Episode 450: 7 Challenges of a Project Business (Premium)
This episode is reserved for subscribers of the Premium Podcast.
As a reminder, if your company’s products and services are delivered to your clients through projects, then your company is a project business. If we compare this to another industry, then a company that sells consumer goods is a retail business.
In this premium interview, we are going to be discussing the 7 challenges of a project business:
- Acceptance of Status Quo
- Failing to identify as a Project Business
- Optimization of Project Management silos has maxed out
- Inadequate communication among key stakeholders or “Lack of stakeholder collaboration”
- Lack of governance/Lack a structured, standardized system of organizing their data
- Lack of automation
- Lack of real-time insight
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Below are the first few pages of the transcript. The complete transcript is available to Premium subscribers only.
Matt Mong: In this episode of The Project Management Podcast™, we’ll discuss the top seven challenges that a project business faces and how to address that.
Cornelius Fichtner: Hello and welcome back to The Project Management Podcast™ at www.pm-podcast.com. This is Premium Episode 450 and I’m Cornelius Fichtner. Premium means that this episode is reserved for our premium subscribers. Thank you very much for joining us today and also for supporting the Podcast financially.
Matt Mong and Henrik Lerkenfeld are back on the program today to discuss project business from the corporate perspective. And as a reminder, if your company’s products and services are delivered to your clients primarily through projects then your company is defined as a project business.
In particular, we are going to be discussing the seven challenges of a project business beginning with the acceptance of the status quo and ending with lack of real-time insight. Enjoy the interview!
Cornelius Fichtner: Hello, Matt and welcome back to the Podcast!
Matt Mong: Hello! Thanks for having me!
Cornelius Fichtner: And same thing goes to Denmark. Hello, Henrik! Welcome back as well!
Henrik Lerkenfeld: Hello, Cornelius! Good to be back!
Cornelius Fichtner: Matt, to get us started here. Would you please give us a quick recap and overview of what we mean by a ‘project business’ and how that differs from managing a project as part of another business?
Matt Mong: Sure! So the term ‘project business’ really was first used I guess back in 2006, 2005 in Academia. It basically refers to any business that provides its goods and services to customers through projects. So this can mean construction, engineering, architecture, engineer-to-order manufacturing and various other types of professional services. So the very core of what these companies do is projects.
So we can think of project business as essentially its own, I guess, macro industry category and we can compare that to other macro industries. For example, retail. So if you sell goods directly to consumers, you’re in the retail business. It doesn’t really matter what type of products you sell. So it can be clothes. It can be home goods, food. In any of these cases, you are considered a retail business.
Really project business is the same. It doesn’t quite matter what you are delivering with your project whether it’s a bridge, a building, an airplane, a centrifuge, or a restructuring plan for a hospital. In any of those cases, you’re delivering your product through projects and that makes you a project business.
So I guess this is true for any type of business. Any type of business can do projects but for project businesses, the key lies in that your delivering these projects is how they serve their customers directly. And it’s how they make money. So other companies may conduct internal capital projects to improve efficiencies or create something new but it’s not their bread and butter. So for project businesses, the project directly affects the bottom line. The project generates the revenue and also the cost. So if a project doesn’t go well, it means the business doesn’t do well. So you know that’s what we mean by project business.
Cornelius Fichtner: Excellent! And just to clarify: A project business so a company who is in the project business will have project managers working for them and they manage the projects for their customers, the external customers who pay money so that the company can make revenue.
Matt Mong: Correct! Exactly!
Cornelius Fichtner: Wonderful. Alright! Thank you for that clarification. I just need to be absolutely clear that today we’re talking about the project business. So the company that is in the business of delivering projects.
Alright! And now, over to you Henrik because our focus today is going to be on the seven challenges of the project business, the organization that’s in the project business. But since our listeners here are project managers, they manage day-to-day projects, quick question to get us started before that: You know the seven challenges, we’ll hear what they are in a bit. But a project is a project is a project. So shouldn’t the challenges generally be the same whether you’re running a project internally for your company versus you are doing the project as part of a project business company?
Henrik Lerkenfeld: I think to a large extent, they are very similar challenges. When you are running a project business, I think that one of the main differences is that your entire enterprise is organized either within or around and in support of projects. So organizationally, the challenge is greater than if you just run the odd capital projects here and there. And also, I think as Matt talked about earlier, the impact and the importance of getting it right is much higher than if you just do the occasional one-off project.
Cornelius Fichtner: Excellent! And now, we’re going to jump into the project business into the organization that does projects as their core business and we’re going to talk about the seven challenges and for each of the challenge, we’ll hear what the problem is, how you address this and maybe you also recommend the good practices of dealing with it. So let’s jump in. The first one is acceptance of the status quo. What do we mean by that, Henrik?
Henrik Lerkenfeld: So we come at this from a technology provider perspective. What we are generally seeing is that project businesses are doing pretty much today what they did 30 years ago. So we get on a daily basis RFPs and RFIs from project companies, which essentially is saying: ‘This is what we are looking for in a solution for our business.’ And very often when we zoom in on these RFPs or RFIs, we are seeing the requirements are limited around project accounting and the assumption is therefore that any kind of deep financial operational project management is being done in third-party applications or spreadsheets but certainly not in the main business application. And that I think is just a habit. It’s just that’s the way it has always been and we are maybe not aware of things potentially being any different.
So what I think needs to happen is project businesses must begin to demand more. If they don’t, the technology providers will just continue to sell accounting software and letting the project business running the main chunks of their business through Excel sheets.
If we talk about another macro industry like manufacturing, that would not be accepted. You’re not going to have a discrete manufacturer having three separate solutions to manage the inventories, the shop orders, and the material requirement planning. So why should project businesses accept that? And that I think is a big problem. There is simply not enough pressure on technology providers to bring better solutions for project business.
Cornelius Fichtner: Challenge number two is failing to identify as a project business. Let me tackle on something here. Is this maybe primarily because the term ‘project business’ even though it has been around for quite a while is quite unknown?
Henrik Lerkenfeld: I think that’s a big part of it for sure. And I think the consequence here is that companies tend to or at least often focus on the wrong thing. So if you’re a construction company, what we sometimes see is that company will focus on the 5 percent of their business that makes them unique to other companies instead of focusing on their core business. So before you start thinking about yourself as a mining contractor or mechanical engineer, think about being a project business and what that means in terms of managing your core business, which is going to be managing projects.
Cornelius Fichtner: I think project managers, they probably get that. But do you think that the C-level executive who actually make this kind of decisions who say: ‘Oh you know what? We’re actually a project business. We’re not an architecture firm.’ Do they get that?
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