Ntcp diamond model project management

C H A P T E R

3

THE DIAMOND FRAMEWORK

TO GO BEYOND the conventional practices of project management, we must begin by recognizing that one size does not fit all. Unlike operations, which are repetitive, each project by definition is unique. Every project represents a new experience, addressing a new problem with a new constellation of management challenges, and the management pro- cess is never a matter of repeating known steps and procedures.

Because individual projects are unique, managers and executives need to understand the ways in which projects differ from one another and the importance of fitting the right organization to the right project. Not un- derstanding these differences, in fact, can often endanger a project and even lead to failure. Consider the following story.

The FCS Project

FCS was a third-generation fire control system developed by a well-known defense contractor in Israel. The main challenge for the FCS project was to improve the hit accuracy of weapons mounted on moving vehicles. (1)Because the contractor was experienced in building components and subsystems for similar previous genera- tions, its executives assumed that they had the capability to com- pete for an entire system. After a competitive bidding process, the company won the contract.

The major technical innovation in the FCS was a new stabilization technique, which promised to improve performance substantially.

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However, it would also require the use of technology that was totally new to the company, as well as an entirely different operational doctrine.

Nevertheless, company managers assumed that they could man- age the development of this new system in the same way as their previous, less comprehensive projects. They also assumed they could use existing modules, with minor modifications, as building blocks for the new system. In addition, they assumed that once they had developed, tested, and validated all the subsystems, it would be a straightforward matter to assemble them into a func- tioning integrated system. Based on these assumptions, they put together a team in the way they always had, and they set about the new project with the same general mind-set and methodology to which they were accustomed.

However, most of the engineers working on the program had no experience with the crucial new stabilization technology. Further- more, none of the team members had built entire systems, with responsibility for overall performance to meet the system's end-user expectations. On top of that, the whole project was new to the cus- tomer, and this meant that the ultimate performance objectives (and minimum requirements) were somewhat uncertain. The plan was to start delivering initial units after sixteen months and to begin full-scale production in three and a half years.

It soon became clear that the original project schedule was un- realistic. The project plan was therefore rewritten—twice. Still, the project steadily fell behind. After the first year, the company initi- ated emergency procedures and started to funnel additional re- sources to the program. Yet it took two full years for company managers to realize that the whole program needed to address two major problems, which lay outside the scope of the original plan altogether. By this time the crisis was full blown.

The first problem was that developing the stabilization technol- ogy would require much more time, because the new units needed additional design cycles to accommodate greater technological uncertainty.

The second problem was more profound: a complex system does not simply function as a collection of subsystems. The program needed an extensive period of system integration, together with the development of a new combat doctrine. Those activities were not part of the original project plan.

A drastic change in project management style was needed. After the intervention of top management, new systems engineering and

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integration groups were added to the team. In addition, the com- pany mobilized specific hand-picked experts, including external consultants, to help the team in its efforts. And top management involvement became much more extensive, with daily briefings and almost instant reporting of new problems and solutions. This change resulted in a breakthrough, and it led, after thirty-eight months, to the delivery of the first fully functioning system. Pro- duction started after five years, with a final delay of twenty-one months and cost overruns of almost twice the original budget.

Why Organizations Need a Framework

The executives of the FCS project had to learn a painful lesson. In retro- spect, if they had correctly assessed the project difficulties ahead of time, they would have instilled the right approach from the start. What the project managers lacked was a model for systematically assessing project uniqueness and understanding the key dimensions by which the new proj- ect differed from those in their previous experience.

But how can we refer to a framework, a model, or a common template if each project is unique? Are we not condemned to telling idiosyncratic stories about each new undertaking? Is there any way of establishing a coherent methodology that can be applied systematically to a wide range of projects?

The answer is yes: each project is unique, but not in every respect. When we survey a wide range of projects, we may find considerable variability— but also quite a number of common features. Indeed, as you will see, the variability itself follows certain patterns, and this means that we can develop general methods for handling various types of projects. This characteristic variability has not been captured so far in the current project manage- ment literature and is not part of the common body of knowledge.2

Project managers are often among the most creative leaders in an or- ganization, perhaps explaining why they have gravitated to this role. They have learned that they must solve their own problems, often without guidance from higher-level executives, and they still must get the job done within a limited time frame. When they don't find a solution in the text- books, they invent their own.

