The Relationship Between Project and Product Management
By Ray W. Frohnhoefer
I’ve started exploring the relationship of project and product management, particularly as they may relate to smaller companies. Each seems to have their separate body of literature, but there are some close ties.
Let’s start by looking at the PMBOK® Guide, Fourth edition definition of project. Note that “product” appears as part of that definition. This leads us to believe that to create a product, we should have a formal project:
“A project is a temporary endeavor to create a unique product, service, or result…Temporary does not necessarily mean short in duration. Temporary does not generally apply to the product, service, or result created by the project; most projects are undertaken to create a lasting outcome.”
Project managers know that projects have life cycles. Products have life cycles as well. The product life cycle usually starts with an organization such as Sales and Marketing or Engineering developing a product idea. This may be internally generated or driven by customers or consumers. The idea may be for a brand new product (e.g. the introduction of an iPhone) or for an improvement to an existing product (e.g. successive versions of the MS Windows OS since the introduction of Windows in the 90s). The final stage of the product life cycle is retirement – the product is no longer produced or supported by the product creators.
Projects may be necessary for one or more phases of the product life cycle. These may include R&D projects to determine project feasibility, projects to create a new manufacturing facility, or the actual product creation.
For small companies or simple products, the product and the project life cycle may coincide — a single project. In this case, the product/project manager needs to bring together Sales & Marketing, Sr. Executives, and the Business Owners of the organization to develop the project charter. They must carry out several essential product management functions to define and create the product, such as:
- Product ideation
- Competitive analysis
- Business case development
- Generating the sales and marketing plan, including product introduction
- Managing the infrastructure needs to support the product (e.g. order taking, order fulfillment, inventory control) which may generate internal projects
- Make investment determinations
The project charter sets forth the high level product/project goals, budget, schedule, and resources and represents the initial product scope. These project charters will compete with other projects in the organization, possibly including those which support the product. The executive team will need to take a broad view of the product and project portfolio to properly sequence the work.
The small product/project has risk and cost management implications for the project manager. When products and projects coincide, the product/project manager needs to take a broader view than the immediate project. The profit and loss statement for the product needs to look at all the costs, including those outside the immediate product creation. These costs may include advertising and infrastructure costs. For project managers, cash flow usually isn’t a consideration, however in these circumstances, cash flow review is critical. A late product often has more far reaching implications and broader risks than a late project, and may include:
- Loss of competitive advantage or position
- Loss of market share
- Loss of revenue contributing to cash flow
- Wasted resources
These risks may be external and related to what competitors are doing.
A prime example is the case of the Burroughs Scientific Processor, originally expected to compete with Cray Systems for the very limited supercomputer market. The limited applications, high R&D costs, and resulting high prices created a limited niche market. Burroughs and Cray both expected to sell no more than about 50such systems initially. When unmitigated, high impact risks caused set backs for Burroughs, more than 50% of the estimated market was captured by Cray. Faced with the prospect of limited or no sales, Burroughs abandoned the BSP product concept and mitigated the losses through the creation of an “attached processor” which boosted the capacity of their existing mainframes.
- Products require projects.
- There may be overlapping or interweaving cycles for projects and projects.
- For small companies and simple products, the project and product cycles may be nearly equivalent.
- In the case of equivalent life cycles, the responsibilities of the product/project manager are broader and include examining profit and loss, cash flows, and broader risk management.
- Failed projects in this environment often carry more risks that have broader implications for the organization.
Ray W. Frohnhoefer, MBA, PMP is the Director of the Project Support Office at EDmin as well as a consultant, speaker, writer, educator, and mentor on Project Management. Ray is currently serving on the Component and Community Relations Governance Committee of the Project Management Institute, a past Component Mentor for PMI Region 7 (Southwest North America), a Past President of PMI, San Diego Chapter, Inc., and an adjunct faculty member at three San Diego universities. You can find out more about his professional roles at http://www.edmin.com/company/index.cfm?function=showBioDetail&id=80 and through his blog, The Project Notebook, at http://projectnotebook.blogspot.com.