main goal was rapid growth and position as the market leader.
Because growth was not possible in the domestic market, case C decided to start
an internationalisation process. They started export activities in Scandinavia and
the Baltic countries. At the same time, case C had made an acquisition in Finland,
buying the business of a big competitor. As a result the case company’s size, in
terms of number of employees, almost doubled. The general atmosphere inside
case C was very optimistic and the attention was strongly focused on the sales
growth. This led to a situation where the company forgot to track the costs, and the
cost structure started to get distort. In 1994 the owner-manager faced problems,
being forced to find balance between work and private life. He felt to have achieved
all the goals he had set for himself. The owner-manager lost his motivation and
wanted to separate himself from the operative management. As a result of this, an
outsider was hired as a deputy managing director responsible for the operative
management.
When case C started its development efforts, the strength of the intention was on a
very high level, but it could not be kept up. When the employees recognised the
weakened owner-manager’s strength of intention, it affected their motivation and
willingness to work hard. The opportunity arena was not perceived as very
attractive in the domestic market, but new business opportunities were discovered
from Poland and Russia. Later on, the tightening competition lowered the prices
and caused decreasing profitability. The business ability was not good enough for
the internationalisation of the company. Case C had a history of management by
the visions, but it was incapable to transfer the visions into action plans. The
interviewees described that the operative management was inefficient. The board of
directors consisted of business specialists with recognised strategic know-how, but
case C did not have capability to translate it into actions for the operative level.
Also the development capabilities were assessed to be inadequate for the
challenges the case company faced. Table 7.13 summarises the entrepreneurial
dimension in case C, based on the semistructured interviews.
140
Table 7.13
Summary of the entrepreneurial dimension in case C
Factor
Description
Opportunity arena
The company had recognised exporting opportunities in the
Baltic countries, Russia and Scandinavia.
Later, the tightening competition lowered the prices making
the export more challenging.
Strength of intention
When the project started the company had a written strategy
and it had been communicated to the employees.
The owner/manager had a strong intention to rapid growth
and business success.
Year 1994 was a turning point, the strength of intention
diluted, the strategy became more verbiage, and lack of
business targets was a reality.
Business ability
Management by visions was ordinary, but the company failed
to translate the visions into action plans.
Operative management was ineffective.
The board of directors was skilled, but the ability to utilise its
know-how was poor.
Figure 7.15 summarises the status of the entrepreneurial dimension in case C
based on the structured interviews and the quality ratings. In general, the strength
of the intention and the opportunity arena were perceived as good. The business
ability was assessed as satisfactory. As a reason for the unsuccessful project
implementation was mentioned the faded strength of intention at halfway through
the project implementation. Further, the inadequate business ability was assessed
to be a critical factor for the failure.
4
Excellent
3
Very good
2
Good
Satisfactory
1
Neutral
-1Fair
Opportunity arena
Strength of
intention
Business ability
-2
Poor
Very-3poor
Figure 7.15
Status of the entrepreneurial dimension in case C
141
7.4.2
Project preparation dimension
Case C has always been inclined to set the goals very high. The ability to achieve
those goals has not been on the same level. According to the interviewees, the
company has had enough resources, but it has been incapable to make the most
with those resources. The goals for the exportation were set too high. The business
impact was not crystallised. Case C has moved forward guided by a vision, not a
detailed estimation of the business impact. Concerning the internationalisation, the
prior knowledge was inadequate, lacking the knowledge of the culture and the
market area. Language skills were a problem for part of the employees. Table 7.14
summarises
the
project
preparation
dimension
in
case
C,
based
on
the
semistructured interviews.
Table 7.14
Summary of the project preparation dimension in case C
Factor
Description
Balance between
goals and resources
It was normal for the company to set very high goals.
Mostly the company had enough resources, but the capability
to utilise and orchestrate the resources was poor.
Clarity of business
impact
The company went forward led by the vision, the exact
calculations were not customary for it.
Sometimes decisions were made based more on emotions
than rational judgment.
Prior knowledge
The company had poor knowledge of internationalisation;
language skills, culture and market area.
Figure 7.16 illustrates the status of the project preparation dimension based on the
structured interview and the quality ratings. The clarity of the business impact and
the balance between the goals and resources were perceived as neutral. The prior
knowledge from the project area was assessed to be poor.
142
4
Excellent
3
Very good
2
Good
Satisfactory
1
Prior
knowledge
Neutral
-1Fair
-2
Poor
Balance between
goals and
resources
C larity of
business impact
Very-3
poor
Figure 7.16
7.4.3
Status of the project preparation dimension in case C
Change management dimension
Traditionally, the leadership in case C has been personified to the owners. The
owner-manager was considered as the only real leader with whom the employees
wanted to discuss and whose feedback they appreciated. It was normal that the
employees and their family members had a long history in the service of the case
company. The general level of education was low. The attitudes towards outsiders
were sometimes uncommunicative and unwelcoming. As a reason for this, the
interviewees considered the reluctance to tolerate unconventional ideas and
knowledge.
There did not exist change resistance, but the rapid internationalisation and the
goals for the exportation were challenged. The employees did not give feedback
about this to the owner. The discussion went on behind the backs. There were
some features of concern with the communication practices. The unwritten rule was
that the employees did not give negative feedback to the owner, who was
considered as the positive engine of the company. The other way around, the
owner did not give negative feedback to the employees. This led to the situation,
where the problems were given a lot of space to expand. Further, a lot of
information was shared with the employees, but not in a form easy to understand.
The two-way communication was not efficient.
In 1994 the change from the owner management to the hired management was a
surprise for the employees. The people were not informed beforehand and the
143
decision was not explained. The hired manager made a good start by launching
extensive development work inside the company, leading to a huge number of
plans, rules and written procedures. The motivation of the employees started to
decrease, when they recognised that the new rules and procedures did not cause
any changes in the daily operations. Also, the management style changed from
conversational leadership to more a technical supervising style. The people did not
find this very inspiring. Table 7.15 summarises the change management dimension
in case C, based on the semistructured interviews.
Table 7.15
Summary of the change management dimension in case C
Factor
Description
Participation of
employees
The employees’ participation was ok, they were conducting
their daily business.
Motivation
In the beginning motivation and commitment were on high
level.
The employees’ motivation took a turn to decrease due to the
perceived drop of the owner’s motivation.
The missing visible results of the project affected the
motivation negatively.
Need for change
The goals for growth were communicated, but the change in
management was a big surprise for staff.
Communication
Information was shared, but in a form that people could not
understand its meaning. Two-way communication did not
succeed.
Both the employees and the owner manager avoided
discussions about the negative issues.
Leadership
The leadership has been personalised to owner.
The hired-manager was not as best in leadership, but his
practices for team working has been appreciated.
Figure 7.17 summarises the status of the change management, based on the
structured interviews and the quality ratings. The leadership was perceived as fair
and the rest of the indicators were assessed to be neutral.
The owner-manager perceived the breakdown of his motivation as critical for the
project failure. The low level of his motivation had a negative effect on the
employees’ motivation.
144
4
Excellent
3
Very good
2
Good
1
Satisfactory
Leadreship
Neutral
-1Fair
Participation
Motivation
Need for change
Communication
-2
Poor
Very-3
poor
Figure 7.17
7.4.4
Status of the change management dimension in case C
Project management dimension
There did not exist evidence about sophisticated planning practices in case C. As
mentioned above, the case company had confidence in leading by visions. On the
other hand, the case company had had difficulties in translating the visions into
action plans enabling efficient operative management and completion of actions
planned to be taken. The new hired manager started to develop planning systems,
but still the completion of operations did not succeed. A lot of plans were produced,
but the implementation was conducted by halves. This affected the motivation of
the employees negatively.
Risk analysis was not done. The control was not systematic and if negative
feedback or problems were recognised, they were bypassed without corrective
actions. On the other hand, a general “speed-blindness” increased inside the
company, leading to inability to recognise the warning signals. Case C drifted
towards a crisis. Table 7.16 summarises the project management dimension in case
C, based on the semistructured interviews.
145
Table 7.16
Summary of the project management dimension in case C
Factor
Description
Project organisation
The organisation was clear in the beginning of the project.
When the organisation grew it became unclear as a result, and
there existed confusion with authorities and responsibilities.
Control and feedback
The company did not have systematic control.
They did not make comparisons between what was planned
and what materialised.
Risk analysis and
problem solving
Risk analysis was not done properly
Shared problem solving was not customary for the company.
Planning and
documentation
The company had made plans (business planning), but not
very sophisticated ones.
The implementation of the plans was conducted by halves.
The documentation and reporting did not expose the critical
situation where the company drifted.
Training
Some employees had opportunity to train themselves, but
more training should have been provided.
Figure 7.18 introduces the status of the project management dimension, based on
the structured interviews and the quality ratings. The project organisation was
perceived to be on good level. The rest of the indicators were assessed to be
neutral or fair.
4
Excellent
3
Very good
2
Good
Risk analysis
and problem
solving
1
Satisfactory
Neutral
-1Fair
Project organisation
Planning and
documentation
Training
Control and
feedback
-2
Poor
Very-3
poor
Figure 7.18
Status of the project management dimension in case C
The factors of the project management were not perceived as critical for the project
failure.
146
7.4.5
Project success and impact on performance
In the middle of the 1980’s case C was one of the four leading suppliers in the
domestic market. In ten years it had achieved a leading position, holding the
market share of 60 %. As a result of this success, arrogance had increased inside
the company. Case C started to face problems, e.g. they lost one very important
customer, a big chain store in Finland.
The rapid growth, focusing only on sales and the inability to recognise the signals
inducing trouble, generated problems all over the company operations; the
production could not produce enough, the quality of the product development was
decreased, the production costs increased un-controllably and the credit losses
boomed. Case C faced a financial crisis. As a result of it, a re-organisation and
streamlining –program took place, to be continued for several years until these
days. The business development effort ended in project failure. The perceived
project success, based on the perceptual and objective data, is described in detail
in Table 7.17.
As the main reasons for the business development failure the owner of the case
company assessed his low level of motivation and the disappearance of the
strength of intention halfway of the project implementation. Further, the lack of
goals was mentioned as a reason for the failure. The hired manager, outsider for
the organisation, was not a successful decision, but this decision or the actions
taken by him, were not seen as the critical reasons for the project failure.
147
Table 7.17
Perceived project success in case C
Perceptual performance
affected by the business
development project
Changes of objective
performance of the company
PROJECT EFFICIENCY
Time
No schedule, no surprises
Cost
Increased costs
Project outcome
Financial crisis
PROJECT EFFECTIVENESS
Impact on customer
Customer satisfaction
Decreased, loss of customers to the
competitors
Business success
Sales growth
In the beginning increased, but
moved downwards
Market share
Decreased
In the beginning about 60 %
Cost reduction
The fixed costs increased
The costs started to increase uncontrollably
Credit losses increased
Sales
1994
1997
2002
growth:
+17.5 %
-9.5 %
-2.2%
Sales:
1994 11.0 M€
1997 11.8 M€
2002 9.4 M€
Operating margin (%):
1994 +12.5 %
1997 –0.4 %
2002 +3.7 %
Credit losses:
1998 1.7 million FIM
Operating profit ratio
Substantially decreased
Operating profit (%)
1994 +7.6 %
1997 –5.0 %
2002 +1.7 %
Productivity
Sales/employee decreased
The organisation grew more than
the sales
Sales/salaries:
1994 2.9
1997 2.7
2002 2.9
Quality
The product quality decreased and
the production capacity became
inadequate
Future potentiality
New product development
Learning over time
Employee satisfaction
Quality of product development
decreased
Recruiting of new inexperienced
employees with weak capability for
development challenges
Systematic thinking increased and
dependence on the owner as a
person decreased
Decreased
148
Case C has learned as a result of the project failure. The employees are not as
dependent on the owner as earlier. The planning and team working practices are
more sophisticated today as a result of the procedures launched by the hired
manager. The sensitivity to recognise warning signals has improved and the
communication is now more efficient. Assessing afterwards, the first signals which
should have been taken into consideration in order to prevent the project failure,
were the difficulties with the exportation; the rapid growth of the number of
employees, the doubts with the price level and the increased credit losses.
Figure 7.19 summarises the perceived project success, based on the structured
interviews and the quality ratings. The project efficiency and the business success
were rated as poor. The impact on the customer was fair and the future potentiality
was assessed as being satisfactory.
4
Excellent
3
Very good
2
Good
Satisfactory
1
Impact on
customer
Neutral
-1Fair
Business
success
Project
efficiency
Future
potentiality
-2
Poor
Very-3poor
Figure 7.19
7.4.6
Perceived project success in case C
PIP-profile
According to the PIP-profile, case C has skipped both strategic and tactical issues.
The interviewees’ assessments are quite similar. Notable divergent between the
assessments appeared only with the personnel-factor, causing a 30 % difference
between the informants’ factor percentages.
According to the PIP-developers, the projects where both the strategic and tactical
functions are inadequately performed, have a high likelihood of failure (Slevin &
Pinto 1987, 37). This is consistent with the evidence from case C. Figure 7.20
illustrates the PIP-profile and its factors.
149
!
PIP-Profile Case C
= Interviewees have dissenting
judgments
Project mission
Strategic
factors
Top management support
Project planning and schedule
Problem solving
Communication
Tactical
factors
Control and feedback
Technical tasks
!
Personnel
Project succes
-
Figure 7.20
7.4.7
20
40
60
80
100
PIP-profile in case C
Summary of case C
Case C was targeting at rapid growth, having the goal of achieving the position as
the market leader. The strength of the intention and the richness of the opportunity
area were perceived as good for reaching the goals. Instead, the business ability
was perceived as neutral. Further, the strength of the intention disappeared
halfway through the project implementation. According to Morrison et al. (2003)
the distinguishing feature of pro-growth business is a balanced alignment of the
owner-manager’s intention, the business abilities and the opportunity environment.
