Abstract

Start-ups can gain a lot from project management methodologies and this article gives an outline of the main project management process that a start-up goes through.

It is well known that project management is a system whereby a specific scope is achieved. This article looks at the elements that would assist an entrepreneur in defining the scope of a start-up and to use some of the central ideas in project management to increase the probability of being successful in achieving that scope.

Special focus is given to the differences between entrepreneurship practice and normal project management practice.

Project managing the start-up — what entrepreneurs can learn from project managers

By Dr Riaan Steenberg MBA, PMP

A project is defined as a temporary endeavour undertaken to create a unique product, service or result. A start-up at the same time is defined as the process of setting something in motion. It is then no surprise that there should be essential parallels between the process of running a project and of starting a business. For many entrepreneurs there is a major disconnect between dreams and what happen in reality, arguably because there is a limited understanding on how to manage the project of starting up a business. This article will give an outline of how to apply some of the essential elements of project management to an entrepreneurial journey.

Many new businesses fail due to the entrepreneur not understanding the twin disciplines of project and portfolio management. If an entrepreneur views themselves as the project manager of their start-up, then magic starts to happen.

Project managers use specific disciplines that lead to success including defining scope, planning, managing stakeholders, navigating issues and risks and ensuring that there is a strong correlation between plan and budget. The project portfolio is also a key element for the project manager, where projects are carefully selected to best utilise resources to achieve organisational objectives.

The notion of disciplined entrepreneurship (Aulet, 2013) is emerging to show that there is a strong correlation between success in the entrepreneurial journey and the extent to which the entrepreneur executes on the disciplines of finding customers, enabling operations and managing resources.

How can entrepreneurs use the insight that there is a strong link between the methods needed to manage projects, to the process of establishing a business?

This insight can be developed by realising that the scope of the project of starting a business needs to include a specific statement of what the business will achieve by when. Specifically, a scope includes the definition of what will be achieved, by when, with user acceptance criteria and specific constraints that will have to be observed. Key assumptions that need to be validated will also be included in a scope statement.

Scoping the business

When entrepreneurs typically set out to start-up a business, there is little consideration of the scope statement of setting up a business and typically the entrepreneur either focuses on the product, market or the operations first. Businesses survive that balances at least two of these factors. Businesses succeed when they balance all three. By setting the scope as a balance between these three factors and understanding that a customer, and a product as well as the mechanism to transfer value between themselves and the customer (logistics and payments) are all essential before you will make any money.

Success for the start-up

Any entrepreneur would do well to scope out their start-up and have a clear definition of what success will look like.

To define success any start-up needs to answer five essential question:

• How does this business find customers (market)?

• What do this business sell to customers (product)?

• How do I ensure that I can deliver (operations)?

• How do I make sure that the business gets paid (payment)?

• Who is doing the work (resources)?

Almost per definition a start-up will not be a business until it has asked these questions conceptually and executed it in the real world. The constant process of executing on the initiatives that continue to answer these questions for a business is the essential business cycle for the entrepreneur. The task of the entrepreneur as project manager is to answer how these questions will be answered.

Progressive elaboration

Once we have defined success, the next step is to develop a viable breakdown of the tasks that need to go into each of the main areas. The idea of progressive elaboration, one of the key tools in the project management toolbox, comes in very handy here.

Once we understand the market question, we can break this down into the main areas to achieve the end objective of getting to a viable start-up.

This idea of progressively achieving our objective by breaking the end result down into smaller sub results, is very critical for an entrepreneur that needs to manage both the big picture of staying afloat, while ensuring that the ultimate aim of the business is achieved.

Once we have the high-level work breakdown structure the normal modalities of project management kicks in, in which we continue to initiate, plan, execute, monitor and control until we have achieved the scope, after which we close the project.

Creating process assets

Project management is concerned with the organisational process assets that is created in every one of its project phases and approaches. This perspective is important for an entrepreneur that needs to decide to create assets that allow the business to continue operating into the future.

An entrepreneur needs to focus on the unchangeable aspects of the business. Business will always need to manage a customer relationship, will always need to sell, will always need to produce. By creating a process that is more successful at these aspects the entrepreneur builds a formidable business that does the unchanging aspects of the business, very well.