But what practitioners often lack is a perspective of sufficient generality; any given manager will participate in only a small number of projects in the course of a career. The contribution of scientific discipline is there- fore to extend and generalize the relevant principles beyond the scope of

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limited individual experience. In our experience, what managers need most is a model to help them identify differences among projects, classify their own projects, and select the right approach for the project.

This chapter presents the NTCP diamond model that is used through- out the book as a practical framework for addressing the variability among projects. Although the diamond model may not be the only way, it provides a workable solution and a starting point for most projects, or- ganizations, and managers. Let's begin with a look at how to assess and classify the project at hand.

How to Distinguish Among Projects

Projects differ from one another in many ways. They can be distinguished by technology, size, location, risk, environment, customer, contract, com- plexity, skills, geography, and many more aspects. But projects also have a lot in common. Every project has a goal, limited time and other re- sources, and a project manager or leader, and projects typically develop budgets, schedules, and organizations to determine who does what. The question is how to combine the common and the different elements into one model that allows managers to classify their projects and choose the right approach for each project.

To classify a project, you can employ three leading drivers: the goal, the task, and the environment.

• Goal. What is the exact outcome or product that this project needs to achieve? What does the end product do? The project's end prod- uct should be seen in a broad sense: it can be tangible or intangible, a process, a business, an organization, a system, a marketing cam- paign, or even an educational program.

• Task. What is the exact work that needs to be done? How difficult is it? How well known is it? Have similar tasks been done before? How complex is it, and how much time is available?

• Environment. The project's environment includes the business environment, the market, the available technology, or the specific industry. It may also involve the external economic, political, or geographic environment, as well as the internal environment in the company: the culture, the people, the skills, the procedures, and any other projects competing for the same resources.

Our objective was to build a context-free framework that would not depend on the industry, technology, or specific organization and would be universal enough to capture the wide spectrum of projects. In our re-

THE DIAMOND FRAMEWORK 41

search we tried to understand the underlying dimensions that make one project different from, or similar to, another in ways that can tell us how to manage projects more effectively.

Drawing on classic contingency theory, we concluded that we can de- fine three dimensions that characterize each project: uncertainty, com- plexity, and pace. (Appendix 3A discusses how classic contingency theory can be applied to projects and how these dimensions emerged. Appendix 3B includes our research questionnaire on classification and appendix 3C discusses the conceptual basis for classification systems.3) Uncertainty refers to the state of our information about the project's goal, its task, and its environment; often this information is sketchy and incomplete, espe- cially at the outset. Complexity is a measure of the project scope, reflected in characteristics such as the number of tasks and the degree of inter- dependency among them. And, of course, pace relates to the time dimen- sion and the existence of "soft" or "hard" deadlines that drive the work.

In practice, we have found it helpful to expand this model, recognizing that there are really two major sources of uncertainty: market (or goal) un- certainty, and technological (or task) uncertainty. Thus the NTCP (novelty, technology, complexity, and pace) diamond model emerged. The uncer- tainty dimension is now split into two parts: novelty is determined by goal or market uncertainty, and technology by technological uncertainty.

Perhaps the best way to explain and explore this model is by looking at well-known examples.

The NTCP Dimensions: Some Famous Examples

One advantage of the NTCP model is that the dimensions are fairly easy to identify. The FCS story, presented earlier, illustrates the difficulty of a project that faced a high degree of new technology and the complex problem of integrating many subsystems into one functioning system. Specifically, the new technology required extensive time for technical design, building, and testing, and the complex nature of the product re- quired a special organization and an extensive period of system integra- tion and systems engineering. These represent the roles of the technology and complexity dimensions. The following story illustrates the impact of the dimension of novelty.

A Market Revolution Created by Sony

The first Walkman was born out of frustration.4 Masaru Ibuka, the cofounder and honorary chairman of Sony in the 1970s, told some

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of his subordinates, "I wish it was easy to listen to recorded music on an airplane. Whenever I fly on business I take a heavy tape deck and headphones onto the airplane." To please their boss, a team of Sony employees removed the recording components from an exist- ing handheld Sony tape recorder, making it lighter and smaller, and added a set of earphones. What was left became a prototype for the first Walkman—small enough to carry onto an airplane or listen to music while taking a walk.