In case C the strength of the intention was instable, the opportunity arena was
seen as promising, but the business ability to realise the opportunities was
perceived as inadequate. The balance between these three entrepreneurial factors
was wobbly.
The goals were set too high, even impossible to achieve. The company had enough
resources, but the capability to utilise the resources was on a low level. Case C did
not have sufficient adequate knowledge for the internationalisation process. This
was a clear disadvantage for the project implementation. This is in line with
Barringer and Jones (2004, 74), who highlight that if the company identifies new
growth opportunities, to translate the opportunities into growth, the company
needs managerial capacity for the changes to be properly implemented and
150
supervised. Case C had many problems with the managerial capacity; problems
with motivation, lack of the knowledge on the operative level and limited time to
socialise the new hired manager.
The status of the change management dimension was faint. The motivation of the
employees was assessed as being good, the leadership as fair and the rest of the
indicators indicating neutral quality ratings. There did not exist any change
management, but to some extent the general management style served the needs
introduced in the change management dimension. The change management
dimension or any of its indicators were not perceived as important for the project
success, nor was the lack of change management seen as the reason for the project
failure. This is contradictory to the research results introduced in the field of project
and change management (cf. Kotter 1996, Lanning 2001, Salminen 2000).
Detailed planning was not appreciated as important in case C. The business impact
was loosely defined and the case company did not have a written plan for the
project. Later on, directed by the hired manager, the business planning practices
were developed, but the plans did not lead to operative actions, nor were the plans
efficiently compared with the realised progress. This result is consistent with Martin
and Steines (1994) and Rantanen (2001) who have discovered that SMEs lack
sophisticated planning practices. The project implementation was deeply integrated
with the daily business, as also Shenhar et al. (2001) and Salminen (2000) have
found. In this light the project management activities are a part of the operative
daily management.
The project efficiency was rated as poor. The impact on customer and the business
success were negatively affected. As a result of the project, case C has gained new
knowledge and better practices they can benefit from in the future. The future
potentiality
–category
was
assessed
as
being
satisfactory.
During
the
implementation phase the motivation of the employees started to decrease as a
result of the missing visible project success.
Case C targeted at rapid growth. As a result of the unsuccessful project
implementation, the project has affected the perceived performance widely, but in
this case in an undesired manner.
151
According to the interviewees, in case C the most important reasons for the project
failure were the lack of business capability, the weakened strength of intention
halfway through the project implementation and the decreased motivation of the
owner,
affecting
the
motivation
of
the
employees
negatively.
Table
7.18
summarises the perceived factors for the project failure.
Table 7.18
Important factors for project implementation in case C
Success dimension
Perceived failure factor
Entrepreneurial dimension
Weakened strength of intention
Inadequate business ability
Project preparation dimension
Change management dimension
Decreased motivation of the ownermanager affected also the motivation
of employees negatively
Project management dimension
The interviewees of the case company assessed the project as having been more or
less unsuccessful. Both the perceptual and objective performance gave support to
this view. Also the PIP-profile indicates a low rate of project success. Both the
strategic and tactical success factors were inadequately performed, the situation
having a high likelihood for project failure (Slevin & Pinto 1987). This is in line with
the evidence from case C.
As a conclusion, Figure 7.21 illustrates a general view about the status of the
success dimensions and the project performance in case C. The entrepreneurial
dimension is above the quality rating of neutral. The rest of the dimensions are
evenly distributed between the quality ratings of neutral and fair.
As in case A and case B the general view gives quite a balanced status within the
dimensions, but in this case C indicating low quality ratings with the exception of
the entrepreneurial dimension.
152
Project
performance
Entrepreneurial
dimension
Project management
dimension
Change management
dimension
Project preparation
dimension
Excellent
Neutral
Very poor
Figure 7.21
7.5
A general view of the success dimensions in case C
Case D: New business venture with a new business concept
Case D is a family-owned company in the media sector employing 159 persons, and
with a turnover of 18.5 million euros in 2003. It has over 100 years’ history. Case D
has a leading position, holding the market share of 80 % in its own province. The
company has a hired managing director. The owners are members of the board of
directors.
Case D had a strong intention to grow, but it was not possible in its own province,
due to the already high market share. The company had traced growth
opportunities outside its traditional business and outside its traditional market area.
In order to serve the growth goals, case D has participated in a business
development project targeting at a new business venture with a new business
concept. The project was organised by setting up a joint-stock company in which
the case company’s share of ownership was 20 %. The partners were new for the
case company. The project director was “the father figure of the idea” representing
the joint-stock company. His capabilities were widely recognised. The project
director was an outsider for case company D.
153
In this study the business development project is assessed from the case
company’s point of view. The central interests are focused on the goals for joining
the project, the decision-making and the project kick-off, the participation in the
development operations, the discovering of the warning signals and the withdrawal
from the development project. In this case, the number of interviewees was
exceptionally only two, the managing director and the chief editor. Both
interviewees had participated in the decision-making, being also involved in the
project implementation. The third informant, the financial manager, delivered the
details about the performance information. Due to the lack of time of the
interviewees, the structured interview was done by asking, not all the statements,
but statements based on the factor-title (one statement / factor).
Both interviewees perceived the business development project as unsuccessful.
Case D decided to join the project in 1999 and to withdraw from it in 2001. The
total price of the business development effort was about 300,000 euros.
7.5.1
Entrepreneurial dimension
Case D had a strong intention to grow. It was supposed to be possible by exploring
new opportunities outside its traditional business. The main goal behind the
decision for joining the project was the growth. A secondary target was to gather
experience from the new business area. In this new area the business opportunities
were perceived as very attractive. Assessing afterwards, the opportunities were
over-estimated. Case D did not have a written strategy, but it had clear goals for
the business, capability for flexible decision-making and enough courage for
controlled risk taking. The business ability was excellent in the traditional business
area, but inadequate in the new business area. Further, the case company had a lot
of operative know-how on how to run the daily business in the traditional business
area, but lack of strategic knowledge and development skills was a problem
recognised later. Table 7.19 summarises the entrepreneurial dimension in case D,
based on the semistructured interviews.
154
Table 7.19
Summary of the entrepreneurial dimension in Case D
Factor
Description
Opportunity arena
Business opportunities were perceived as very attractive.
Assessed afterwards they were based on over-optimistic
expectations.
Strength of intention
The company had a strong intention to grow and gain success.
A written strategy did not exist and the goals were loosely
defined.
The project’s connection to strategy was not very clear.
Business ability
The company had enough courage but the business
capabilities were inadequate.
The interviewees assessed the opportunity arena and the strength of the intention,
giving the quality rating of very good. Instead, the business ability was perceived
as fair. Figure 7.22 illustrates the status of the entrepreneurial dimension in case D,
based on the structured interviews and the quality ratings.
4
Excellent
3
Very good
2
Good
Satisfactory
1
Business
ability
Neutral
-1Fair
Opportunity arena
Strength of
intention
-2
Poor
Very-3poor
Figure 7.22
Status of the entrepreneurial dimension in case D
In case D the lack of business ability in the new business area was seen as one
reason for the unsuccessful project implementation. With a better business ability,
the warning signals would have been recognised and the corrective actions done
earlier. Without the strength of intention and the very attractive opportunity arena
case D would not have decided to join the project. The project was recognised to be
a risky business.
155
7.5.2
Project preparation dimension
The director of the project was looking for new partners and venture capitalists to
the project. He made an appointment with the owner of case D. The owner and the
members of the top management participated in the meeting. The owner of the
case company became interested in the project and decided immediately to join the
project, without discussing it with the other members of the management team.
Quick decision-making is customary to case D. As mentioned above, the
opportunity arena was seen as very promising from the business perspective, but
the project was considered also as an experiment with the possibility of failure. The
case company joined the project without having a clear vision or an agreement
about its role in the project. It seems that the director of the project considered
case D as an investor, but case D expected that sooner or later it would be in the
role of a content producer.
The goals and the estimated need for resources were unbalanced. The need for
financial resources increased step by step. The business was loosely defined, and
based on over-optimistic expectations, done by the brokerage company, an
outsider for the project partners. Case D trusted the introduced calculations.
Further, the case company did not have prior knowledge of the new business area,
new business concept, production systems or technology. They believed that the
partners and especially the project director had that knowledge. It came evident
that this belief was not correct. Table 7.20 summarises the project preparation
dimension in case D, based on the semistructured interviews.
Table 7.20
Summary of the project preparation dimension in case D
Factor
Description
Balance between
goals and resources
The need for financial resources was under-estimated
compared to what should have been needed in reality.
Clarity of business
impact
Estimation of return of investment was made by outsiders.
The decision to participate in the project was based on overoptimistic expectations.
Prior knowledge
The case company did not have prior knowledge in the project
area.
The partner was supposed to have the knowledge, but
afterwards it was realised that he did not have enough
knowledge.
The company had a lot of knowledge on how to run its
traditional business, but lack of knowledge in development
work was a problem.
156
The interviewees assessed the balance between the goals and the resources
articulated with the quality ratings as neutral. The clarity of the business impact
was fair and the prior knowledge was very poor. Figure 7.23 introduces the status
of the project preparation dimension in case D, based on the structured interviews
and the quality ratings.
4
Excellent
3
Very good
2
Good
Clarity of
busines
impact
Satisfactory
1
Neutral
-1Fair
-2Poor
Prior
knowledge
Balance between
goals and
resources
Very-3poor
Figure 7.23
Status of the project preparation dimension in case D
The interviewees assessed the lack of prior knowledge as a critical factor for the
project failure. Further, with a more carefully preparation phase in case D, they
might have figured out more realistic investment calculations giving the information
needed during the project implementation, and recognised the warning signals and
the risks earlier.
7.5.3
Change management dimension
Only a few members of the organisation were involved in the implementation of the
business development project. Resistance did not exist, but suspicions and criticism
were presented by the staff. At the beginning those involved in the project were
motivated and participated actively in the development work. Due to the lack of
information from the project director, there were not many issues to be
communicated. One of the owners was very active and participated in the meetings
with the project partners. The operative management was more in the role of
bystander. Later, as a result of the difficulties to translate the vision into the action
plans, and as a result of the missing project success the motivation started to
decrease. Table 7.21 summarises the change management dimension in case D,
based on the semistructured interviews.
157
Table 7.21
Summary of the change management dimension in case D
Factor
Description
Participation of
employees
Only a small number of employees were involved, but those
few participated actively.
Motivation
In the beginning the level of motivation was on a high level,
later it fell down as a result of missing visible project success.
Need for change
Need for change was communicated and explained with the
growth target.
Resistance for change did not exist, but suspicions and
questioning occurred.
Communication
Communication was smattering without profound discussion.
Communication and sharing the information were almost
impossible due to the lack of information from the project
partners and from the person in charge of the project.
Leadership
Leadership was not lauded, but it was assessed to be
sufficient – only a few people were involved in the project.
Both the participation and the motivation were on good level. The need for change
was communicated satisfactorily. Communication and leadership were assessed as
being neutral. Figure 7.24 gives a general view of the status of the change
management dimension, based on the structured interviews and the quality ratings.
4
Excellent
3
Very good
2
Good
1
Satisfactory
Neutral
-1Fair
Participation
Motivation
Need for change
Communication
Leadership
-2
Poor
Very-3
poor
Figure 7.24
Status of the change management dimension in case D
The interviewees did not perceive the change management dimension as critical for
the project implementation or for the project failure. The project implementation
was done outside the company and those few participants involved in the project
were persons from the top management.
158
7.5.4
Project management dimension
Case D did not make a plan for the project. According to the interviewees, detailed
planning is not customary in the case company. The project director made the
plans, introducing the vision and the expectations, but he could not translate the
vision into action plans. The concrete, operative action never realised. The predocumentation covered agreement with the project partners. Carefully conducted
risk analysis was never done by the case company, but in the starting point the
project was classified as a possible risky business. The project control and feedback
were not systematic, and without the action plans even impossible. The project
organisation was appointed, but the roles of the members were not clear. The
owner of the case company was the person mostly participating in the meetings. As
mentioned above, the case company’s role was also unclear. Case D expected that
it would be in the role of a content provider, but in the reality it was in the role of a
venture capitalist.
Case D started re-assessment of the project and its business opportunities, when
the official day of the joint-stock company’s business launch had passed. They
could not discover any signs about the possibility to start running the business for a
long time. The results of the progress report - the technology was not ready, the
content was open and the reliable estimations about the profitability were
alarmingly low - all gave evidence in favour of the withdrawal decision. In order to
start the business, much more money should have been needed. Case D was not
willing to put more money and decided to dissolve the agreement by paying the
contract penalty for this decision. Table 7.22 summarises the project management
dimension in case D, based on the semistructured interviews.
159
Table 7.22
Summary of the project management dimension in case D
Factor
Description
Project organisation
The project manager and steering group were appointed, but
the arrangement did not work. The project manager had a
vision, the steering group was a listener, and nobody could
translate the vision into action.
Control and feedback
Control was inefficient, and based on reports introducing the
vision and meeting memos of the steering group.
Control was not possible due to the lack of a concrete action
plan.
Later, the case company had problems with other partners,
everyone started to protect themselves from more losses.
Training
Training was not provided and the case company did not see
any need for the training.
Risk analysis and
problem solving
No risk analysis was done and there did not exist shared
problem solving.
Planning and
documentation
Written plans introducing visions were done, but they did not
lead to concrete action plans.
Documentation was based on meeting memos.
Figure 7.25 illustrates the status of the project management dimension, based on
the structured interviews and the quality ratings.
4
Excellent
3
Very good
2
Good
Risk analysis
and problem
solving
1
Satisfactory
Neutral
-1Fair
Project
organisation
Control and
feedback
Planning and
documentation
Training
-2
Poor
Very-3
poor
Figure 7.25
7.5.5
Status of the project management dimension in case D
Project success and impact on performance
The project efficiency was poor. The costs were more than expected, the project
was behind the schedule and the project outcome was a total failure. The new
business never started. The total loss of the development effort for the case
company was about 300,000 euros. The project did not have a significant impact on
the customer. One positive impact was mentioned: the participation in the
nationally interesting project gave some positive publicity and a more dynamic
business image in the eyes of the partners and the customers.
