David H. Gobeli

Organizing for product development projects

How should companies organize to support the development of new products? Erik Larson and David Gobeli assessed the relative effectiveness of five different project management structures by comparing the performance of 540 development projects in terms of cost, schedule and technical performance. The findings contradict Peters and Watermans popular conclusion that project teams are superior to matrix structures for developing new products and services. Both the balanced matrix and project matrix compared favorably with project teams in terms of cost, schedule and technical performance. Furthermore, the project matrix received a stronger recommendation from managers than the project team. Little support was found for either the functional or functional matrix approach to project management.

Significance of project management structure on development success

The significance of project management structure on the success of 546 development projects was investigated. Multivariate procedures revealed that success varies according to the project structure used, even when other determinants are accounted for. Projects relying on the functional organization or a functional matrix were less successful than those which used a balanced matrix, project matrix, or project team. The project matrix outperformed the balanced matrix in meeting schedule, and outperformed the project team in controlling cost. Implications for managing development projects are briefly discussed. >

Matrix Management: Contradictions and Insights

Does matrix management stifle or foster the development of new products? The arguments in favor of and against matrix consist primarily of anecdotal success or failure stories. The issue is further obscured by the failure to recognize that there are different types of matrix. Data on the usage and effectiveness of three matrix structures (functional, balanced, and project matrixes) were collected from 500 managers experienced in product development. The results indicate that matrix is still the dominant approach for completing development projects. However, while all three types of matrix have comparable usage rates, the project matrix is considered the most effective. Companies using matrix management should consider project matrix if they are trying to improve performance.

Observations on the measurement of R&D productivity: a case study

Recent concerns over national and corporate competitiveness have stimulated a renewed interest in the measurement of R&D productivity. However, the complexity of measurement problems in R&D organizations has resulted in a situation where there is a scarcity of generally accepted techniques. The authors review the major measurement issues connected with R&D productivity and presents the results of a case study to develop a R&D productivity measurement system. They describe the process of designing such a system for a high-tech product-development organization, and also provide a reduced list of ten R*D productivity indicators for ongoing monitoring purposes. >

Effectiveness of CEO pay-for-performance

Abstract Firm performance has a generally positive, but diminishing relationship with the level of CEO pay-for-performance sensitivity to stock returns, consistent with the tradeoffs between incentives and risk sharing that underlie the use of pay-for-performance. Two moderating risk variables capture this tradeoff and significantly shape the pay-for-performance relationship: a firms business risk and the standard deviation of its stock returns. At higher levels of pay-for-performance sensitivity, the future performance of higher risk firms is more negatively related to sensitivity than for lower risk firms. Our results support the notion that CEO risk aversion limits the benefits from incentive pay, and that when too much risk is placed on the CEO, firm performance suffers. Compensation managers should take these results into account when making changes in CEO pay-for-performance plans.

The return on R&D versus capital expenditures in pharmaceutical and chemical industries

The impact of research and development (R&D) on firm performance is generally agreed to be positive, but the nature and extent of this impact share little agreement in the previous research. Using an improved, time series, cross-sectional regression model that accounts for both contemporaneous and firm-specific serial correlation, as well as the feedback between firm profitability and investments, our study compares the rate of return from a dollar investment on R&D to a dollar investment on fixed assets in pharmaceutical and chemical industries. We find positive associations of R&D intensity and all variables of firm performance (net margin, operating margin, sales growth, and market value). We find that an investment in R&D earns an operating margin return much higher than the industry cost of capital. We also find that the effect of an investment in R&D on the firms market value is about twice as much the effect of an investment in fixed assets. These findings have implications for corporate investment strategies, indicating that additional R&D investment is more likely to provide a firm with a unique and sustainable competitive advantage.

Technological Innovation Strategies

ABSTRACTA new framework for analyzing different strategies of technological innovation is presented. The framework compares the product innovation emphasis to the process innovation emphasis by using market focus as a mediating variable. Eight computer industry firms are highlighted to show how they vary from reactors and value leaders to product innovators and integrators. The reactors lack any clear innovation strategy, while the integrators achieve both multiple product innovations and value leadership. This exploratory study presents some preliminary implications for managers who are trying to improve their technological innovation strategies.

Accelerating Innovation at Hewlett-Packard

OVERVIEW: Accelerating the rate of innovation is a top priority for technology managers; understanding and managing common innovation enablers and barriers saves time and money. A review of multiple programs in Hewlett-Packard revealed that the top enablers of innovation are highly skilled people, a helping culture, management support, using checkpoints to provide focus, and interdisciplinary people working together. However, barriers are different across programs; consequently, managers should regularly interview teams to determine which barriers need to be addressed. And, barriers can be predicted on the basis of technology and market newness. For example, products with technologies that are new to the company face capability issues while products with new markets may experience market planning issues.

Matrix management: More than a fad

Abstract Matrix management has received much criticism in the past few years, even being called just another management fad by some. But little empirical evidence has been presented to demonstrate actual usage or satisfaction levels among practitioners. This article defines five different forms of project management, including three variations of matrix management. It then presents the results of a survey using these definitions that was administered to a diverse sample of 115 practitioners. The survey measured the frequency of usage of the five different forms of project management and the effectiveness of projects using these different project structures. The results suggest that matrix management is more than a fad and will probably continue to be a popular form of project management, in spite of its problems.

A Survey of Project Scheduling Tools

ABSTRACTA nationwide survey of 40 firms explored their use of project scheduling tools and computer software. The survey suggests that Gantt charts, networks, and tabular listings are the most common scheduling tools. Of the three, networks were rated as being the most effective, although respondents indicated that they do require extra time and effort to master. Respondents also commented that Gantt charts are used primarily to communicate data to upper management and that tabular lists are used primarily at the working level. The most commonly used software packages that support these scheduling tools are also presented.