Even though he had no marketing research support, CEO Akio Morita decided in 1979 to develop and market the Walkman as a commercial product. As Morita put it, "The market research is all in my head; we create markets!" With no clear specifications, the development team worked for months, with two objectives: good sound quality and small headphones that felt like you weren't wear- ing them at all.

Although the technology was not new, the product represented a new-to-the-world concept. Initial customer reaction was lukewarm. Of thirty thousand units produced, only three thousand were sold, and Sony managers understood that they needed an innovative marketing strategy. But how could they convince people they needed a product that they'd never seen, owned, or even thought of before?

The first step was to get the word out to people who influence the public, such as celebrities and music industry people. Sony sent free Walkmans to Japanese recording artists and to TV and movie stars. Targeting younger people and active folks, Sony employees rode the trains, wearing their Walkmans and listening to music. On Sundays, they walked around in Tokyo shopping centers and cultural and sports events. Each employee wearing a Walkman became a walking sales demonstration.

Some people were skeptical at first, but when they tried out the new music system they were amazed. This was an entirely new ex- perience. Japan was swept up in the Walkman wave, and soon visit- ing tourists were going home with these made-in-Japan souvenirs. Within a year, sales reached a million units and the Walkman revo- lution began. No wonder its brand name became generic and was admitted to the Oxford English Dictionary in 1986.5

This almost classic story illustrates the difficulty organizations may encounter with market uncertainty. In projects having this kind of uncer- tainty, a company cannot rely on common marketing research, nor can it

THE DIAMOND FRAMEWORK 43

precisely predict expected sales. Market uncertainty is based on how new (or novel) the product is to the market it serves.

Let's look now at the idea of complexity, illustrated by the story of another well-known product.

The BMW Z3

In the late 1980s BMW struggled with slowing sales imposed by new Japanese luxury car competitors.6 The company also suffered from the decline of worldwide motorcycle markets. In an effort to reverse this trend, BMW decided to reposition itself as a producer of quality-oriented luxury vehicles having a unique and definitive identity in the marketplace. It defined its product as "the ultimate driving machine," built for people seeking excitement and a unique expression of individuality. Among other things, BMW needed a product that would satisfy the same needs that motorcycles do and would represent an exciting, aesthetically pleasing product. Several alternatives were considered, among them race cars, dune buggies, sport utility vehicles, and roadsters. The roadster concept was finally adopted in 1992 because it allowed BMW to maintain its goal of producing superior and exciting vehicles. The vehicle was dubbed Z3.

BMW understood the complexities of car production. It was ac- customed to overcoming the difficulties associated with the design, development, and production of new cars as complex systems, a process involving the integration of many subsystems produced by numerous internal and external subcontractors. However, the Z3 presented additional levels of complexity. The first was the decision to launch the Z3 as the first BMW car designed in Germany but produced in the United States (in a new plant in Spartanburg, South Carolina), thereby aligning with a long-term company objective of becoming a truly global brand. This decision required adapting to a different culture of concurrent cross-functional teams in a matrix organization. The goal was to use a new lean and flexible manufac- turing environment, a lesson learned from Honda.

Second, BMW decided to leverage the buzz of the Z3 and invest 60 percent of its marketing efforts in nontraditional venues. The goal was to generate interest in the Z3 two years before product launch. The nontraditional approach included, among other things, launching a tie-in with the new James Bond movie, Golden Eye, featuring the Z3 as a gift item in the Neiman Marcus

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catalog, and featuring the car in an interactive BMW home page on the Web.

To cope with these complexities, managers attempted to make the design as simple as possible. They used an existing 3-series car platform and very few new components. However, to make sure everything went right, BMW produced 150 integration and testing prototypes. This number was much higher than with any previous project. Parts for initial units were made in Germany, but integra- tion took place in the United States, and when completed, these cars were put in U.S. showrooms before product release. This action gave joint German and U.S. teams the opportunity to identify and resolve design and manufacturing problems early in the product's life cycle. It also enabled redesign work without the need to shut down production, and it created market interest before the official launch.