160
As a result of the project, case D has learned its lessons. The experience produced
visionary thinking, new business capabilities and new development knowledge to
serve the needs of the company. Case D has realised the importance of developing
new business based on the know-how available inside the own company. Nowadays
it assures that the new business supports the traditional business. Further,
nowadays in case D, more participants are involved in the future discovering and
the strategy process. Figure 7.26 gives a general view of the perceived project
success in the case D.
4
Excellent
3
Very good
2
Good
Satisfactory
1
Impact on
customer
Neutral
-1Fair
Business
success
Project
efficiency
Future
potentiality
-2
Poor
Very-3
poor
Figure 7.26
Perceived project success in case D
The project failure had a limited effect on the case company’s operations and
performance. The project was implemented outside the company and the role of
the case company as an active player was not realised. Table 7.23 summarises the
perceived and the objective performance.
161
Table 7.23
Perceived project success in case D
Perceptual performance
affected by the business
development project
Changes of objective
performance of the
company
PROJECT EFFICIENCY
Time
Behind the schedule
Cost
More than expected
Project outcome
Total failure
Impact on customer
Company image in the eyes of the
customer
More dynamic business image in the
eyes of customers
Business success
Operating profit ratio
Total loss of the investment
300,000 euros
The book entry of the loss
was 268,000 euros in 2002
Future potentiality
Learning over time
Visionary thinking, new business
capability and new development
knowledge
New practices
An increased number of participants
are involved in the future
discovering and the strategy
process
7.5.6
PIP-profile
According to the PIP-profile, case D skipped the most factors. One strategic factor,
the top management support, was on a high level. 60 % of the companies from the
reference database give lower scores. The rest of the factors indicate low
performance.
The interviewees’ assessments were quite similar. Divergent assessments appeared
only with the project mission -factor causing a 30 % difference in the results.
Figure 7.27 illustrates the PIP-profile and its factors in case D.
162
!
PIP-Profile C ase D
Project mission
= Interviewees have dissenting
judgments
!
Strategic
factors
Top management support
Project planning and schedule
Problem solving
C ommunication
Tactical
factors
C ontrol and feedback
Technical tasks
Personnel
Project succes
-
Figure 7.27
20
40
60
80
PIP-profile in case D
The PIP-developers warn that this kind of situation easily leads to the project
failure. Another possibility could be strong tendency toward errors of inaction
(Slevin & Pinto 1987). This case evidence fits both of the above-mentioned findings.
7.5.7
Summary of case D
The status of the entrepreneurial dimension was stronger than the other
dimensions. The case company had a strong intention to grow and to gain business
success. The opportunity arena was seen as very attractive. The discovery of new
opportunities was not based on the case company’s own prior knowledge, but on
the partner’s prior know-how (cf. Shane 2000). The business ability was not
adequate in the sector of the targeted new business area. In case D the strong
intention to grow and the very attractive opportunity arena where in balance, but
the company’s business capability to realise these opportunities in the new business
area was perceived as inadequate. This finding is in line with Morrison et al. (2003)
who highlight the importance of the balance between the intentions, opportunities
and business ability.
The balance between the goals and resources was wobbly. The need for financial
resources increased more than expected. The business impact was loosely defined,
and based on unrealistic expectations. The decision of joining the project was done
100
163
very quickly without carefully done preparation. The case company did not have
prior knowledge in the new business area or its production systems and technology.
This is in line with Barringer & Jones (2004), who have recognised that if a
company identifies new growth opportunities, its ability to translate opportunities
into growth depends on the availability of sufficient managerial capacity. Case D
lacked the strategic knowledge and the development skills. The evidence from case
D is also in accordance with Hyvärinen (1993) and Shane (2000) who highlight the
importance of prior knowledge as a source of success.
The change management and the project management dimensions were not seen
as important. The project was implemented outside the company and the case
company did not take an active role in directing the project implementation. The
project planning was thin, but the case company itself did not have more
sophisticated planning practices, which is consistent with Martin and Steines (1994)
and Rantanen (2001).
According to the interviewees, in case D the critical factors for the project failure
were the lack of business capability and the lack of prior knowledge in the new
business area. With the help of crystallised business impact the warning signals
might have been recognised earlier. A crystallised business impact would not have
been enough to prevent the failure, but it might have offered a point of comparison
leading to earlier withdrawal from the project with lesser losses. Without the strong
intention to grow and without the attractive opportunity arena, the case company
would not have joined the project. Table 7.24 summarises the perceived important
failure factors.
Table 7.24
Important factors for project implementation in case D
Success dimension
Perceived factors for project
failure
Entrepreneurial dimension
Inadequate business ability
Project preparation dimension
Lack of prior knowledge
Change management dimension
Project management dimension
The project was classified as unsuccessful. The project efficiency and the business
success were poor and the impact on the customer was fair. The objective and
perceptual performance gave support to this view. Also the PIP-profile indicated a
164
low success rate. Case D had skipped both the tactical factors and most of the
strategic factors, giving a ground to high potential for project implementation
failure (Slevin & Pinto 1987). Despite the financial loss, the interviewees assessed
that the project had also a positive impact on the performance. The experience
produced important new knowledge and skills to the company supposed to
generate benefits in the future. This finding is consistent with Bowen et al. (1994)
who highlight the importance of learning through development projects, and this
new knowledge is sometimes even more important than achieving the original
project goal.
In case D the project’s negative impact was limited on the financial performance,
when in the other case companies the project affected the performing organisations
widely, also on areas and functions not mentioned as the project goals. A perceived
reason to this was the external nature of the development project from the case
company’s point of view. The project implementation was done outside case D, led
by an outsider project director. Only a few persons from the top management
participated in the project implementation. There were not subsystems to transfer
the results to other functions inside the case company.
Figure 7.28 illustrates a general view of the status of the success dimensions and
the project performance in case D. The entrepreneurial dimension and the change
management dimension are above the quality rating neutral. The rest of the
dimensions are below it.
165
Project
performance
Entrepreneurial
dimension
Change management
dimension
Project management
dimension
Project preparation
dimension
Excellent
Neutral
Very poor
Figure 7.28
7.6
A general view of the success dimensions in case D
Cross-case analysis
Eisenhardt (1989) argues that cross-case analysis should be used to search for
patterns. The overall idea is to force the researcher to go beyond the initial
impressions using structured and diverse lenses on the data. As a result, the
likelihood of achieving an accurate and reliable theory is increased. Eisenhardt
(1989, 540 - 541) suggests three tactics:
1.
Select categories and look for within-group similarities coupled with
intergroup differences
2.
Select pairs of cases and list the similarities and differences between each
pair
3.
Divide the data by data source to exploit unique insights possible from
different types of data collection
In this sub-chapter the research cases are compared with each other in order to
highlight the similarities and differences between the cases. The cases have been
categorised to two groups according to their relative success, to successful and
unsuccessful ones. The used success criteria were discussed in Chapter 3.4, and
can be summarised that the success of the development project is defined as the
degree to which the effort fulfils the following criteria:
166
The project is perceived to meet its technical efficiency requirements
The project is perceived as successful by customers (Impact on customer)
The project has generated positive economic results (Business success)
The project is perceived to generate success in the future (Future
potentiality)
The next chapters present the cases grouped by the degree of success. It also
presents the key success factors of each success dimension. The degree to which
each success factor was realised in each case is indicated in an eight-level scale of
excellent, very good, good, satisfactory, neutral, fair, poor and very poor. The
coding principles have been introduced in Chapter 6.2.3. The criteria of being a key
factor is that the factor’s importance has been recognised in the case company and
the quality rating supports this view.
7.6.1
Project success and performance
Case A and case B have been rated as successful. Both of them fulfil all the success
criteria introduced in the previous chapter. In addition to this, all the informants in
the case companies A and B perceived the projects as successful. Case C and case
D have been rated as unsuccessful. Both of them fail to fulfil three of the four
success criteria. Only the future potentiality fulfils the criteria, being rated as
satisfactory in both unsuccessful cases. In addition to this, all the informants of the
case companies in question perceived the project as unsuccessful. The categories
determining the project success are described in Table 7.25.
Characteristic for both the successful and unsuccessful cases is that the quality
ratings of the future potentiality -category are on the highest level compared with
the other categories. Also the unsuccessful cases benefited from the project
through learning in spite of the fact that the project was a failure in terms of
project efficiency, impact on customer and business success.
167
Table 7.25
Perceived project success
Case A
Case B
Case C
Case D
Project efficiency
Very good
Good
Poor
Poor
Impact on customer
Very good
Good
Fair
Fair
Business success
Excellent
Good
Poor
Poor
Future potentiality
Excellent
Very good
Satisfactory
Satisfactory
Successful
Successful
Unsuccessful
Unsuccessful
Perceived project success
In Table 7.26 the success of the development projects is evaluated in the light of
the
perceived
improvements
or
impairments
on
the
performance.
The
improvements have been marked with a plus sign (+) and the impairments with a
minus sign (-). As can be figured out with the successful cases, the positive results
have been spread widely, covering all the categories of the project success. With
the unsuccessful cases the same phenomenon can be found in case C, but not in
case D due to the project’s external nature for the performing company. In case C
the performance changes were as expansive as in the successful cases, but mostly
negative in nature.
The cases suggest that the internal business development projects have affected
the performing organisations widely also in areas and functions not mentioned as
project goals. With the successful cases the success seems to spread out to areas
and functions not mentioned as project goals, and also with the unsuccessful cases
the failure seems to spread out to other areas and functions. Further, the cases
suggest that both the successful and unsuccessful projects produce performance
improvements to the company. As a result of learning, in every case the knowledge
and the skills of the employees and the managers improved in a way that is
perceived to generate benefits to the company in the future.
The case evidence also suggests that the visible project success during the
implementation phase have an effect on the other dimensions especially through
the motivation of the project participants.
168
Table 7.26
Perceived performance of the business development projects
Case A
Successful
Case B
Successful
Case C
Unsuccessful
Case D
Unsuccessful
Time
-
+
Cost
+
+
-
-
Quality
+
+
-
-
Customer satisfaction
+
+
-
Business image
(Appreciation in the
eyes of the customer)
+
+
PROJECT EFFICIENCY
-
PROJECT EFFECTIVENESS
Impact on customer
Delivery reliability
+
+
Business success
Sales growth
+
Market share
Cost reduction
+
Operating profit ratio
+
Productivity
+
Quality (delivery time,
product and production
quality)
Return on investment
+
-
+
-
+
-
-
+
-
+
-
+
+/-
+
Future potentiality
Market development
+
Product development
Learning over time
+
Employee satisfaction,
working atmosphere
and level of motivation
+
Partnership and
networking
+
New practices inside
the company
Innovativess – new
ideas
Other competitive
advantage
+
+
+
+
+
= positive impact
= negative impact
+/- = both negative and positive impacts
When measuring or assessing the impact of the project on the case company and
its performance, within every case the success categories were appropriate, but the
indicators inside these categories varied depending on the project and on the
company’s measuring practices.
169
The project efficiency was able to assess or measure in every case with the
indicators of time, cost and quality, derived from the Iron Triangle of the project.
The impact on customer was able to assess with three indicators: customer
satisfaction,
delivery
reliability
and
business
image,
reflecting
changes
in
appreciation in the eyes of the customers. Customer satisfaction and the business
image were used in both successful cases and in one unsuccessful case. Only one of
the case companies was measuring delivery reliability. The business success was
able to measure or assess with seven indicators, five of them from the list validated
by Gupta and Govindarajan (1984). It was necessary to add two indicators,
because they were essential for the performance measurement in two of the case
companies; productivity of the employees measured by the sales/salaries, and
quality measured by delivery time, product quality and/or production quality. The
operating profit ratio was used in every case and the sales growth was used in both
successful cases. The future potentiality -category includes one indicator used in all
the cases, learning over time. The rest of the indicators vary depending on the
project. The assessment of the project success is mostly based on the perceived
performance figured out with perceptual and quasi-perceptual measures. The
objective performance gave support to the assessments.
7.6.2
Entrepreneurial dimension
With the successful cases the strength of the intention and the business ability were
at least at a good level. Both case companies perceived these factors as critical for
the project success. Both successful cases perceived the opportunity arena as good,
but not very promising.
With unsuccessful cases the strength of the intention and the opportunity arena
were perceived at least as good, but both case companies lacked the business
ability to realise these opportunities. The strength of the intention and the business
ability were perceived as failure factors. The factors key to success and key to
failure were similar in the entrepreneurial dimension. Table 7.27 summarises the
factors of the entrepreneurial dimension.
170
Table 7.27
Summary of the entrepreneurial dimension
Case A
Successful
Case B
Successful
Case C
Unsuccessful
Case D
Unsuccessful
Strength of intention
Very good
Success factor
Very good
Success factor
Good
Failure factor
Very good
Business ability
Excellent
Success factor
Good
Success factor
Satisfactory
Failure factor
Fair
Failure factor
Opportunity arena
Good
Good
Good
Very good
The cases suggest that the strength of the intention and the business ability are
key factors to project success. Both are needed in order to realise new business
opportunities. The cases also indicate that the strength of the intention is necessary
for the project success, but is not enough to prevent failure.
7.6.3
Project preparation dimension
The successful cases had managed to balance setting of goals and allocation of
resources. In both successful cases the business impact was not clearly defined.
Prior knowledge was the factor indicating contradictory quality ratings within the
successful cases, being excellent in case B and neutral in case A. Case A had
started the project without prior knowledge, but managed successfully with the
knowledge creation and sharing process inside the company.
The unsuccessful cases differed from the successful ones in terms of adequate prior
knowledge and the balance between goals and resources. The resources were
under-estimated in relation to the goals and both cases lacked prior knowledge. The
business impact was unclear in both the successful and unsuccessful cases.
