Classifying Projects

Dr. Araz Taheri - Architect / 15.08.2024

Classification is essentially a means of making things more manageable. As Kwasnik (1992) notes, it is “not only a way of representing entities but is also a way of imposing order on them” (1). Some scholars even suggest that the need to classify, label, and group things is an innate part of human nature. Moreover, the modern bureaucratic state achieves much of its work by categorizing things, people, and actions into well-defined groups (1).

As mentioned in a previous article, the term "project" can encompass everything from a simple personal idea to a complex space exploration mission. To make this broad spectrum easier to understand, classifying projects based on their type and size can prove invaluable.

There are various ways to characterize projects, and doing so is often helpful for defining project structures, determining organizational frameworks, and allocating necessary resources (2). For example, Professor Aron Shenhar, a globally recognized project management leader, classifies projects into external and internal types based on the position or closeness of the customer to the organization.

This classification considers whether the ultimate customer resides in the external market or is internal to the organization. Depending on this classification, projects can either be strategic or operational in nature.

•External Projects: Typically focus on developing products or services for customers in the market. These are often referred to as sponsored projects and are common in sectors where services with a project-based character dominate, such as construction, consulting, or software development (3, 4). External projects can be further divided into:

-Derivative Projects: Involve extending, improving, or upgrading existing products, often for short-term operational gains.

-Platform and Breakthrough Projects: Focus on new product development or production processes, involving a longer-term strategic perspective.

Another perspective on external projects comes from Professors John Rodney Turner and Anne Keegan. They describe external delivery projects as those undertaken in commercial settings where one organization provides predefined deliverables to another based on a contractual agreement (4).

•Internal Projects: According to Shenhar, these are initiated within an organization by an internal sponsor, such as senior management or departmental heads. These projects aim to address operational challenges or develop internal processes. Examples include:

oProblem-Solving Projects: Address specific challenges, such as adopting new cost-saving technologies.

oUtility Projects: Maintain operational systems.

oResearch Projects: Explore innovative solutions.

oMaintenance Projects: Sustain organizational performance (4).

Hans Mikkelsen adds that internal projects often focus on organizational or operational development, such as implementing new manufacturing technology or introducing structural changes (4).

Project Types Based on Objectives

Projects can also be categorized based on their objectives:

•Investment Projects: Focus on building assets (e.g., machinery or buildings) that incur upfront costs but aim for future financial returns. If profitability is uncertain, these projects may be delayed or canceled (3).

•Organizational Projects: Aim to improve organizational structures or processes, such as through mergers or new development concepts. These changes often encounter resistance from employees (3).

•Innovation Projects: Develop new products, services, or knowledge. These projects are often unpredictable, with outcomes that may evolve significantly over time, such as software or machinery development (3).

Project Goals

Projects can also differ based on their goals:

•Closed Goals: These have known, clear objectives with limited solutions (e.g., a building extension for a specific purpose).

•Open Goals: These offer numerous possibilities in terms of approach and outcome (e.g., improving organizational flexibility) (2).

At another level, projects can be classified by their size and complexity, ranging from small, medium, and large-scaled sizes and with low to high complexity, depending on their social, technical, or organizational intricacies (2).

EXPOB Team’s Perspective: Similar Fruits with Different Colors or Different Fruits with Similar Colors

According to project management leaders, classifying projects is an essential step toward achieving better results. While projects may share similar characteristics, they often differ significantly in nature. These differences become clear through classification. Projects can also be distinguished by their field, such as IT, Mining, Construction, Finance, etc., or within a company based on their external client type, including public projects and private projects.

At EXPOB, we believe that the classification of projects, whether internal or external, innovation or investment, with open or closed goals, or low or high complexity, has a profound impact on how they are planned and executed. These factors ultimately shape the decision-making process and the pathways to success.

This information is valuable not only for project owners and managers making strategic decisions but also for teams involved in projects as outsourced experts, designers, controllers, suppliers, and employees. It provides crucial data about future challenges and potential risks associated with their projects. For instance, open-goal innovative projects require attention to detail, creativity, and patience. Resources should be arranged according to the uncertainty of these projects. In contrast, investment complex projects demand flexibility, rapid decision-making, and quick solutions to adapt to their dynamic and complex environments.

Small and medium-sized enterprises (SMEs) can particularly benefit from project classification. By understanding the unique nature of their projects, SMEs can make more informed decisions and achieve greater operational efficiency. Below are examples from various sectors, highlighting their differences and similarities:

1. Open Goal, External Innovation Project: Apple Farm Shelter

- Scenario: An apple farm owner, whose trees have been severely affected by hailstorms due to climate change, contracts an external company to design and develop seasonal, removable, lightweight shelters for the orchard.

Type of Project: Innovation Project

Goal Type: Open Goal – The final design and implementation of the shelters evolve based on ongoing research and development.

Internal/External: External – The project is managed by an external contractor with specialized expertise.

2. Closed Goal, Internal Problem-Solving Project: Medium-Scaled Construction Company

- Scenario: A medium-scaled construction company faces challenges due to unforeseen inflation, which has significantly increased the cost of materials and labor. To mitigate these issues, the company initiates a project to identify and implement cost-effective partitioning wall systems that are suitable for regions with a less-skilled workforce.

Type of Project: Problem-Solving Project

Goal Type: Closed Goal – A clearly defined objective to reduce costs.

Internal/External: Internal – Focused on internal challenges.

3. Closed Goal, Internal Organizational Project: Medium-Scaled Furniture Manufacturer

- Scenario: A medium-scaled furniture manufacturer, facing rising labor costs due to increased salaries, decides to restructure its internal operations to improve efficiency and reduce expenses. The company hires a management consulting firm to guide this transformation.

Type of Project: Organizational Project

Goal Type: Closed Goal – Clear objective to improve internal structure.

Internal/External: Internal – Focused on internal processes, despite external consultation.

4. Small-Scale Residential Villa Development

- Scenario: A construction company purchases land and develops small clusters of villas, typically between 3 to 5 units per project. The villas are either sold or pre-sold to customers as part of the project lifecycle.

Type of Project: Investment Project – The project involves acquiring assets (land) and developing villas for financial returns through sales or pre-sales.

Goal Type: Closed Goal – The objective is clear: to complete the construction and sale of the villas within the specified scope.

Internal/External: External – The villas are developed for customers in the external market, with the end goal of satisfying buyer demand and generating revenue.

Conclusion and Call to Action

Now, how can you classify your projects? Do you think there are other ways of classifying projects? Into which classification do your projects fall? What is the rate of similarity between your last five projects? Do you believe that classifying projects can be helpful in the decision-making process, especially in the early stages of a project?

We would be delighted if you could share your thoughts and experiences with us. Thank you for reading!

 

1.Investigation of potential classification systems for projects

Conference Paper Methodology 14 July 2002

Crawford, Lynn | Hobbs, J. Brian | Turner, J. Rodney

2. Project Management Handbook, By Jürg Kuster, Eugen Huber, Robert Lippmann, Alphons Schmid, Emil Schneider, Urs Witschi, Roger Wüst · 2015

3.https://www.iapm.net/en/blog/project-types/

4. The Wiley Guide to Project, Program, and Portfolio Management, Edited by Peter W. G. Morris, ‎Jeffrey K. Pinto · 2007