When all bugs had been removed, and in spite of supply delays, the Z3 captured 32 percent of the estimated target market in its first year of sales, exceeding revenue forecasts by 50 percent. Fea- turing the Z3 in the James Bond movie and other nontraditional marketing techniques resulted in nine thousand preproduction orders and caused a marketing paradigm shift at BMW.

The Z3 project is an example of how a company managed an unusual degree of project complexity. Its success resulted from BMW's detailed at- tention to building the right organizational structure and extensive inte- gration efforts, with a great many integrated prototypes. The project reflected a massive and successful change in BMW's culture and struc- ture—a change to a modern, global company that employs an integrated design, marketing, and manufacturing team to produce cars that commu- nicate pure driving enjoyment, to sell all over the world.

Our next story illustrates the pace dimension of the diamond by re- calling the painful events of Hurricane Katrina.

Hurricane Katrina

Katrina hit the coasts of Louisiana and Mississippi on August 29, 2005, causing the greatest devastation from a natural disaster in the history of the United States. The storm was a reminder that even the most developed society in the world is as vulnerable as other

THE DIAMOND FRAMEWORK 45

societies, and in some ways more vulnerable. But it was also a wake-up call for government as the sector responsible for the safety and well-being of its citizens. Katrina's magnitude and scope were beyond the comprehension and perhaps the capacity of a city or state to handle. It demonstrated that when catastrophe strikes, it is the responsibility of the federal government to act swiftly to save lives and property and to get life back to normal as quickly as possible.

Yet the Federal Emergency Management Agency (FEMA) and other U.S. government agencies were slow to respond and act. Crit- ical time passed before any government help was evident in New Orleans, while people, desperate for help, clung to rooftops or scavenged food and shelter. For three days looters and criminals took advantage of the chaos and added terror and fear to the dev- astated city. It took the government four days to begin acting. At that point, finally, a convoy of military trucks drove through the floodwaters, and the first supplies of water and food reached vic- tims who had waited for days. Thousands of armed National Guard troops also streamed into the city to help restore order.

Anyone looking at Katrina's relief efforts as a project would conclude that the failure was caused by the government's inability (or unreadiness) to respond immediately to the crisis at the most critical time, when thousands of people were seeking help and chaos took over. In retrospect, the government learned too late about the extent of the disaster and waited too long to hear from local authorities about what help they needed.7 In the absence of information, the federal government did not take action; yet during a catastrophe, the first few hours are the most critical. That is when you can save the most lives and have a significant impact on the outcome. The reality is that during those fateful moments there is no time to wait for information or prepare plans.

The story of Hurricane Katrina shows that you cannot treat a crisis like any other project. Typical projects start by making a plan and then taking action to implement it. But in crisis, plans are often useless. On one hand, it would be helpful to think of possible scenarios ahead of time and build contingency plans for any imaginable disaster; it would also help to prepare equipment and people who are ready to respond. On the other hand, when crisis strikes, it is often unimaginable, and you must be ready to act without a plan.

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The most important thing is to be there, to take action, and to give local leaders the authority to respond on the spot; above all, you must adopt the habit of improvisation, which means you must start doing in- stead of waiting until you have a plan. These kinds of projects, which we call blitz, represent the highest level of pace in the NTCP model. Also, however, Katrina relief was the most complex project possible, because it involved an entire city and its people. In the complexity dimension, then, it would be called array, representing the highest end of the spectrum.

The NTCP Model: An Introduction

The NTCP model is a structured framework that managers can use when making decisions about projects and about how they should be run. These decisions may involve such things as selecting the right projects and their managers, allocating resources, planning, assessing risk, select- ing the project management style, selecting the project's structure, building processes, and choosing tools. Each dimension includes three to four levels along a spectrum in which a project might fall, as shown in figure 3-1.8

In chapters 4 through 7 we examine each dimension (or each base) of the diamond in detail. For now let's briefly walk through them.

Novelty: How New Is Your Product in the Market?

Product novelty is defined by how new the product is to its markets and potential users. This dimension represents the extent to which customers are familiar with this kind of product, the way to use it, and its benefits. It also represents the uncertainty of your project goal—that is, how clearly you can define the requirements and customer needs up front.