Prior knowledge was a key factor affecting both the project success and the project
failure. The clarity of the business impact was not a key factor to either the project
success or to the project failure. Table 7.28 gives a summary of the project
preparation dimension.
171
Table 7.28
Summary of the project preparation dimension
Case A
Successful
Case B
Successful
Case C
Unsuccessful
Case D
Unsuccessful
Balance between goals and
resources
Good
Very good
Neutral
Neutral
Prior knowledge of the
project area
Neutral
Excellent
Success factor
Poor
Very poor
Failure factor
Clarity of business impact
Neutral
Fair
Neutral
Fair
Failure factor
The cases suggest that prior knowledge is an important factor for the project
success, but it was not considered as critical in two of the cases. The evidence from
case A suggests that without prior knowledge the business development project can
be successful, when efficient and continuous learning is organised to support the
project implementation. The case evidence from the unsuccessful cases also tells
that if the company fails to create the missing knowledge, the lack of knowledge
will be a failure factor. So, adequate knowledge is a key factor, but it can be either
prior knowledge or created for the project implementation.
7.6.4
Change management dimension
In general terms, the successful cases succeeded with the change management.
Almost all the factors had good or very good quality ratings, with the two
exceptions in case B, where communication and the need for change were rated as
satisfactory. Both successful cases regarded the participation of the employees as
an important factor to the project success. In addition to this, in case A high
motivation was perceived as a key factor. In case B the high motivation was
considered as a source for the high participation.
With the unsuccessful cases all the quality ratings of the factors were below the
ones of the successful cases.
Participation was perceived as an important factor for the project success.
Motivation was perceived as important for both the project success and the project
failure. Table 7.29 summarises the change management dimension.
172
Table 7.29
Summary of the change management dimension
Case A
Successful
Case B
Successful
Case C
Unsuccessful
Case D
Unsuccessful
Leadership
Very good
Good
Fair
Neutral
Need for change
Very good
Satisfactory
Neutral
Satisfactory
Participation
Very good
Success factor
Very good
Success factor
Neutral
Good
Communication
Good
Satisfactory
Neutral
Neutral
Motivation
Very good
Success factor
Very good
Neutral
Failure factor
Good
The cases suggest that participation and motivation are key factors for the project
success. Motivation was considered as critical in case A, and as a factor affecting
the participation positively in case B. Case C perceived the lack of motivation as a
factor for the project failure.
7.6.5
In
Project management dimension
general,
the
successful
cases
also
succeeded
better
with
the
project
management. All the factors were rated between neutral and very good. The
planning and documentation had the lowest quality rating. The projects were
guided by a strong vision, which was translated into action plans only in the ownermanagers’ heads. The training provided to the employees was perceived as critical
to project success.
On average, in the unsuccessful cases almost all the factors of the project
management dimension had lower quality ratings than in the successful cases.
Similar to the successful cases, also the unsuccessful cases had the lowest quality
ratings in the planning and documentation. Also the unsuccessful projects were
directed on the basis of a strong vision. Both the successful and unsuccessful cases
lacked sophisticated planning practices. This evidence did not support that it was
critical to the success or the failure. Table 7.30 gives a summary of the project
management dimension.
173
Table 7.30
Summary of the project management dimension
Case A
Successful
Case B
Successful
Case C
Unsuccessful
Case D
Unsuccessful
Planning and
documentation
Satisfactory
Neutral
Fair
Poor
Project organisation
Very good
Satisfactory
Good
Satisfactory
Risk analysis and problem
solving
Good
Good
Fair
Fair
Control and feedback
Good
Good
Neutral
Satisfactory
Training
Good
Success factor
Good
Success factor
Fair
Neutral
The cases suggest that training is a key success factor of the project management
dimension. It ensures that by providing appropriate and well-timed training to the
employees, the knowledge for the project implementation and deployment is
adequate.
7.6.6
PIP-profile
The general view of the PIP-profile of the successful cases illustrates that both
projects had factors indicating high performance and low performance (Figure
7.29). Half of the strategic factors have scores above the critical 50 %. In both
successful cases the top management support –factor has high scores and the
project planning and schedule -factor has low scores. Two thirds of the tactical
factors have scores above the critical 50 % -level. The problem solving and the
personnel –factors indicate high performance in both cases. Low performance can
be found in communication, technical tasks and control and feedback –factors. The
strategic factors indicate a slightly lower performance than the tactical factors, but
both categories have factors indicating high performance. In both successful cases
the project performance is above the critical 50 %.
174
Case A
PIP-Profile -Successful cases
Case B
Project mission
Strategic
factors
Top management support
Project planning and schedule
Problem solving
Communication
Tactical
factors
Control and feedback
Technical tasks
Personnel
Project succes
0
Figure 7.29
20
40
60
80
100
PIP-profile of the successful projects
In the unsuccessful cases, both the strategic and tactical factors were skipped.
Table 7.30 summarises the PIP-profile of the unsuccessful cases.
C ase C
C ase D
PIP-Profile - Unsuccessful cases
Project mission
Strategic
factors
Top management support
Project planning and
schedule
Problem solving
C ommunication
Tactical
factors
C ontrol and feedback
Technical tasks
Personnel
Project succes
0
Figure 7.30
20
40
PIP-profile of the unsuccessful projects
60
80
100
175
In case D the top management support indicates high performance. The rest of the
factors are below the critical 50 %. In case C all the factors are below the critical 50
%. The project performance is low in both unsuccessful cases, indicating 10 %
level. Only 10 % of the companies in the reference database give lower scores.
The cases suggest that both the strategic and tactical factors perform quite well in
the successful cases. Further, the cases suggest that both of them under-perform in
the unsuccessful cases.
7.6.7
Summary of the cross case analysis
In general the successful cases performed well in
every
dimension.
The
entrepreneurial and change management dimensions had slightly higher quality
ratings than the project preparation and project management dimensions. The
project success was not a consequence of one dimension. Figure 7.31 offers a
general view of the successful cases.
The unsuccessful cases performed well concerning the entrepreneurial dimension,
but the rest of the dimensions had lower quality ratings (Figure 7.32). Similar to
the successful cases, also in the unsuccessful cases the entrepreneurial and change
management dimensions had slightly higher quality ratings than the project
preparation and project management dimensions. Both the successful and
unsuccessful cases were led by strong visions. Further, both the successful and
unsuccessful cases were unwilling or incapable to concentrate on the task-oriented
functions, such as planning, scheduling the work and supervising the employees in
setting and achieving the performance goals.
The entrepreneurial dimension had high quality ratings in both the successful and
unsuccessful cases. It seems to be a necessary condition for the project success,
but not a sufficient condition to prevent project failure.
176
Project
performance
Entrepreneurial
dimension
Project management
dimension
Change management
dimension
Project preparation
dimension
Excellent
Neutral
Very poor
Figure 7.31
Case A
Case B
A general view of the successful cases
Project
performance
Entrepreneurial
dimension
Change management
dimension
Project management
dimension
Project preparation
dimension
Excellent
Neutral
Very poor
Figure 7.32
A general view of the unsuccessful cases
Case C
Case D
177
The general views indicate that the successful cases perform well in all the success
dimensions,
and
the unsuccessful
cases under-perform in all the success
dimensions. This evidence supports the proposition introduced in the theoretical
framework (Chapter 5.3). The framework suggests that success in a business
development project depends on a mix of success dimensions. Good performance in
one success dimension affects the others. This case evidence suggests that
successful business development projects have well-balanced good performance
concerning all the dimensions. Good performance in one dimension is not enough to
guarantee project success, but it gives a good base for the other dimensions. The
other way round, poor performance in one success dimension affects the others,
leading to poor performance of the project. This is in line with Pasanen (2003, 202)
who has discovered that the SME success is dependent on several interrelated
factors, and success in one area leads to success in the other areas and so creates
an upward success spiral. In this case study, failure in one area seemed to lead to
failure in other areas, creating a downward failure spiral.
What are the factors perceived to affect the project success or project failure? The
case companies with successfully implemented projects introduced the following as
important factors: strength of intention, business ability, a high level of
participation, and training. In addition to this, case B assessed prior knowledge in
the project area as a key to the success, and case A the high level of motivation of
the employees. With the unsuccessful cases the failure factor mentioned by both
companies was the inadequate business ability. In addition to this, missing strength
of intention, lack of prior knowledge, unclear business impact and low level of the
motivation were mentioned as factors for the failure. Table 7.31 indicates the key
factors of the success and failure. The criterion for being a key factor is that the
factor’s importance was recognised in the case company and the quality rating
supports this view.
178
Table 7.31
Summary of the key factors
Key success factors
Key failure factors
Entrepreneurial dimension
Strong intention
Business ability
Unstable intention
Business inability
Project preparation dimension
Prior knowledge or creation of
required knowledge
Lack of the prior knowledge
Change management dimension
Participation
Motivation
Missing motivation
Project management dimension
Training
How to measure or assess the project success and the changes of performance
affected by the business development project? With both the successful and
unsuccessful cases the four categories of project success: the project efficiency, the
impact on the customer, the business success and the future potentiality, gave an
appropriate framework for this. There were some common indicators, applicable to
assessing or measuring the performance in most of the cases. The project efficiency
was measured or assessed by using three traditional indicators: time, cost and
quality. The customer satisfaction and the business image were used for measuring
or assessing the impact on customer. The operating profit ratio and the sales
growth were used to measure the business success. Learning over time was used in
every case as an indicator of the future potentiality –category. Table 7.32
summarises the common indicators for each project success category for measuring
or assessing the project success.
Table 7.32
Common indicators for measuring or assessing project success
Project success category
Common indicators
Project efficiency
Time
Cost
Quality
Impact on customer
Customer satisfaction
Business image
Business success
Operating profit ratio
Sales growth
Future potentiality
Learning over time
The rest of the indicators vary depending on the case. Thus the list of indicators is a
basis that should be complemented, depending on the features of the individual
project and the individual company.
179
How did the development projects affect the company’s performance? The internal
business development projects, both successful and unsuccessful affected the
performing company widely also in areas and functions not initially targeted. With
the successful cases the success spread out to areas and functions not mentioned
as project goals, and also with the unsuccessful cases the failure seemed to spread
out to other areas and functions. As a result of learning, both the successful and
unsuccessful projects affected the company’s performance positively by generating
new knowledge, skills and practices that can be utilised in the future.
180
181
8
DISCUSSION AND CONCLUSIONS
The purpose of this study was to discover the success dimensions and factors of
business development projects implemented in the SME-context. Further, the aim
of the study was to find out how the business development projects have affected
the performing company. In order to answer this question, it was necessary to find
out how the impact of the business development project on performance can be
measured or assessed. The research problem was approached by studying
successful and unsuccessful business development projects implemented in SMEs,
and trying to capture the phenomenon more holistically than previous studies have
done.
This chapter introduces the conclusions on the basis of the results of the study.
First the objectives of the study are recapitulated and compared with the results to
argue for the research contribution. The results are introduced according to the
research questions. After that the validity and reliability issues are discussed. In
this connection the generalisation of the results is also discussed. Finally the
problems and limitations of the research are pointed out, as well as outlines for
future research.
8.1
The results of the study
The research questions of this study were:
How to measure or assess the impact of the business development project
on the performance in SMEs?
How have the business development projects implemented in SMEs
affected their performance?
Which are the success dimensions and key factors of the business
development projects in terms of project success?
These questions are discussed in this chapter introducing the results based on the
case study. The results of the pilot case study are in line with them.
182
How to measure or assess the impact of the business development project
on performance in SMEs?
Based on the case evidence, the impact of the project on the performing company
can be assessed on the basis of changes of performance using three different types
of indicators: perceptual, quasi-perceptual and objective. Perceptual and quasiperceptual measurement is based on subjective assessments, forming a view of
perceptual performance. Objective measurement is based on financial information,
forming a view of objective performance. In this study the objective performance
gave support to the validity of the perceptual performance. A natural question is,
how to be certain that changes of performance are created by the business
development project. The performance data was gathered from two different
sources; directly from the case companies and from external, independent sources.
This case study utilised a multi-informant system, and unanimity was a criterion
used. The general view of the performance changes fitted the nature of the
implemented business development project. This study gives support to the view
that the impact of the project on the performance can be found out with the
changes of performance assessed by the persons involved in the project who know
the business, practices and processes of the company, and when both the
perceptual and quasi-perceptual measures are used together with the multiinformant system.
The impact of the business development project on performance was divided to
four categories of project success: project efficiency, impact on customer, business
success and future potentiality. Based on the case evidence, these four categories
gave an adequate setting to find out the impact of the business development
project on performance in the SME-context within different time perspectives, and
used with both successful and unsuccessful projects.
The indicators inside the
success categories varied depending on the project and the measuring practices of
the company. Based on the case study some, common indicators were found
applicable for assessing or measuring performance in most cases. The project
efficiency was able to measure or assess by using the traditional indicators: time,
cost and quality. The operating profit ratio and the sales growth were used to
measure the business success. The learning over time was a usable indicator of the
future potentiality –category. The rest of the indicators varied depending on the
case. The list of indicators introduced in this study is a basis that should be
183
complemented, depending on the features of the individual project and individual
company.
How have the business development projects implemented in SMEs
affected their performance?
Based on the case evidence, the internal business development projects affected
the performance of the company widely also in areas and functions not initially
targeted. The implications cover all the success categories: project efficiency,
impact on customer, business success and future potentiality. With the successful
cases, the success tended to spread out to areas and functions not mentioned as
project goals, and with the unsuccessful cases the failure seemed to spread out
widely to the company’s functions. Despite the success rate of the project, learning
was perceived to have affected the performance of the companies positively by
generating new knowledge, skills and practices that can be utilised in the future.
The business development project that was external by nature, had a limited effect
on the business success of the company, being restricted to profitability (book entry
of the loss).
Which
are
the
success
dimensions
and
key
factors
of
business
development projects in terms of project success?
