Project as a network

In this subchapter the network structure of projects is discussed. In most projects there is a network present, or in actual fact there may be several networks existing within one project network. First and foremost the whole project based business is a network with suppliers and their sub-suppliers, buyers with related stakeholders, consultants, authorities, and in some cases even non-business actors, such as political stakeholders. Therefore, a project can be a very complex structure of actors.

3.2.4.1 Project supplied by a network of suppliers

It is normal in project marketing that one company alone cannot provide the entire scope needed to develop a solution for a customer’s problem. Thus, resources and capabilities of multiple actors are merged to develop the required offering, and in this way a group of suppliers function as a cohesive unit (Mattsson 1980).

The structure of a project network can also be viewed from the perspective of the roles of the actors, looking at what each actor in the project is supplying and their roles. Cova, Ghauri and Salle (2002, 4-9) have proposed a typology from the supplier’s perspective, which depends on the scope of the supply. Even if the typology of project types presented in Table 11 is based on the supplier’s role, the other aspect, the buyer’s role and responsibilities, are important. The more responsibility the buyer has with regards the suppliers, the more important it is that there are no uncertainties regarding the supplier.

Table 11. Project type typology by Cova, Ghauri and Salle (2002).

Project type Explanation Relationships between Buyer and suppliers

Subcontracting One main contractor is selling a project to a buyer. Main contractor buys parts of the project from subcontractors.

Main contractor acts as the one and only seller towards a buyer.

Partial projects Suppliers supply parts of the

project directly to a buyer. All suppliers have a relationship with the buyer.

Package deals A package deal is considered to include a solution to a buyer's

Supplier has relationships with multiple buyers.

problem, a complete

system/components, equipment plus the know-how to handle the same In some cases it may also include a service contract for a number of years.

Turnkey projects Turnkey projects involve delivery of a complete plant, project but after completion of it as well.

Turnkey plus projects Turnkey projects are being combined with other activities and these activities range from the project's inception to its completion.

Like in turnkey projects.

Figures 4-6 present the typology of the project types adapted to the business of the focal company. The figures present the project network structure in a rather simplistic way.

Figure 4. Main contractor and subcontractors (adapted from Cova et al. 2002, 5).

In a project like the one illustrated in Figure 5, one main contractor is selling the project to a buyer. It is normal that the main contractor cannot cover the full-range of products or services to supply the project, and the main contractor has to buy part of them from third parties, which are sub-contractors to the main contractor. The main contractor is responsible for its sub-contractors and their scope of supply to the buyer, and often the main contractor is free to select the sub-contractors.

Figure 5. Partial projects (adapted from Cova et al. 2002, 5).

In a partial type project the buyer purchases parts of the project from suppliers. The buyer manages the project comprising the parts purchased from the suppliers. Each supplier is responsible only for own scope of supply, even though some adaptations may be needed in order to make the parts function as a system.

Figure 6. Turnkey project (Cova et al. 2002).

Turnkey projects are very similar to main contractor type projects, but in turnkeys the supplier has to deliver a project, which is ready for operation. Thus, a turnkey project concerns delivery, which is more complete than in the other types of projects. A turnkey project can be complemented e.g. with services or with financial instruments, and those types of projects are called turnkey plus projects. The percent of turnkey plus type projects is increasing.

3.2.4.2 Project network features

It is justified to consider a project as a specific temporary network (Hellgren and Stjernberg 1995; Dubois and Gadde 2000; Lundin and Steinthórsson 2003). Meyerson, Weick

and Kramer (1996, 167-171) consider temporary groups as an organisational form having a finite life span, a shared and clear goal, and success that depends on a tight and coordinated coupling of activity with the organisation being assembled by a contractor.