Product novelty includes three types: derivative, platform, and break- through.9 These categories determine which marketing approach is best and how much impact the product will have on project management. In essence, product novelty will affect three major issues: the reliability of marketing research, the time it takes to define and freeze product require- ments, and the specific marketing strategies for the product. The levels of novelty are defined as follows:

• Derivative products are extensions and improvements of existing products.

• Platform products are new generations of existing product lines. Such products replace previous products in a well-established market sector. A typical example is a new car model.

• Breakthrough products are new-to-the-world products. They transform a new concept or a new idea into a new product that customers have never seen before. The first Sony Walkman and the first 3M Post-it notes are typical examples.

Technology: Technological Uncertainty

The major source of task uncertainty is technological uncertainty. (Other sources might be the lack of team experience or tight budget constraints.) Technological uncertainty has an impact on, among other things, design and testing, communication and interaction, the timing of design freeze, and the needed number of design cycles. It also affects the technical com- petence needed by the project manager and project team members. Four levels comprise technological uncertainty.10

THE DIAMOND FRAMEWORK 47

48 A NEW MODEL FOR MANAGING PROJECTS

• Low-tech projects rely on existing and well-established technologies. The most typical examples are construction projects.

• Medium-tech projects use mainly existing or base technologies but incorporate a new technology or a new feature that did not exist in previous products. Examples include products in stable industries, such as appliances, automobiles, or heavy equipment.

• High-tech projects represent situations in which most of the tech- nologies employed are new to the firm but already exist and are available at project initiation. Most computer and defense develop- ment projects belong to this category.

• Super-high-tech projects are based on new technologies that do not exist at project initiation. Although the mission is clear, the solution is not, and new technologies must be developed during the project. A good example is the moon-landing program.

Complexity: The Complexity of Your Project (System Scope)

A simple way to define various levels of complexity is to use a hierarchical framework of systems and subsystems. We call it system scope, and in most cases a lower scope level can be seen as a subsystem of the next higher level. Project complexity is directly related to system scope and affects proj- ect organization and the formality of project management. Three typical levels of complexity are used to distinguish among project management practices: assembly, system, and array.

• Assembly projects involve creating a collection of elements, compo- nents, and modules combined into a single unit or entity that per- forms a single function. Assembly projects may produce a simple stand-alone product (such as a CD player or a coffee machine) or build a subsystem of a larger system (such as an automobile trans- mission). They may also involve building a new organization that is responsible for a single function (such as payroll).

• System projects involve a complex collection of interactive ele- ments and subsystems, jointly performing multiple functions to meet a specific operational need. System projects may build prod- ucts such as cars, computers, or buildings, or they may deal with the creation of entire new businesses that include several functions.

• Array projects deal with a large, widely dispersed collection of sys- tems that function together to achieve a common purpose (some-

THE DIAMOND FRAMEWORK 49

times they are called "systems of systems" or "super systems"). Examples of arrays include national communications networks, a mass transit infrastructure, or regional power distribution networks, as well as entire corporations.

Pace: How Critical Is Your Time Frame?

On this scale, projects differ by urgency (or how much time is available) and by what happens if time goals are not met. Pace impacts the auton- omy of project teams, the bureaucracy, the speed of decision making, and the intensity of top management involvement. We have identified four levels of pace: regular; fast/competitive; time-critical; and blitz."

• Regular projects are those efforts where time is not critical to imme- diate organizational success.

• Fasti competitive projects are the most common projects carried out by industrial and profit-driven organizations. They are typically conceived to address market opportunities, create a strategic posi- tioning, or form new business lines.

• Time-critical projects must be completed by a specific date, which is constrained by a definite event or a window of opportunity. Missing the deadline means project failure. Examples might be the launch of a space vehicle based on a specific cosmic constellation, or the Y2K project.

• Blitz projects are the most urgent, most time-critical. These are crisis projects. Solving the crisis as fast as possible is the criterion for success.

The Adaptive Diamond Model

Combining the specific project categories on each dimension creates our adaptive diamond model. The diamond shape provides a graphical illustra- tion of a project according to its levels of novelty, technology, complexity, and pace. Figure 3-2 shows, for example, the diamond of a platform, high- tech, system, time-critical project.