The case evidence strengthens the view that business development project success
in
the
SME-context
has
five
success
dimensions:
entrepreneurial,
project
preparation, change management, project management and project success. Good
performance in one success dimension seemed to affect the others. The good
performance in entrepreneurial and project preparation success seemed to give a
firm basis for a successful business development project. Good performance in
change management and project management seemed to ensure successful
planning and implementation of the project. The project success indicated
performance improvements and benefits for the enterprise and its customers in
different time frames.
This case evidence suggests that successful business development projects have
balanced, high performance concerning all the dimensions. Good performance in
one dimension was not enough for project success, but it gave a good basis for the
other dimensions. The other way round, poor performance in one success
184
dimension affected the others, leading to poor performance of the project. The
success of the business development project seems to be dependent on several
interrelated dimensions and factors. Success in one area led to success in other
areas, and so created an upward success spiral. Failure in one area led to failure in
other areas, creating a downward failure spiral.
Inside these success dimensions, six individual factors were found to be key factors
for successful project implementation: strength of intention, business ability,
knowledge, participation, motivation and training. Vice versa, most of these factors
were also found to be failure factors. Unstable strength of intention, business
inability, lack of knowledge and missing motivation were found to be key factors
escalating into project failure.
The framework developed in this study provided a systematic way for analysing the
business development projects and their impact on performance and the
performing company. As a summary, Figure 8.1 illustrates the refined framework.
Feedback
Enterprise
Detector
Selector
Effector
Output
Measurement
system
Management
decision
Implementation
of actions
Enterprise
performance
DEVELOPMENT PROJECT
Entrepreneurial
success
Perceived
performance
Key success factors:
Strength of
intention
Business ability
Figure 8.1
Project
preparation
success
Change
management
success
Project
management
success
Project success
Perceived
performance
Perceived
performance
Perceived
performance
Perceived
performance
Key success factors: Key success factors: Key success factors:
Knowledge in
Participation
Training
the project
Motivation
area
Success categories
Project efficiency
Impact on customer
Business success
Future potentiality
Framework of business development project success in SMEs
185
8.2
Contribution of the research
Despite the decades of research, there seem to be no generally accepted theory on
the success dimensions or success factors of business development projects.
Contemporary research and literature seem to concentrate on project and change
management, paying only scant attention to performance from the business
perspective and bypassing the entrepreneurial perspective. Further, the academic
interest in business development success has mainly focused on large organisations
or new business ventures. SMEs that have already established their business have
not been within research interests. This study represents a unique piece of work by
examining
the
business
development
project
success
holistically
in
its
implementation environment, focusing on SMEs that have already established their
business. The study builds a framework for a generic theory of business
development success in the SME-context based on literature from the areas of
project
and
change
management,
entrepreneurship
and
small
business
management and performance measurement, and based on empirical evidence
from SMES that have implemented a challenging business development project.
As many studies show (e.g. Boddy & Buchanan 1992, Hartman & Ashrafi 2004,
Kotter 1996, Schaffer & Thomson 1992), the failure rate of business development
projects is alarmingly high. At the same time the need for competitiveness is
increasing all over the world. In order to remain competitive, SMEs are facing a lot
of challenges to improve their productiveness, quality, cost efficiency, etc. The list
is extensive. Thus there is a clear need for a practical theory of business
development success in the SME-context. Practitioners need a simple and practical
method to be able to manage complex business development projects successfully,
paying attention to the dynamic business environment and the characteristics of
SMEs. This study provides a piece of new contribution to fulfilling this need.
The present study offers one possible groundwork in creating tools for practitioners.
The framework developed in this study provides a systematic way to analyse the
business development project and its impact on the performing company. The
results may provide a basis for benchmarking one’s own business and evaluate how
well their own firm meets the success dimensions and key factors. Further, this
study provides a setting for analysing the business development project success in
different time frames.
186
The contribution can be summarised as follows:
Business development project success has been studied holistically in its
implementation environment, in SMEs that have already established their
business. This approach, encompassing the different disciplines, provides
new knowledge about the multidimensional phenomenon characterised by
several factors with complicated interrelationships.
A framework for a generic theory of business development project success
in the SME-context has been built, providing a systematic way to analyse
the business development project and its impact on the performing
company.
Success dimensions and key factors of business development projects
implemented in the SME-context have been identified.
A setting for analysing the project success from different time perspectives
in the SME-context has been produced.
The impact of the business development project on the performing
company has been clarified.
8.3
Validity and reliability of the research
Silverman (1993, 156) suggests two forms of validation as particularly appropriate
to the logic of qualitative research; triangulation and respondent validation. In
triangulation different kinds of data and different methods are used to see whether
they collaborate on another. The method that takes the researcher’s findings back
to the subjects being studied is known as respondent validation.
According Yin (1994, 33) four tests are relevant to confirm the quality of the
research design (Table 8.1). The tests are:
Construct validity establishing the correct operational measures for the
concepts being studied.
Internal validity establishing a causal relationship, whereby certain
conditions are shown to lead to other conditions, as distinguished from
spurious relationships.
187
External validity establishing the domain to which a study’s findings can be
generalised.
Reliability demonstrating that the operations of a study – such as the data
collection procedures - can be repeated, with the same results.
Table 8.1
Case study tactics for four tests (Yin 1994, 33)
Test
Case study tactic
Use multiple sources of evidence
Establish chain of evidence
Construct validity
Have key informants review draft case
study report
Do pattern-matching
Internal validity
Do explanation-building
Do time-series analysis
Use replication – logic in multiple-case
studies
External validity
Use case study protocol
Reliability
Develop case study database
The implementation of these tests in this study has been introduced in the following
chapters.
8.3.1
Construct validity
Construct validity refers to establishing the correct operational measures for the
concepts being studied (Yin 1994, 33). In the present study the construct validity
was ensured primarily in three ways: using multiple sources of evidence,
establishing a chain of evidence and obtaining the key informants’ comments and
feedback on the report drafts.
Data source triangulation means checking out the consistency of different data
sources, i.e. looking at the same case from different sources of data (Stake 1995,
112 - 113). In this study both qualitative and quantitative data collected from
primary and secondary sources was used. Different methods of collecting data were
used
as
another
source
of
triangulation;
informants
were
interviewed,
questionnaires (structured interviews) were applied, and documents were studied.
Most of the data was collected by interviews from the case companies. The number
of informants was three or more per one case company. The secondary data was
188
collected from publicly available sources, e.g. annual reports and annual accounts
from the National Board of Patents and Registration. The reason for applying the
rich triangulation in this research was to become more confident with the results.
The aim was to find both confirming and disconfirming evidence and to challenge
the initial interpretations. Triangulation served well in doing this.
The key informants’ feedback was used. The report drafts were sent to the key
informants and they were asked to comment on the descriptions and analysis. After
that the researcher had a meeting, a telephone discussion or a discussion by email
with the key informants. Details of the key informants’ feedback are given in
Appendix 2.
Establishing the chain of evidence is related to the reader’s ability to follow the
different phases of the research from beginning to final conclusions (Yin 1994,
102). This report is structured by the issues and in a chronological manner to make
it easy to trace all the steps from the research questions, leading to the evidence
and conclusions.
8.3.2
Internal validity
Internal validity establishes a causal relationship proposed by the research. In the
present study pattern-matching and explanation building were used to establish
internal validity. Each case description should provide a detailed picture of the
business development effort implemented in the case company to justify the
interpretations made.
8.3.3
External validity
External validity is about determining whether the findings are generalisable
beyond the specific study. Generalising the results of case studies has been an
issue of ongoing debate. The logic of the generalisation from case studies is
replication, and the generalisations are analytic generalisations by nature, not
statistical (Yin 1994, 31).
189
The external validity was established by using the replication approach introduced
by Yin (1994, 49). To provide theoretical replication, the cases were selected to
produce contrasting results. Two of the cases represent successful ones and two
cases represent unsuccessful ones. Important for the replication procedures is the
development of a theoretical framework, which should state the conditions under
which a particular phenomenon is likely to be found (Yin 1994, 46). In this study
the theoretical framework was produced after the literature review and refined after
the pilot case study.
Yin (1994, 31) notes that if two or more cases are shown to support the same
theory, replication may be claimed. The empirical results may be considered more
potent if two or more cases support the same theory but do not support an equally
plausible rival theory.
A profound understanding of the problem domain and the cases in the study allow
to suggest that it would be useful for SMEs in the selection and planning phases of
a business development project to take into consideration the dimensions and
factors introduced in the framework for the business development project success.
The enterprises can use the structured questioning as a checklist and evaluate how
well their own firm satisfies these issues. In this sense the results are transferable.
This study was conducted in Finland and in Finnish SMEs. The applicability of the
results in other countries may be limited because the differences in cultural aspects
and
values
may
affect
management
and
leadership
style,
communication,
commitment, motives, etc. Further, the applicability of the results is limited to
business development projects that are internal by nature.
8.3.4
Reliability
Reliability demonstrates that the operations of a study can be repeated with the
same results (Yin 1994, 33). Gummesson (1993, 15) provides a similar definition.
Reliability requires that the research, when repeated by the researcher or someone
else, should lead to the same or similar results. Silverman (1993, 165) argues that
reliability can be improved by comparing the analyses of the same data by several
researchers. Replication refers to the possibility of obtaining similar results and
conclusions when a study is repeated in the same manner (Yin 1994).
190
In this study the case study protocol and study database were used as relevant
tactics. The study database was created by collecting all the relevant material
concerning each case in the database. The interpretations were included in the
database. High reliability was pursued by tape-recording all the interviews. Also the
careful reporting in the study contributes to the reliability of the study. An auditor
should be able to repeat the procedures, arriving at the same findings.
Information was collected from multiple data sources, and several informants were
interviewed per case company. This made it possible to reduce biases. No
inconsistencies between primary and secondary data were found. Maintaining the
chain of evidence contributes to the reliability of the information (Yin 1994, 90 –
100).
8.3.5
Limitations and problems of the research
A subjective approach was adopted in this study. The information was largely based
on subjective evaluations and interpretations of the reality. This should be taken
into consideration when interpreting the results. However, it is possible that using
the informants’ subjective evaluations supported by the objective measures leads
to a better understanding of the business development success in SMEs (cf. Dess &
Robinson 1984; Ketokivi & Schoeder 2004). The informants were aware of the use
of objective data from secondary sources. This might have been an issue to prevent
conscious incorrect assessments, e.g. overestimation of the results during the
interviews.
The
interviews
semistructured
were
based
interview
and
on
the
informants’
structured
open
questioning.
By
narrative
using
story,
a
open-ended
questions, it was possible to gain information that might otherwise have been
missed. However, it should be noted that the list of questions used during the
interviews might have guided the informants in their responses at least to some
extent.
This study was mostly based on cross-sectional data on projects implemented some
years ago. The assessment and measurement of the success and performance
changes were conducted afterwards the project implementation. Because the
191
project success may vary during the project life cycle, the results of this study may
not give the right picture for every phase of the project implementation. It is also
possible that the current situation and recent incidents have affected the
informants’
answers.
However,
the
influence
of
one
respondent
was
not
dominating, because the number of informants was at least three per case
company, and because the demand for unanimity was used as a criterion during the
case analysis.
The business development projects were implemented as integrated to the daily
business and the daily responsibilities of the employees and owner-managers. It
might have been difficult for the informants to fully and objectively separate, which
of the performance changes were caused by the business development project and
which of them were results of changes in some other issues, e.g. changes in the
business environment or competition. Attempts to avoid this bias were made by
utilising the multi-informant system, and by collecting information from different
sources, including industry key figures and information about competitors. The
information from the different sources was triangulated and no inconsistencies were
found. However, this possible problem should be noted when interpreting the
results.
This study focused on searching the general patterns and features of the business
development projects implemented in SMEs. This study did not concentrate on
special features and special content of different types of projects. This means that
the main focus was on the issues connected to context, process and control. The
technical content were in a minor role. The results of the present research should
be viewed in this light.
8.4
Outlines for future research
This study suggests a number of implications with regard to further research. This
case study provides insights into a narrow perspective only. It is based on two
successful business development projects implemented in small companies and two
unsuccessful
business
development
projects
implemented
in
medium-sized
companies, all of them representing companies that already had established their
business. The natural further question is to ask if there is variation across different
kinds
of
project
types
implemented
in
different
kinds
of
companies
and
192
representing different stages of company life cycle. These issues, as well as the
project life cycle dynamics for the success dimensions and the success factors
should be studied further.
This study is mostly based on cross-sectional data on projects implemented some
years ago. The assessment and measurement of the performance were done
afterwards the project implementation. A longitudinal study might be useful to find
out how the perceived performance changes through the project implementation
and after its completion and how the importance of the different success
dimensions varies through the project implementation. Such study might provide
valuable information on the changes and give a basis for developing smart tools to
help SMEs in their business development efforts.
The framework for the business development project success in SME-context was
designed based on prior research, two pilot cases and four cases. It would be useful
to verify it with a quantitative study.
A fruitful subject for further research might be to study what kind of support SMEs
need for the business development work and how the current development tools,
procedures and services provided by the public business advisor organisations fit
for use in the SME-context.
In conclusion, it is hoped that the success of business development efforts emerges
in topics and headlines of several future studies. They will provide the needed
support to find and develop solutions to improve performance and competitiveness
of SMEs.
193
9
SUMMARY
Today business is done at global level more than ever before. Under the increasing
market pressure, enterprises are forced to improve their competitive position e.g.
by discovering new potential arenas for growth, by decreasing costs, and by
improving quality and productivity. A business development project is one tool for
this. There are not many answers to the question of how the development projects
launched to improve the business performance in SMEs, have gained success.
The academic interest in business development project success has mainly focused
on projects implemented in larger organisations, rather than in SMEs. Previous
studies on the business success of SMEs have mainly focused on new business
ventures rather than on existing SMEs. However, nowadays a greater number of
business development projects is undertaken in existing SMEs, where they can pose
a great challenge. This study focuses on business development success in SMEs
that have already established their business.