Dealing with uncertainty

If we have a new product or market or if the delivery mechanism is volatile, then we may need to plan to test multiple different types of approaches. The PMBOK gives us some of the tools that we can use in this instance including risk and issue logs, and also advising the use of experts, benchmarks and experimental initiatives to determine what will bring us to success. Before you launch a new marketing campaign, test it and find out if it sells to one user. If it does, then use it to sell to hundreds. If you are not sure if it will work, then speak to someone that had done something like this before. Note upfront that you are engaging in a risky activity and review what has gone wrong at every turn.

This type of constant review is at the heart of lean start-up (Ries, 2011) and other "fail-fast" methodologies that is aimed at getting to a minimum viable product (with a market and ability to deliver) as fast as possible.

Many of the tools of project management is aimed at enabling a project manager to keep the project in scope. While deviations in scope is usually agreed with the project sponsor, in the case of the entrepreneurial enterprise, the entrepreneur is the sponsor and will need to be clear on when the project parameters are going outside of the risk appetite of the entrepreneur.

Resourcing and Controlling

For projects, as with start-ups, one of the critical aspects of having a successful experience is to balance scope, time and resources. For an entrepreneur there is a challenge where the person can run out of cash by employing resources that are not producing revenue or by engaging in expansion too early in the process.

In most project scenarios the budget is linear, i.e. you are given a set budget to get to the end objective. In a start-up scenario there are a couple of differences, as early success and an increased revenue budget, may change the cost budget of the project, or open up the scope on another project in the start-up project portfolio. A lack of success may reduce the cost budget of the overall start-up project and if a minimal set of conditions are not achieved, may force an early termination of the project.

As entrepreneurs, financial uncertainty more often translates into hope and a prayer. As a project manager, this would usually signal us to very vigilant and have robust projections for each aspect of the project and build strong control mechanisms to keep everything in line with various cost budget scenarios.

Closing out the start-up phase

When the essential aspects of the business are in place, there is a time, as with all projects, in which the initial scope has been completed.

A start-up project is complete when the business is marketing, selling and delivering products to customers in a sustainable way. The first milestone is where the revenue derived from a customer is higher than the cost of acquiring and servicing the customer. The second milestone is when the total revenue from customers exceed the total cost of operations. The third milestone is when the total profit has exceeded the investment of the original investors.

The second milestone, i.e. when we make more money than we spend which is more typically called operational break-even, is a good time for the start-up project to end, and for the business to carefully match its free cash-flow to the initiatives that it needs to take to improve its market, product or operations to enhance its potential for profitability.

In project management we learn that there are some very specific elements to closing out a project.

Some of the key elements of a close-out is to validate that the original scope was achieved, and to account for any changes in the original scope. This reflect is critical to allow the business to decide if it has been successful in the eyes of the entrepreneur.

At this time, it is also important to re-evaluate all resources to determine if the people, suppliers and processes that has brought the business to the point of establishing, will be the same going forward or if the next phase will require a different approach.

Each scope, when closed, gives rise to the next frontier and for entrepreneurs this is no different than for any other project.

Conclusion

The aim of this article has been to show that the overall key process of project management is as relevant to entrepreneurs as it is to project managers and that the main tools of project management can add a lot of value to an entrepreneurial journey.

Project managers can also learn from entrepreneurs as they often face similar challenges. How do you implement a new system, or take a new product to market? The challenges are the same, with some critical differences around how the revenue and cost dynamic and also the risk portfolio plays out.

I know for myself as both an entrepreneur, and a project manager that the parallels play out daily and that the practice of both have allowed me to be a better entrepreneur and also to advise my clients better on how to start-up their enterprises.

References:

Aulet, Bill. Disciplined entrepreneurship: 24 steps to a successful startup. John Wiley & Sons, 2013.

PMI. "The Project Management Body of Knowledge (PMBOK® Guide)—Sixth Edition." Project management Institute (2017).

Ries, Eric. The lean startup: How today's entrepreneurs use continuous innovation to create radically successful businesses. Crown Books, 2011.

About the author

Riaan Steenberg assists entrepreneurs to move from entrepreneurial intent to the point where they start-up businesses. Riaan completed his PhD in Business Management with a focus on enabling entrepreneurship education. He has also been a certified PMP for more than 10 years and uses practical methodologies to assist people to overcome start-up challenges.