The diamond model serves several purposes in coming chapters. First, it shows clearly what type of project is at hand. To communicate in writing a specific diamond of project classification, we use a language that translates the diamond to letter notations (in a vector format). Thus, the diamond in figure 3-2 is noted as D = (PI, HT, Sy, TC). Similarly, a breakthrough,

medium-tech, array, fast/competitive project would be noted as D = (Br, MT, Ar, FC).

Second, as you'll see next, you can use the diamond as a tool for ana- lyzing the fit between the required and the actual project management styles. It is also useful for two-way communication between management and project teams.

Required and Actual Management Styles: The Fit and the Gap

The level of fit between the required and the actual management style often provides an explanation for project troubles or failure. It also gives you an opportunity to analyze the problem and offer recommendations for getting a project back on track.

We thus use the diamond as a graphical tool to demonstrate gaps be- tween how a project should be managed and how it was actually man-

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THE DIAMOND FRAMEWORK 51

aged. We call it the required style versus the actual style. We use a solid- line diamond for the required style, and a dotted-line diamond for the ac- tual style. For example, in the FCS project story that opened this chapter, the required style was platform, high-tech, system, fast/competitive. Ana- lyzing the events and managerial actions, we conclude that the project was initially managed as a platform, medium-tech, assembly, and fast/ competitive project (see figure 3-3).

The third purpose for the diamond is for use by management to iden- tify the major benefits and risks associated with the project. As everyone knows, risk and opportunity go together. The greater the opportunity, the higher the risk. The same is true for projects.

Project Selection: Balancing Benefit and Risk

With the diamond model, managers can select the right project manager, assign team members, and identify how much management attention is needed. Thus as managers make decisions on project selection, initiation, and resource allocation, they can look at the diamond as a tool for dis- cussing the potential benefits and risks of each project proposal. In real

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life, bigger diamonds are more precious but more prone to be stolen. Big- ger diamond models represent projects having higher potential payoffs and benefits, but they also portend higher risk.

Each of the NTCP dimensions represents a different type of risk and benefit to the project. Table 3-1 and the following discussion summarize these benefits and risks for each of the four dimensions. (Chapter 9 in- cludes a detailed discussion about project risk management and how to apply the diamond analysis to quantify the risk in real-life projects.)

• Novelty. Derivative projects produce improvements to existing products, which typically are well defined in advance. Platform projects, however, produce new generations of existing products, which represent a significant change in performance. But this change involves increased risk of product performance under- or overkill, something customers may not like. Breakthrough, new- to-the-world products may create outstanding opportunities for businesses, but they present the greatest risk to companies of hit- ting the right product, recovering the investment, or attracting faster competitors.

• Technology. Higher technology may produce more-advanced products with increased performance and functionality. But they obviously create increased risk of technology that is incomplete or immature or simply fails. At the highest level of super-high-tech, customers may expect a quantum leap in performance and benefits (such as in space programs), but because technologies need to be developed during the project, such projects are far riskier than those that adopt known technologies.

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• Complexity. Complexity presents both an opportunity based on the level of investment and a risk associated with complexity (or size). The risks involved with complexity are both organizational and technical. As complexity grows, the number of components grows and the need for interaction and coordination increases. System projects have difficulty in integration and configuration management, and array projects must deal with political, environ- mental, and economic issues.

• Pace. Increasing pace creates faster response. The risk of rushing things increases, however, as pace becomes faster. In time-critical projects, for example, missing the end date means project failure, and in blitz projects immediate reaction is necessary; otherwise, the crisis will not be resolved.

The Impact of the NTCP Dimensions on Project Management

Once the project has been selected and the expected benefits and risks as- sessed, how should various projects be managed? Each of the NTCP di- mensions affects project management in a different way (see figure 3-4). In the coming chapters we explore all these aspects in more detail. Here is a summary:

• Novelty affects the accuracy of market predictions, the ability to determine requirements, and the timing of requirements freeze. The higher the novelty, the less you can depend on marketing research. At the highest level, breakthrough, market data is virtually non- existent, because customers have never seen your product and cannot tell you how they will use it or even whether they like it. You need to obtain customer feedback quickly using early proto- types before final product requirements are set.

• A higher technology level requires increased design and develop- ment activities, more design cycles, later design freeze, and better interaction among team members. A high technology level also re- quires that team members have higher technical skills and that you hold frequent technical reviews in addition to the usual managerial reviews.