The objective of the present study was to gain a deep understanding of business
development project success in the SME-context, and to identify the dimensions
and factors affecting project success. Further, the aim was to clarify how the
business
development
projects
implemented
in
SMEs
have
affected
their
performance.
The paradigm advocated in this study was a qualitative one, emphasising subjective
and multiple reality where perceptions are important, because they are the basis
for individuals’ actions. The people involved in the business development efforts of
SMEs were seen to be the most appropriate informants, because the problem area
can be best understood from the point of view of the individuals directly involved in
the activities in question.
The empirical evidence is based on a multiple case study consisting of two
successful and two unsuccessful business development projects implemented in
SMEs. A multi-informant system and multiple data sources were utilised in the case
study. Much of the collected information was based on subjective understandings
and interpretations made by the interviewees involved in the development efforts of
the case companies. Objective, operationally defined data of performance collected
194
from independent secondary sources was used as complementary evidence. The
qualitative research method was selected for this study. However, quantitative
methods were included within the qualitative analysis.
In this study, a framework for a generic theory of business development project
success in the SME-context was developed on the basis of prior research in the
areas of project and change management, entrepreneurship and small business
management, and performance measurement, and on the basis of empirical
evidence from SMES that have implemented a challenging business development
project.
According to the case evidence, the framework provides a systematic way for
analysing the business development project and its impact on performance and the
performing
company.
The
framework
consists
of
five
success
dimensions:
entrepreneurial, project preparation, change management, project management
and project success. The case evidence indicates that good performance of one
success dimension affects the others. Good performance with entrepreneurial and
project preparation success gave a firm ground for a successful business
development project. Good performance with change management and project
management ensured successful planning and implementation of the project.
Project success indicates the results, performance improvements and future
benefits for the enterprise and its customers.
This case evidence indicates that successful business development projects have a
balanced, high performance concerning all the dimensions. Good performance in
one dimension is not enough for the project success, but it gives a good ground for
the other dimensions. The other way round, poor performance in one success
dimension affects the others, leading to poor performance of the project. In the
SME-context the business development project success seems to be dependent on
several interrelated dimensions and factors. Success in one area leads to success in
other areas, and so creates an upward success spiral. Failure in one area seems to
lead to failure in other areas, creating a downward failure spiral.
When examining the performance changes affected by the business development
project, it was found that the internal business development projects affected SMEs’
performance widely also in areas and functions not initially targeted. The
implications cover all the success categories: project efficiency, impact on
195
customer, business success and future potentiality. With successful cases, the
success tends to spread out to areas and functions not mentioned as project goals,
and with unsuccessful cases the failure seems to spread out widely to the SMEs’
other functions.
Six individual factors were found to be key factors for successful project
implementation: strength of intention, business ability, knowledge, participation,
motivation and training. Vice versa, most of these factors were also found to be the
failure factors. Unstable strength of intention, business inability, lack of knowledge
and missing motivation were found to be factors escalating to project failure.
The contribution, quality, limitations and outlines for future research were discussed
at the end of this study. It was expressed that the developed framework provided a
systematic way for analysing the business development project and its impact on
performance and the performing company. It was suggested that the framework
provides a basis for benchmarking one’s own business and helps to evaluate, how
well the enterprise meets the success dimensions and key factors.
All in all, this study serves as a starting point for further studies and provides some
practical guidelines for those struggling with business development efforts in SMEs.
Hopefully this study also brings academics from different traditions a little bit closer
to each other and helps to create understanding between these different disciplines.
196
197
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APPENDICES
APPENDIX 1 – DEFINITIONS OF TERMS
To be able to answer the research questions, it is important to define the following
terms.
TERM
DEFINITION USED IN THIS STUDY
Business development
project
Business development projects are targeting at more effective
business operations. The goal of the business development
project is better performance from someone’s (interest group’s)
point of view. (Salminen 1995, Definitions).
Business performance
Company’s capability to produce targeted output satisfying the
needs of the interest groups (Laitinen 2003, 366)
Enterprise
An enterprise is a system consisting of a detector, a selector and
an effector. The detector is the function by which a system
acquires information about its environment, which is then used as
the basis of the selection of a behavioural response by the
selector. The behaviour is executed by the effector. (Salminen
2000, 41)
In this study the terms enterprise and firm has been used as the
same meaning.
Entrepreneur - owner /
manager
The definitions have been adopted from Stewart Jr. et al. (1998,
204) and Carland et al. (1984, 358):
An entrepreneur is an individual, who establishes and manages a
business for the principal purposes of profit and growth. She or he
is highly driven for success and characterised principally by
innovative behaviour. An entrepreneur will employ strategic
management practices in the business and she or he has a high
propensity for risk-taking.
Small business owners are less risk oriented, and they are not as
highly motivated to achieve as the entrepreneurs are. The small
business owner establishes and manages a business for the
principal purpose of furthering personal goals.
This study has used the terms entrepreneur and owner/manager
in the same meaning without analysing the person’s propensity
for risk-taking or achievement.
Financial performance
Financial performance is based on financial indicators and reflects
the fulfilment of the economic goals of the firm (Venkatraman &
Ramanujam 1986, 803).
Performance measure
A performance measure is a metric or an indicator used to
quantify the efficiency and/or the effectiveness of the action in the
enterprise. Objective measures reflect the financial performance,
and subjective measures reflect the perceptual operational
performance (cf. Miller et al. 2003, 216; Venkatraman &
Ramanujam 1986, 803 - 804). Guasi-perceptual measures are
operationally defined, but the measurement is done as perceptual
(Ketokivi and Schoeder (2004, 261).
Project
A project is an endeavour in which human, material and financial
resources are organised in a novel way to undertake unique scope
of work, of given specification, within the constraints of cost and
time, so as to achieve a beneficial change defined by quantitative
and qualitative objectives. (Turner 1999, 3)
Appendix 1 continues
Project success / project
performance
Project success can be defined in three ways: 1) the goals and
objectives accomplished by the project, 2) the benefits derived
from the project and 3) the impact of the project on the
company’s performance (Guimaraes 1997, 199).
Project success consists of efficiency and effectiveness. Efficiency
is related to achieving the goals on the schedule within the budget
and effectiveness refers to the ability to create performance
improvements and positive perceptions among the organisational
members and customers. (Salminen 2000, 15).
In this study, the terms project success and project performance
have been used in the same meaning.
Project success criteria
The success criteria consist of measures by which the success or
failure of project will be judged (Cooke-Davies 2002, 185).
Measuring success involves also evaluation of the degree to which
the objectives have been achieved. In this process, the objectives
become the success criteria (de Wit 1988, 168).
Project success factor /
project critical success
factor
Success factors are those inputs to the system that lead directly
or indirectly to the success of the project (cf. Cooke-Davies 2002,
185). Critical success factors are those factors, which are critical
for the successful completion of the project (cf. Belassi & Tukel
1996, 142).
Small and medium sized
enterprise
This study has adopted the definition introduced by the European
Commission (Official Journal of European Union 2003):
A small and medium sized company (SME) has fewer than 250
employees, its annual turnover does not exceed 50 million euros,
and/or the annual balance sheet total does not exceed 43 million
euros.
A small enterprise employs fewer than 50 persons, and its annual
turnover and/or annual balance sheet total do not exceed 10
million euros.
APPENDIX 2 – SUMMARY OF RESEARCH DATA AND INFORMANT FEEDBACK
CASE
RESEARCH DATA
FEEDBACK
Case A
Data collected directly from the case company
Interviewees:
Owner (managing director)
Quality manager
Production technician
Observation during four visits
Feedback from the owner
(managing director), telephone
discussions
Support to the interpretation
Data from secondary, independent sources:
Financial statements and annual reports of
the case company (years 1993 – 2002)
Financial statements and annual reports of
three competitors (years 1994 – 2001)
Key figures of the industry (years 1995 –
2003)
Articles written about the company
Case B
Data collected directly from the case company
Interviewees:
Owner (chair of board of directors)
Owner (managing director)
Foreman of the site
Project manager of supplier partner
Observation during four visits
Feedback from the owner (chair of
board of directors), meeting in the
case company
Support to the interpretation
Data from secondary, independent sources:
Financial statements and annual reports of
the case company (years 1995 – 2003)
Financial statements and annual reports of
the two competitors (years 1999 – 2003)
Key figures of the industry (years 1997 –
2003)
Case C
Data collected directly from the case company
Interviewees:
Owner (chair, board of directors)
Managing director
Personnel manager
Observation during five visits
Feedback from the owner (chair of
board of directors) and from the
personnel manager, telephone
discussions and meeting in the
case company
Support to the interpretation
Data from secondary, independent sources:
Financial statements and annual reports of
the case company (years 1993 – 2003)
Financial statements and annual reports of
one competitor (years 1993 – 2003)
Key figures of the industry (years 1995 –
2003)
Articles written about the company
History of the company
Case D
Data collected directly from the case company
Interviewees:
Managing director
Chief editor
Other informant financial manager
Data from secondary, independent sources:
Financial statements and annual reports of
the case company (years 1999 – 2003)
Key figures of the industry (years 1999 –
2003)
Articles written about the new business
venture
Feedback from the chief editor by
email
Support to the interpretation
APPENDIX 3 - INTERVIEW GUIDELINES USED IN THE CASE STUDY
(Translated from Finnish)
STORY OF THE BUSINESS DEVELOPMENT PROJECT:
Tell the story of the project, its start-up and results. A short description of the
project, its targets and actions taken during it.
Questions to assist the story:
How did the project get started and what was the reason to start
it?
Who was the sponsor or champion of the project?
What were the goals of the project and who decided about
them?
Project organisation, who did, what and when – key persons and
their roles?
Did you have an external expert involved in the project and if
yes, what was his/her role?
Which were the critical milestones and turning points during the
project?
Which were the biggest risks?
What kind of resistance was there towards the project, why did
it exist, and how was it surpassed?
How was the project progress monitored and controlled?
What problems occurred during the project?
Were the project goals achieved?
Which were the results of the project and from whose point of
view?
What was the customer / project sponsor satisfaction?
Which were the most valuable results to your company?
How were project and its results evaluated?
How was the project terminated?
Key success factors in different phases of the project?
Appendix 3 continues
BACKGROUND INFORMATION
Your status in the project:
The aim of the project:
The main results of the project:
The main problems of the project:
The most important measure or indicator by which the success was measured
or assessed:
The most important driving force (or leading factor) to ensure the business
success:
Appendix 3 continues
THE PERFORMANCE IMPROVEMENTS OR IMPAIRMENTS REFLECTED BY THE
DEVELOPMENT PROJECT
Please assess the development project’s impact on your company’s business success, a measured value
(M) or your assessment (A). Please deliberate on the indicator’s importance on the development
projects success in your case.