INPM argues that the environment of project marketing-related relationships has a socially constructed nature, due to the complexity of relationships (Skaates and Tikkanen 2003, 506; Cova, Mazet and Salle 1996, 650). Cova, Mazet and Salle (1996) have proposed the “mileu” concept, which was intended to transfer project marketing from the purely economic level to the socio-economic level, and it is also argued that it demonstrates that project marketing, to a certain extent, consists of the management of a firm’s relationships with a local network of business and non-business actors, who actually form the milieu. The milieu concept emphasises that the project marketing environment is complex in nature with it having a socio-spatial configuration, which is said to include four elements: a territory, a network of heterogeneous actors related to each other on the territory, a representation constructed and shared by these actors, and a set of rules and norms (the law of the milieu) regulating the interactions between these actors.

Thus the milieu is a network with some of its own “law’s” in which economic, social, cultural, institutional and multiple other rules and behaviour models exist. The actors acting in the milieu are aware of the “laws”, but whenever they see it as being possible, they try to change the rules. Cova et al. (1996, 655) argue that “the concept of milieu thus favours the construction of the notion of economic space of relationship”. The economic space is considered as a space of functional, hierarchical, cooperative relationships developed in a geographical space. In the local space the milieu supports the network of relationships oriented towards the construction of specific competences and their nurturing through social and collective processes. The milieu acts as a microcosm in which network forces are at play but are reinforced and empowered by spatial and cultural proximity.

3.2.4.3 Buying centre

In the previous subchapters we have learned that one of the determinants of project environment is complexity (Mandjak and Veres 1998, 482; Cova and Hoskins 1997, 547), and the whole project can be considered a network (Dubois and Gadde 2000; Hellgren and Stjernberg 1995). Suppliers are networked (Mattson 1980), but one element in industrial and project buying is that instead of a single actor making decisions, there is a buying centre, which is actually a buying network (Cova, Salle and Vincent 2000; Cova, Ghauri and Salle 2002, 29). Johnston and Bonoma (1981) have defined a buying centre as “all those members

of an organisation, who become involved in the buying process for a particular product or service”. There are, however, indications that in some organisations the decision making process is in the hands of one person and in those organisations the practises are different from joint procedures. Single “hands decision making” is governed mainly by risk avoidance objectives (Patton 1997), which does not necessarily differ from normal project practises that are full of risks (Cova, Ghauri and Salle 2002, 37-38).

The buying network can in some cases be fragmented across several organisations, and therefore it is very difficult to predict project development and characteristics and to mobilise internal competences due to the discontinuity and uniqueness of the projects (Cova, Ghauri and Salle 2002, 29). Suppliers encounter also the challenge that decisions regarding capital equipment involve persons on several levels of authority (Woodside, Liukko and Vuori 1999).

Owusu and Welch (2007, 148) argue that the term buying network is not only applicable to direct supplier selection, as the network is involved at various stages of the buying process. The network refers to relationship connections that have an influence on the buying decisions of the project in question, and the relationships may be either new ones or long-term relationships, which have been involved in other projects.

Intra-organisational buying can have different members depending on the complexity of the product being marketed and eventually purchased. A member can come from e.g.

purchasing, manufacturing, or engineering (Jennings and Plank 1995, 417). In the case of a buying network, the structure may also have external members, other organisations specialised e.g. in certain fields of engineering (Cova, Salle and Vincent 2000, 556).

In project buying what is specific is that decision making concerning who will supply the project is only one episode in a process (Cova and Crespin-Mazet 1996, 348), and the buying process continues, until the project has been delivered (Owusu and Welch 2007, 149).

There are many interactions between the supplier and the buyer, with them taking place both during the phases of the project before the buying decision has been made as well as in the implementation phase (Owusu 2003). A project may have many interactions especially during the early phases of it, when the supplier has not yet been selected, or it may take a constructivist approach and the offer is entirely constructed during the interactions between the parties. In some cases the supplier may not exactly know what the project will be. The supplier creates the offer according to the course of the interaction (Cova and Crespin-Mazet 1996, 352).