• Complexity affects your organization and its procedures. The greater the complexity of a project, the more complex the organiza- tion will be and the more formal the procedures you will need.

• Pace requires increased attention to time deadlines. The faster the pace, the greater the autonomy you need to give your project teams and the more support they will need from top management.

Remember, however, that no model can apply to all situations. Orga- nizations may therefore need to develop their own way of classifying proj- ects.12 For example, organizations may face other kinds of uncertainty, not only in the market or technology. They may need to pay specific at- tention to uncertainties associated with politics, economics, geography, and funding. Each of these uncertainties may have its own impact on project management.

Similarly, some projects may face other types of complexity, regarding everything from vendor groups and customers to local or global network complexity. Or projects may also be distinguished by cost constraints; for example, a project's cost may depend on the requirements and the

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THE DIAMOND FRAMEWORK 55

plan, or a project may be given a cost constraint of "not to exceed" a cer- tain amount.

In sum, there are many ways to distinguish projects, and it is beyond the scope of this book to outline all possibilities. However, once project managers accept and internalize the concept that different projects re- quire different management styles, companies can find the specific way they need to adapt particular projects to their unique circumstances.

We conclude this chapter with the story of the World Trade Center (WTC). The World Trade Center will always be remembered for the tragic terrorist attack of September 11, 2001. However, here we want to remem- ber how the WTC came to be built: through a unique project that realized the dream and vision of its leaders. The project, which began construc- tion in the 1960s and was completed in 1973, represented project manage- ment at its best. If we apply the model of this book to this project, we see that its builders correctly identified the risk and opportunity of this task and knew how to select the right approach for this unusual project. We offer this story as a tribute to great project management.

The World Trade Center Project

The World Trade Center was conceived in the 1960s to revitalize lower Manhattan. It was one of the first visible signs that New York's economy was transforming from manufacturing to services. The Port Authority of New York and New Jersey (PA) undertook the project—the only organization that had both the political au- tonomy and the financial resources to pull it off.

Austin Tobin, the executive director of the PA, put Guy Tozzoli in charge of the WTC project. Tozzoli, a young Navy veteran who specialized in radar engineering, had previous experience in smaller port projects in New Jersey and New York but no experience in construction. Still, to his credit Tobin saw qualities in Tozzoli that led to the decision to put the young engineer in charge, in spite of all the odds.13

Early in 1964, after considering a few less ambitious architec- tural proposals the Port Authority announced that it would create the tallest building in the world. Minoru Yamasaki, the chosen architect, was ordered to aim higher than the Empire State Build- ing. Adding twenty more stories, the PA hoped, would favorably tip the economics of this real estate venture. But the PA also wanted to focus the project on a single, powerful idea: encouraging world

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peace by promoting international business.14 Construction took eight years and involved more than ten thousand workers in various stages, with an average of four thousand on a daily basis. The PA's World Trade Department coordinated and administered more than seven hundred contractors.

To characterize the project's diamond components, we will start with novelty. Combining a shopping mall with wide office spaces and transportation systems was not a breakthrough idea, but cer- tainly it was not a derivative of existing similar commercial com- plexes. That made the project a platform. As for complexity, the World Trade Center comprised seven buildings on sixteen acres of prime land, totaling more than 12 million square feet of high-quality office space. The center encompassed a collection of systems, in- cluding elevators; heating, venting, and air conditioning (HVAC); and transportation, utilities, communications, sanitation, and other elements. Lower Manhattan's largest shopping mall was located in the WTC basement, along with a seven-level parking garage. Its interface with public transportation systems and other facilities in the neighborhood clearly placed the project at the top of the com- plexity classification, into the array category (see figure 3-5).

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In contrast to most standard construction projects, the World Trade Center was more technologically challenging than anything that had been done before. The first major advance in technology was the "reverse bathtub" system, which solved the problem of reaching bedrock through the water table of the Hudson River. Although this technique used an existing technology developed by an Italian firm, it had never been tried on such a large scale.