Degree of change
Difference between the present value of the indicator and the value of
the indicator before the development project start-up
Importance for company:
1
2
3
4
INDICATOR OF BUSINESS
SUCCESS
=
=
=
=
not important at all
minor importance
considerable importance
very important
DEGREE OF
CHANGE
M/A
IMPORTANCE OF
INDICATOR
Sales growth rate
Market share
Operating profits
Profit to sales ratio
Cash flow from operations
Return on investment
Cost reduction
New product development
Market development
Personnel development
R&D activities
Public affairs
Other indicator, what:
Appendix 3 continues
FACTORS THAT COULD HAVE IMPACT ON THE DEVELOPMENT PROJECT
SUCCESS
Entrepreneurial
dimension
Indicator or focus of the
assessment
Strength of intention
Existence of crystallized strategy
for the company
Existence of vision, mission and/or
overall goals for the company
Strength of owner/manager’s
intention to achieve strategy
and/or goals
Project’s connection to strategy
Richness of
opportunity arena
Promising industry evolution
Promising niche markets
Business ability
Managerial skills of owner /
manager
Know-how and expertise of owner
/ manager
Ability to capitalize the
opportunity arena
Status of the
factor
Importance of
the factor
Status of the
factor
Importance of
the factor
Other indicator,
what:
Project preparing
dimension
Indicator or focus of the
assessment
Realistic project goal
Balance between
targeted project goals Realistic allocation of resources
and estimated
resources
Business impact
Existence of crystallized attractive
business impact
Knowledge from the
area of project
Level of prior knowledge in the
area of the project
Other indicator,
what:
Appendix 3 continues
Change
management
dimension
Indicator or focus of the
assessment
Leadership
Behaviour and actions of the
persons leading the change
Need of change
Identification about the reasons
for change and effectiveness of
communicating about them
Participation of
employees
Level of involvement in planning
and implementation by those
whose work the change will affect
Communication
Effectiveness of information
distribution about the changes and
feedback gathering
Motivation
Level of motivation and
commitment to change efforts
Status of the
factor
Importance of
the factor
Status of the
factor
The importance of
factor
Other indicator,
what:
Project
management
dimension
Indicator or focus of the
assessment
Purposeful planning
and documentation
Sophistication of planning and
documentation
Project organisation
and identifying the
key persons
Existence of project organisation
Project organisation’s ability to
contribute the objectives of the
project
Level of defined responsibilities
and authorities between key
persons
Control and feedback
on progress
Activity of monitoring the plans
during the implementation
Activity of performance tracing
during the implementation
Risk management
Identification of risks
Management of risks
Training
Sufficiency of training
Practicality of training,
Level of timing of training in new
processes and operating
procedures
Other indicator,
what:
Appendix 3 continues
Project success
dimension for
longer term
Indicator or focus of the
assessment
Cost and time
Level of meeting budget goal
Level of meeting schedule goal
Quality
Level of meeting of direct, primary
goals
Level of meeting technical
specification
Level of meeting functional
performance
Impact on customer
Customer satisfaction
Fulfilling the customers’ needs
Solving a customer’s problem
The customer is using the product
Preparing for the
future
Creating a new opportunity
- Creating a new market
- Creating a new product line
- Developing a new technology
- Developing processes and/or
procedures
- Learning over time
Other indicator, what
Status of the
indicator
The importance
of indicator
APPENDIX 4 – STRUCTURED INTERVIEW (QUESTIONNAIRE)
(Translated from Finnish)
Fully
disagree
Fully
agree
Neutral
1
2
3
4
5
6
7
The goals were realistic and possible to achieve
1
2
3
4
5
6
7
The resources were adequate for achieving the goals
1
2
3
4
5
6
7
There was sufficient manpower to complete the project
1
2
3
4
5
6
7
We had the required equipment / technology
1
2
3
4
5
6
7
The business impact of the project was well-defined at an early phase
1
2
3
4
5
6
7
The business impact was displayed by clear calculations
1
2
3
4
5
6
7
The business impact was clear for all those participating in the decision-making 1
2
3
4
5
6
7
2
3
4
5
6
7
PROJECT PREPARING
The balance between goals and resources
Business impact
Prior knowledge
The persons participating in the project had excellent competence
1
We had prior knowledge in the project area
1
2
3
4
5
6
7
We were aware of the knowledge required in the project implementation
1
2
3
4
5
6
7
CHANGE MANAGEMENT
Leadership
The leadership was high-class during the project planning and implementation
1
2
3
4
5
6
7
The top management supported the participants in crises / in difficult situations 1
2
3
4
5
6
7
The top management were responsive to participants requests for additional
resources or for help
1
2
3
4
5
6
7
The top management shared the responsibility with the project team for
ensuring project success
1
2
3
4
5
6
7
The project team members’ authority and responsibility were in balance
1
2
3
4
5
6
7
The reasons for starting the project and the need for change was explained
clearly
1
2
3
4
5
6
7
The project goals were clear for everyone participating in the project
implementation
1
2
3
4
5
6
7
The information about the changes were shared efficiently to the employees
early in planning phase
1
2
3
4
5
6
7
Need for change
The staff fully understood the reasons why the project needed to be conducted 1
2
3
4
5
6
7
The staff fully understood the benefits of the project to company
1
2
3
4
5
6
7
The staff had an opportunity to give their contribution to the project and to the
1
decision-making
2
3
4
5
6
7
The staff had an opportunity to participate in project planning and/or
implementation
1
2
3
4
5
6
7
The staff participated actively in the project implementation
1
2 3 4 5 6 7
Appendix 4 continues
Participation of the employees
Fully
disagree
Fully
agree
Neutral
1
2
3
4
5
6
7
The motivation of the participants and the persons affected by the project was
on high level
1
2
3
4
5
6
7
The staff was committed to the project and worked for its successful
implementation
1
2
3
4
5
6
7
The staff shared their ideas with the project team members and participated
actively in experiments
1
2
3
4
5
6
7
Individuals supplying input received feedback on the acceptance or rejection of
1
their input
2
3
4
5
6
7
When the budget or schedule was revised, the changes and the reasons for the
1
changes were communicated to all the members of the project team
2
3
4
5
6
7
The reasons for changes to existing policies/procedures were explained to the
members of the project team, other groups affected by the changes and top
management
1
2
3
4
5
6
7
The project team was informed about possible problems
1
2
3
4
5
6
7
The value of the project was discussed with clients
1
2
3
4
5
6
7
The clients were kept informed of the project’s progress
1
2
3
4
5
6
7
All the groups affected by the project knew how to make problems known to
the project team
1
2
3
4
5
6
7
Specific project tasks were well managed
1
2
3
4
5
6
7
The project team members’ competence corresponded with their tasks
1
2
3
4
5
6
7
The technology that was used to support the project worked well
1
2
3
4
5
6
7
Appropriate technology was selected to ensure project success
1
2
3
4
5
6
7
The people implementing the project understood their tasks and their effect on
1
the project
2
3
4
5
6
7
Motivation
Communication
PROJECT MANAGEMENT
Technical tasks
Project planning and documentation
We had a detailed plan for the completion of the project
1
2
3
4
5
6
7
We knew which activities contained slack time or slack resources that could be
utilised in other areas during emergencies
1
2
3
4
5
6
7
We had a detailed budget for the project
1
2
3
4
5
6
7
We had an adequate documentation of the project to permit easy use by the
clients, users or participants
1
2
3
4
5
6
7
The clients were given the opportunity to provide input early in the project
planning phase
1
2
3
4
5
6
7
Project organisation
The required human resources were specified in the plan (who and when)
1
2
3
4
5
6
7
The project team personnel understood their role in the project team
1
2
3
4
5
6
7
The job descriptions for team members were defined and distributed in written
form
1
2
3
4
5
6
7
The project organisation was defined
1
2
3
4
5
6
7
A project manager was appointed
1
2
3
4
5
6
7
All important aspects of the project and progress were monitored
1
2
3
4
5
6
7
Regular meetings to monitor project progress and improve feedback to the
project team were conducted
1
2
3
4
5
6
7
Control and feedback
The actual progress was regularly compared with the project schedule
1
2
3
4
5
6
7
The results of project reviews were regularly shared with all project personnel
1
2
3
4
5
6
7
When the plan required revision, input was solicited from the project team
1
2 3 4 5 6 7
Appendix 4 continues
Fully
disagree
Fully
agree
Neutral
1
2
3
4
5
6
7
The risk analysis was carefully done
1
2
3
4
5
6
7
We had a plan in case risks started to realise
1
2
3
4
5
6
7
We had contingency plans in case the project was off schedule or off budget
1
2
3
4
5
6
7
Possible problems were predicted during the project
1
2
3
4
5
6
7
The project leader did not hesitate to enlist the aid of personnel not involved in
1
the project in the event of problems
2
3
4
5
6
7
Brainstorming sessions or ideation were held to determine where problems
were most likely to occur
1
2
3
4
5
6
7
In case of project difficulties, project team members knew exactly where to go
for assistance
1
2
3
4
5
6
7
Problems that arose could be solved completely
1
2
3
4
5
6
7
Immediate action was taken when problems came to the project team’s
attention
1
2
3
4
5
6
7
7
Risk analysis
Problem solving
Training
Required training was organised for the personnel
1
2
3
4
5
6
The personnel was satisfied with the content of the training
1
2
3
4
5
6
7
The training was practical
1
2
3
4
5
6
7
The participants got new tools and knowledge able to be utilised immediately in
1
their daily work
2
3
4
5
6
7
ENTREPRENEURIAL ISSUES
The strength of intention
We had a clear strategy
1
2
3
4
5
6
7
We had defined the mission, vision and clear goals for the business
1
2
3
4
5
6
7
The owners / managers had a strong intention to realise the strategy
1
2
3
4
5
6
7
The owners / managers had a strong intention to gain success
1
2
3
4
5
6
7
The company wanted to grow
1
2
3
4
5
6
7
The project goals were in line with the general goals of the company
1
2
3
4
5
6
7
1
2
3
4
5
6
7
Opportunity arena
In our industry the future business opportunities were promising
In our industry there were promising opportunities in small customer segments 1
2
3
4
5
6
7
The atmosphere for entrepreneurship was favourable
2
3
4
5
6
7
1
The legislation was not a barrier for utilising business opportunities
1
2
3
4
5
6
7
Funding was not a problem
1
2
3
4
5
6
7
We did not have external barriers for utilising new business opportunities
1
2
3
4
5
6
7
The owners’ / managers’ business ability was on a high level
1
2
3
4
5
6
7
The owners’ / managers’ know-how was on a high level in terms of utilising
new business opportunities
1
2
3
4
5
6
7
The owners / managers were excellent in discovering new, profitable business
opportunities
1
2
3
4
5
6
7
3
4
5
6
7
Business ability
We had enough resources to utilise new business opportunities
1
2
We had top-class knowledge to realise business opportunities
1
2 3 4 5 6 7
Appendix 4 continues
Fully
disagree
Fully
agree
Neutral
1
2
3
4
5
6
7
The project was conducted on schedule
1
2
3
4
5
6
7
The project was conducted on budget
1
2
3
4
5
6
7
PROJECT PERFORMANCE
Project efficiency
The project outcome fulfilled the expected requirements
1
2
3
4
5
6
7
We were satisfied with the process by which the project was completed
1
2
3
4
5
6
7
The problem for which this project was conducted was solved in the best
possible way
1
2
3
4
5
6
7
The customers benefited from the project
1
2
3
4 5
6
7
Important clients were using the project outcome or were benefiting from the
project outcome
1
2
3
4 5
6
7
Impact on customer
Customers have given positive feedback of the project
1
2
3
4 5
6
7
The project has improved customers’ performance
1
2
3
4 5
6
7
Business success
As a result of the project our business performance has improved
1
2
3
4 5
6
7
Our company is financially benefiting from the project
1
2
3
4 5
6
7
I can introduce several facts about how our company’s business success was
improved by the project
1
2
3
4 5
6
7
Commercially the project was successful
1
2
3
4 5
6
7
We can benefit from the project in the future
1
2
3
4 5
6
7
The project will generate income or decrease the costs later in the future
1
2
3
4 5
6
7
The project has given a birth to something new in our company; new
development ideas, new product or service ideas, new procedures
1
2
3
4 5
6
7
The project will affect our competitiveness positively in the future
1
2
3
4 5
6
7
As a result of the project we have learned something special, we can take an
advantage in the future
1
2
3
4 5
6
7
Preparing for the future
Case A
Descriptions of the factors
The project started based on
customer needs.
The project made it possible to
improve the competitive position
of the company by
differentiation.
The business ability was
perceived to be good.
The company had recognised
possibilities to expand business
to the European markets.
Confidence in entrepreneurship
in Finland was wobbly due to
governmental actions.
Business ability was perceived
as good, but lack of resources
was a problem.
More aggressiveness in
customer contacts could
improve the results.
Strength of intention
Richness of opportunity
arena
Business ability
Company did not have a written
strategy, but it had a strong
vision about the future and its
business goals.
The owner-managers had a
strong intention to gain business
success.
The company had no intention to
grow in terms of the number of
employees.
Experiments were appreciated as
important for the future of the
company.
Case B
The company had a vision and a
strategy, but crystallisation was
needed.
The owner-manager had a
strong will to gain business
success.
The company was targeting at
controllable, moderate growth.
The business development was
closely connected to the general
business objectives.
ENTREPRENEURIAL DIMENSION
Success dimensions and
indicators
APPENDIX 5 – CASE COMPARISONS
Business opportunities were
perceived as very attractive.
Assessed afterwards they were
based on over-optimistic
expectations.
The company had enough courage
but the business capabilities were
inadequate.
The company had recognised
exporting opportunities in the
Baltic countries, Russia and
Scandinavia.
Later, the tightening competition
lowered the prices making the
export more challenging.
Management by visions was
ordinary, but the company failed to
translate the visions into action
plans.
Operative management was
ineffective.
The board of directors was skilled,
but the ability to utilise its knowhow was poor.
Appendix 5 continues
The company had a strong intention
to grow and gain success.
A written strategy did not exist and
the goals were loosely defined.
The project’s connection to strategy
was not very clear.
Case D
When the project started the
company had a written strategy
and it had been communicated to
the employees.
The owner/manager had a strong
intention to rapid growth and
business success.
Year 1994 was a turning point, the
strength of intention diluted, the
strategy became more verbiage,
and lack of business targets was a
reality.
Case C
Case A
Descriptions of the factors
The company had more than 20
years experience and a lot of
prior knowledge in the project
area.
The company did not have much
prior knowledge on the project
area, but the required knowledge
had been created during the
project implementation.
Clarity of business impact
Prior knowledge
The company had poor knowledge
of internationalisation; language
skills, culture and market area.
The company went forward led by
the vision, the exact calculations
were not customary for it.
Sometimes decisions were made
based more on emotions than
rational judgment.
The business impact was not
defined in numbers. The
managers expected to improve
the company’s competitive
position.
The project was considered also
as an experiment producing new
knowledge.
The business impact was not
defined in numbers.
The financial result was not a
primary target. It was seen as a
result but could not be defined
exactly.
Balance between goals
and resources
The balance between project
goals and resources were wellrated.
Case C
It was normal for the company to
set very high goals.
Mostly the company had enough
resources, but the capability to
utilise and orchestrate the
resources was poor.
Case B
Sometimes the goals were set
too high, even impossible to
achieve. Lack of resources could
be a result of inability to set
realistic goals.
Part of the development efforts
had been terminated due to lack
of resources or the needs had
changed.
The controllability of the projects
had become more difficult.
PROJECT PREPARING DIMENSION
Success dimensions and
indicators
Appendix 5 continues
The case company did not have
prior knowledge in the project area.
The partner was supposed to have
the knowledge, but afterwards it
was realised that he did not have
enough knowledge.
The company had a lot of
knowledge on how to run its
traditional business, but lack of
knowledge in development work
was a problem.
Estimation of ROI was made by
outsiders, but the decision to
participate in the project was based
on over-optimistic expectations.
The need for financial resources was
under-estimated compared to what
should have been needed in reality.
Case D
Case A
Descriptions of the factors
Only a small number of employees
were involved, but those few
participated actively.
Communication was smattering
without profound discussion.
Communication and sharing the
information were almost impossible
due to the lack of information from
the project partners and from the
person in charge of the project.
In the beginning the level of
motivation was on a high level, later
it fell down.
The employees’ participation was
ok, they were conducting their
daily business.
Information was shared, but in a
form that people could not
understand its meaning. Two-way
communication did not succeed.
Both the employees and the owner
manager avoided discussions about
the negative issues.
In the beginning motivation and
commitment were on high level.
The employees’ motivation took a
turn to decrease due to the
perceived drop of the owner’s
motivation.
The missing visible results of the
project affected the motivation
negatively.
The key persons participated
actively in the project
implementation.
Communication was not efficient
inside the case company.
Communication inside the
project was felt to be troublefree because a small number of
people were involved in the
project. The pilot projects were
conducted with all the
participants in attendance,
facilitating fluent communication.
Slow progress at the beginning
of the project affected
motivation negatively
In general, the motivation and
commitment of the key persons
were on a high level.
The employees participated 100
% in the development work.
Communication was perceived to
be open and efficient.