Second, to transport the fifty thousand people working in the towers, the design included more than one hundred elevators of a new high-speed, high-capacity type; their doors opened to both sides to allow the first-entering passengers to be first out. Third, the exterior structural column design was also revolutionary, taking advantage of newly developed high-strength steel. An additional concern was the ten- to fifteen-foot sway the tall towers would experience and to what degree the occupants could tolerate it. These and other technological challenges categorize this effort as a medium-tech project.

Initially, many changes made for economic and political reasons extended the planning more than fifteen years. However, once con- struction started, the pace approached the fast/competitive cate- gory, in which time-to-completion has business and economic consequences. Timetables of the WTC project had to be checked daily to avoid the potential $1 million daily cost of work delays. From the moment construction began, progress remained on pace with only a few small glitches.

Project managers understood well the extent of uncertainty and complexity posed by this project and had prepared the right means and processes to deal with them. For example, although it is com- mon in construction projects to freeze the design before the begin- ning of construction, management was ready to support changes, which were perceived as critical to the long-term success of the WTC. For instance, management decided to modify the window design for the WTC rooftop restaurant to give visitors a breathtaking view of the city.

As a large array project, the WTC needed a well-run bureau- cratic central system of coordination. Work was divided among hundreds of subcontractors by the office of engineering and archi- tecture. To solve system integration problems, the PA employed a large construction company, together with an advisory board of architects and real estate personnel. The group of twenty engineers and architects had direct channels of communication, enabling the complex integration of all subunits. Meetings with the Board

58 A NEW MODEL FOR MANAGING PROJECTS

of Directors of the Port Authority were conducted monthly, and lower-level review meetings took place weekly and even daily.

In retrospect, throughout the entire project its leadership man- aged the project with a strategic, long-term perspective in mind. They did not focus only on finishing the project on time and within budget but were constantly concerned with the business and long- term effects of the end result. They were also ready to face the economic, environmental, social, and political aspects of the WTC. Although no theoretical classification existed at that time, manage- ment clearly took the right action to deal with project risk by under- standing implicitly the extents of novelty, technology, complexity, and pace (as shown earlier in figure 3-5).

The construction of the World Trade Center had a dramatic long-term effect on the well-being of the great city. Described as the biggest construction project in the world, the WTC became a symbol of world trade and peace. After its completion, construc- tion boomed in lower Manhattan, creating extremely valuable real estate. A service economy blossomed, with financial services and insurance leading the way.

The first three chapters of this book have shown why organizations need a new model to deal with the challenge of projects. These chapters form the conceptual basis for the rest of the book. In the next four chap- ters, part 2, we discuss in detail the four dimensions of project distinction and provide the rules for how to adapt project management to your proj- ect's type.

A common theme in all these chapters is the idea of viewing a project as a temporary organization and a process. In reality, however, you can distinguish a project's effort by three different, though not disjointed, processes in the project life cycle. The first is the requirements definition process, which involves defining the customer needs and translating them into product requirements. Second is the technical process, which involves translating the requirements into technical specifications and then designing, building, and testing the product. The third is the managerial process, which involves controlling the first two processes, collecting information about their progress, and making decisions about them.

In our search for project contingencies we use this view of a project in each of the following four chapters to ask a key question: how do the var-

THE DIAMOND FRAMEWORK 59

ious project types affect the project organization as well as these pro- cesses? We begin with novelty in chapter 4.

Key Points and Action Items

• The theory of contingency suggests a context-free distinction based on the uncertainty, complexity, and pace of projects. We expand this theoretical perspective by using two types of uncertainty: market and technology. This leads to the project adaptation diamond (the NTCP model), which includes four dimensions: novelty, tech- nology, complexity, and pace.

• A project's novelty refers to how new the product is in the market and how certain the goal is; technology refers to how much new technology is used on the project; complexity refers to how com- plex the product is in a hierarchy of systems and subsystems; and pace refers to how urgent the time frame may be. Each dimension is divided into three to four specific project types. A single project is represented by its own diamond.

• The NTCP diamond model enables managers to identify project risks and opportunities as well as the gap between the required management style and the actual management style employed on an ongoing project. The model is also useful for selecting the right approach to the project during planning and initiation.

• Although the NTCP model provides a context-free framework for most projects, in some cases you may need a specific model for your project or organization. It can be based on other types of uncer- tainty or complexity, or other environmental variables.