The main tools were daily and
weekly meetings and
discussions.
In urgent cases the key person –
system was a communication
channel.
The motivation and commitment
to the development work were
on a very high level.
The project success during the
implementation fed the
motivation.
Need for change
Participation of
employees
Communication
Motivation
Appendix 5 continues
Need for change was communicated
and explained with the growth
target.
Resistance for change did not exist,
but suspicions and questioning
occurred.
The goals for growth were
communicated, but the change in
management was a big surprise for
staff.
No change resistance occurred,
but some suspicions existed
mainly in a form that did not
generate problems.
Continuous daily communication
ensured the communicated need
for change.
Profound discussions gave time
to people to understand and to
commit themselves for the
development efforts.
Leadership was not lauded, but it
was assessed to be sufficient – only
a few people were involved in the
project.
Case D
Leadership
The leadership has been
personalised to owner.
The hired-manager was not as best
in leadership, but his practices for
team working has been
appreciated.
Case C
The owner-managers had a
conversational leadership style.
Leadership was perceived as
good.
Case B
The company had established an
empowermental and
conversational leadership style.
The leadership was perceived to
be motivating and supportive
CHANGE MANAGEMENT DIMENSION
Appendix 5
continuesSuccess
dimensions and
indicators
Case A
Descriptions of the factors
The quality manager was responsible
for the development work. The
company was targeting at 100 %
participation of the employees and the
project implementation was linked to
the employees’ daily responsibilities.
Case C
The organisation was clear in
the beginning of the project.
When the organisation grew it
became unclear as a result, and
there existed confusion with
authorities and responsibilities.
The project manager and steering
group were appointed, but the
arrangement did not work. The
project manager had a vision, the
steering group was a listener, and
nobody could translate the vision
into action.
Written plans introducing visions
were done, but they did not lead to
concrete action plans.
Documentation was based on
meeting memos.
Case D
Risk analysis was not done, but the
owner-managers were aware of the
technical risks.
The pilot projects were conducted with
all the participants in attendance and if
problems occurred, they were solved
on site in co-operation with other
project partners.
Training was provided by the partner
supplier.
The training was mainly assessed as
being well-timed and sufficient, but in
some cases the employees regarded it
as impractical.
Training was provided to the
employees, but the timing was a little
bit in arrears. The company utilised a
knowledge-card –system linked to jobrotation targeting at new knowledge
creation and efficient knowledge
sharing.
Risk analysis and
problem solving
Training
Appendix 5 continues
Some employees had
Training was not provided and the
opportunity to train themselves,
case company did not see any need
but more training should have
for the training.
been provided.
Risk analysis was not done
No risk analysis was done and there
properly
Shared problem solving was not did not exist shared problem solving.
customary for the company.
Control was inefficient, and based on
reports introducing the vision and
meeting memos of the steering
The company did not have
The company did not have a
group. Control was not possible due
systematic control.
systematic control during the project
They did not make comparisons to the lack of a concrete action plan.
implementation, but individual pilot
projects were monitored in connection between what was planned and Later, the case company had
problems with other partners,
what materialised.
to contract-based cost accounting.
everyone started to protect
themselves from more losses.
The number of project participants in
the case company was five: ownermanagers (2) and three employees.
The managing director was in the role
of the project manager.
Risk analysis was not done, but
managers had discussed the risks
before bigger investments.
The company was targeting at having
the employees involved in problem
solving.
The progress was controlled in daily
and weekly meetings. The managing
director concentrated on monitoring
Control and feedback that the trend was as expected, and
the quality manager was monitoring
the progress of the development work
in detail.
Project organisation
Planning and
documentation
Case B
The company had made plans
(business planning), but not
The company did not have a written
very sophisticated ones.
plan, and the owner-managers did not
The implementation of the plans
The planning and documentation fitted
see any advantage in a written plan.
was conducted by halves.
to the procedures specified in the
The supplier partner had a plan for the
The documentation and
quality system.
commercialisation and the case
reporting did not expose the
company could benefit from it.
critical situation where the
company drifted.
PROJECT MANAGEMENT DIMENSION
Success dimensions and
indicators
One-off loss of 300,000 €
New know-how and judgment to
assess business opportunities and
more succesful way to conduct
business development work
The case company lost some
customers as a result of increased
arrogance
The competitive position weakened
Decreased profitability, huge fixed
costs, weakened competitive
position in the market and the
company drifted to financial crisis
The company has learned its
lessons; sensitivity to recognise
warning signals has improved, the
organisation is more efficient,
dependence on the owner has
decreased, communication has
improved
As a result of a reorganisation
programme the company has lost
the development know-how
Customer satisfaction has
improved.
The business image is better
now.
Sales growth
Increased profitability in the new
product area
Increased market share
New product development has
started
Improved technical knowledge of
employees
The competitive position became
better due to the differentation
Customer satisfaction and
delivery reliability improved and
the customers benefited from
the project.
Positive impact on sales growth,
profitability and cost reduction.
The working atmosphere and the
motivation of the employees
improved.
The empolyees knowledge are
better now and the job-rotation
system has increased multiskillfulness.
New ideas to develop new
products and to improve
production systems introduced.
Impact on customer
Business success
Future potentiality
Total failure with schedule, budget
and project outcome
Case D
The costs were overran
The schedule was unclear from the
beginning
The outcome was a crisis
Case C
Project efficiency
Case B
The project was implemented
behind schedule and the budget
was not specified. The project
quality exceeded the
expectations.
Case A
Descriptions of the indictors
The case company did not have
a budget and the schedule was
loosely defined. Afterwards the
case company was satisfied with
budget and schedule.
The project outcome fitted the
technical and functional
specifications
PROJECT SUCCESS
Success dimensions and
indicators
5.8
6.0
6.6
6.0
6.1
6.2
!
Very good
6.25
6.25
Appendix 6 continues
The informant's mean value has decreased
the quality rating
Very good
6.75
5.8
Excellent
6.6
6.7
Project efficiency
7.0
Impact on customer
6.0
7.0
Excellent
Business success
6.7
6.5
7.0
5.50
4.75
6.75
6.0
Good
Satisfactory
7.0
5.7
5.1
5.50
5.50
Project Performance
6.0
4.4
Good
Future potentiality
6.0
5.2
5.5
Good
5.0
5.8
5.5
5.7
Training
Planning and documentation
5.3
5.8
5.8
5.6
5.8
Risk analysis and problem solving
Very good
Control and feedback
6.0
5.5
6.3
5.50
6.25
6.0
Good
6.25
5.7
5.5
Very good
Project management dimension
5.0
6.3
Project organisation
5.8
6.5
!
5.7
Communication
6.0
6.25
6.25
6.5
Very good
Very good
Very good
Motivation
6.0
6.0
6.2
6.25
6.3
6.0
6.4
5.7
7.0
Need for change
Participation
6.0
5.0
6.2
Leadership
6.0
6.1
Change management dimension
4.7
4.25
3.0
Neutral
5.5
5.5
!
!
Prior knowledge
5.8
5.0
5.50
4.25
5.5
6.0
Good
Neutral
6.0
3.0
6.0
6.0
Balance between goals and resources
Clarity of business impact
6.0
4.7
6.5
Project preparing dimension
4.5
5.50
7.0
Opportunity arena
Good
!
!
Quality rating as a
numerical value for
general view
6.2
7.0
6.5
Mean value
Quality rating
6.75
6.25
7.0
7.0
Mean value
Company
Excellent
Very good
7.0
6.6
7.0
5.8
Mean value
Mean value
Informant 3
Entrepreneurial dimension
Informant 2
Informant 1
Business ability
Strength of intention
Case A
APPENDIX 6 – SUMMARY OF THE STRUCTURED INTERVIEW (QUESTIONNAIRE)
5.6
4.3
5.5
Leadership
Need for change
Communication
5.8
5.2
5.4
5.6
5.5
5.5
5.50
5.50
Appendix 6 continues
The informant's mean value has decreased
the quality rating
Good
Good
5.50
Project efficiency
5.6
Good
5.4
5.5
Very good
4.75
4.25
Impact on customer
5.3
6.0
Neutral
Satisfactory
6.25
6.0
6.0
4.4
4.8
5.50
5.50
5.3
6.0
5.3
5.2
Good
Good
6.0
4.0
4.3
5.6
5.7
Business success
Planning and documentation
5.3
6.0
Future potentiality
Project organisation
5.7
6.0
5.7
4.7
4.0
Training
Good
Project Performance
5.8
5.0
Risk analysis and problem solving
5.3
5.1
4.6
4.75
5.50
4.75
6.25
5.5
6.25
5.50
5.8
Satisfactory
Good
Satisfactory
Very good
Very good
6.25
3.50
5.4
4.9
5.6
5.1
6.2
6.3
Very good
Fair
5.5
6.75
Project management dimension
4.8
6.0
5.0
6.0
6.0
6.0
3.7
Excellent
Control an feedback
4.3
5.2
6.0
7.0
6.0
6.0
4.0
!
5.5
Motivation
!
7.0
Change management dimension
Participation
5.5
4.0
6.5
5.50
5.50
6.5
3.0
6.0
Good
Good
Balance between goals and resources
Clarity of business impact
6.5
5.8
5.5
7.0
6.0
6.0
Project preparing dimension
Prior knowledge
5.3
5.0
6.0
5.5
Very good
Business ability
Opportunity arena
6.1
Quality rating as a
numerical value for
general view
5.8
6.4
Mean value
Quality rating
6.25
5.6
Mean value
Company
6.4
Mean value
Mean value
Informant 3
Entrepreneurial dimension
Informant 2
Informant 1
Strength of intention
Case B
4.0
4.8
4.0
4.8
4.4
Change management dimension
Participation
Motivation
Need for change
Communication
Leadership
6.0
2.0
1.0
2.0
Project efficiency
2.6
5.5
4.0
5.4
2.2
2.5
3.0
4.0
2.3
3.3
2.7
5.1
3.9
!
!
Impact on customer
Business success
4.0
2.50
3.50
2.50
3.3
4.75
3.50
3.50
Appendix 6 continues
The informant's mean value has decreased
the quality rating
Poor
Fair
Poor
Satisfactory
Fair
Fair
3.50
Project Performance
Future potentiality
4.3
3.4
Fair
3.5
4.4
3.2
Training
3.6
2.4
2.3
3.8
3.3
Planning and documentation
!
Good
Neutral
Risk analysis and problem solving
5.1
4.5
4.1
4.6
4.4
3.50
4.25
4.25
4.25
4.1
4.25
5.50
4.25
5.6
3.8
Fair
Neutral
Neutral
Neutral
Neutral
5.0
5.2
3.9
4.1
4.1
4.3
4.4
3.1
Project management dimension
3.6
4.3
4.3
5.4
5.0
4.7
Project organisation
Control and feedback
3.8
3.3
3.3
3.6
4.3
3.0
2.50
!
4.75
Poor
1.7
Prior knowledge
4.0
4.0
Satisfactory
5.50
3.7
4.7
5.0
4.5
Good
5.3
5.50
Quality rating as a
numerical value for
general view
4.25
4.25
3.3
3.0
5.0
5.6
Good
Quality rating
Neutral
Neutral
4.0
4.0
4.6
6.0
5.6
Mean value
Company
Project preparing dimension
4.0
Business ability
6.2
5.8
Mean value
Informant 3
Balance between goals and resources
Clarity of business impact
4.7
Strength of intention
5.7
Mean value
Mean value
5.2
Informant 2
Informant 1
Entrepreneurial dimension
Opportunity arena
Case C
2.0
Project efficiency
2.0
3.5
2.5
Due to the lack of time of the interviewees, in case D the structured interview was done
by asking, not all the statements, but statements based on the factor-title (one
statement / factor, e.g. opportunity arena was very promising).
2.0
3.0
2.0
!
4.0
3.0
4.5
3.50
2.50
3.50
2.50
3.3
4.75
2.50
The informant's mean value has decreased
the quality rating
Poor
Fair
Poor
Satisfactory
Poor
4.25
Impact on customer
Business success
4.0
2.5
Fair
Neutral
5.0
4.25
4.25
Project Performance
Future potentiality
3.0
3.5
4.0
Satisfactory
Satisfactory
Neutral
Neutral
2.0
!
5.50
4.75
Planning and documentation
3.0
4.0
4.5
4.5
4.0
4.5
Good
Satisfactory
4.9
5.50
4.0
4.0
5.0
4.0
6.0
5.0
4.5
Good
1.50
4.0
Communication
Leadership
5.0
5.0
5.5
Very poor
3.50
3.1
4.25
Risk analysis and problem solving
4.0
3.0
Motivation
Need for change
6.0
1.5
Fair
Neutral
Training
5.0
4.0
Change management dimension
Participation
1.0
4.0
!
!
6.25
3.50
4.0
5.0
Prior knowledge
2.0
4.5
Fair
Very good
4.75
4.75
2.0
Clarity of business impact
3.0
6.0
3.0
5.3
6.25
Quality rating as a
numerical value for
general view
5.0
4.0
6.0
Project preparing dimension
Balance between goals and resources
6.0
2.0
Very good
Quality rating
Project management dimension
6.0
Business ability
6.0
Mean value
Company
Project organisation
Control and feedback
6.0
4.0
Strength of intention
6.0
Mean value
Mean value
6.0
Informant 2
Informant 1
Entrepreneurial dimension
Opportunity arena
Case D
Very poor
1.50
3.50
2.50
Poor
4.25
4.75
5.50
6.25
6.75
Middle of the
category (cf.
coding principles)
Fair
Neutral
Satisfactory
Good
Very good
Excellent
Quality rating
Quality rating as a numerical value for
the general view
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PARVIAINEN, ASKO. Design of axial-flux permanent-magnet low-speed machines and
performance comparison between radial-flux and axial-flux machines. 2005. 153 s.
Diss.
ISBN 952-214-043-0
ISBN 952-214-045-7 (PDF)
ISSN 1456-4491
Lappeenranta 2005