Kim_Inv Paper

A Primer on the Stage Gate Process _____________________________

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(Extracted, in part, from Lit Reviews by Students in Introduction to Systems Engineering)

Table of Contents

Stage-Gate Overview 1

Typical Stage-Gate Model 3

Misconceptions about the Stage-Gate Process 6

Best Practices 8

References 13

Stage-Gate

® Overview

1,2,3

1. Definition

The Stage-Gate ® Product Innovation process is a conceptual and operational model for moving a new

product development (NPD) process from idea to launch. It is a blueprint for managing the NPD process in order to improve effectiveness and efficiency, by breaking down the effort into stages separated by management decision gates. (Fig.1) The entrance to each stage is a gate: These gates control the process and serve as quality control and Go/Kill/Hold/Modify check-points.

Stage-Gate ® is a registered trademark of Product Development Institute Inc, developed by Dr. Robert G.

Cooper in 1986 and first published in his book “Winning at New Products”. Later he was joined by Dr Scott Edgett, who is also considered as a co-founder of this process.

The foundations of this approach lay in a number of experiences, suggestions and observations of a large number of world-class companies’ managers; added to research in the field of product development. Since its first introduction, it has been implemented in whole or in part in hundreds of leading firms worldwide, many of which have provided new features and details to further refine and improve the process.

A Primer on the Stage-Gate Process

Stud

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Fig. 1- Typical Stage-Gate ® Product Innovation process, along with discovery and post launch review

2. The Stages

Stages (Fig.2) are where the action occurs. They are defined by the activities within them, and there is usually a prescribed list of actions for each stage. Stages are designed to gather information in order to reduce project uncertainties and risks, and to allow management to make a decision at the end of the stage and move forward with the project. Therefore, information requirements define the purpose of each stage in the process.

Each following stage costs more than the preceding one because the process is an incremental commitment, where project expenditures are increasing while the unknowns and uncertainties are driven down.

Fig. 2 – Stages

3. The Gates

Gates (Fig.3) are the points where the team converges and where all new information is brought together. Effective gates are central to the success of a fast-paced, new product process. They are quality control check points with Go/Kill/Hold/Modify prioritized decisions, and consist of deliverables (what the project leader and team must bring to the gate decision-point) and criteria (against which the project is judged in order to make the decision) which drive to outputs (approved action plan) allowing the project to move forward to the next stage, while committing new resources.

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Gates provide the funnels, where mediocre projects are culled out at each successive gate. This is where the action is planned for the next stage. Gates meetings are usually staffed by senior managers from different functions, the gatekeepers, who manage the resources required by the project leader and team for the next stage.

Fig.3 Gates

Typical Stage-Gate Model

In the typical Stage-Gate ®

model (Fig. 4), the key stages and gates are 1,2

:

Discovery: This is the pre-work designed to discover new opportunities and generate new ideas.

Gate 1. Idea screen: Idea screening is the first decision to commit resources to the project. If the decision is Go, the project moves to scoping or preliminary investigation stage. Gate 1 is a decision for a tentative commitment to the project.

Stage 1. Scoping: A quick, preliminary investigation of the project. This stage provides inexpensive information to enable the field of projects to be narrowed before stage 2.

Gate 2. Second screen: This is a more rigorous screen where the project is reevaluated in the light of new information obtained in Stage 1. If the decision is Go at this point, the project moves to an heavier spending stage: Build the business case.

Stage 2. Build the Business Case: A much more detailed investigation involving primary research leading to a business case.

Gate 3. Go to development: This is the final gate prior to the development stage, the last point at which the project can be killed before committing a very large part of the resources available. Gate 3 evaluation consists of a review of the activities undertaken in stage 2, assessing quality of execution and effective requirement realization, while a very deep financial analysis is also undertaken. A Go decision moves the project to stage 3: Development.

Stage 3. Development: The actual detailed design and development of the new product, along with some product testing work. Deliverables at the end of stage 3 are lab-tested products. Full production and market launch plan plans are also developed in this potential lengthy stage.

Gate 4. Go to testing: This post-development gate is a check on the progress and the continued attractiveness of the product and project. Development work is reviewed and checked, ensuring that the developed product is consistent with the original definition and agreed requirements. A deeper

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financial analysis is made based on new and more accurate data. A Go decision moves the project to stage 4: Testing and validation.

Stage 4. Testing and validation: Tests or trials in the marketplace, lab and plant to verify and validate the proposed new product and its marketing and production or operation. The entire viability of the project is assessed: the product itself, the production process, customer acceptance, and the economics of the project. The following activities are taken in this stage: In house product tests; User preference or field trials of the product; trial, limited, or pilot production/operations; Pre-test market, test market, or trial sell; revised business and financial analysis.

It’s usual that stage 4 yields some unwanted results, thus, the project goes back to stage 3.

Gate 5. Go to launch: This final gate opens the door to full commercialization (market launch and full production/operations start up). This is the final point at which the project can still be killed. Criteria focus on the quality and results of testing and validation. The operation and market launch plans are reviewed and approved for implementation in stage 5 if a Go decision is made.

Stage 5. Launch: Commercialization or beginning of full operation or production, marketing and selling. Here the market launch, production/operations, distribution, quality assurance and post-launch monitoring plans are executed. Production equipment is acquired (sometimes done in stage 4), installed and commissioned; logistics pipeline is filled and sales starts.

Post-Launch review: Two post launch reviews are typical. The first one is held three to five months after product launch, when initial launch results are available. The second one is held twelve to nineteen months later, when the project is stable. Project performance is assessed, and team accountability is evaluated. This review marks the end of the project.

Fig. 4 – A value stream map of the typical New Product Process

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After the initial development of the typical Stage-Gate ®

model, further studies and researches, involving companies evolving on the current market and meeting real issues with their product development process; different multiple versions of Stage-Gate

® were developed. They are: Stage-Gate

® XPress

(Fig.5) for project of moderate risks, such as: improvements, modifications and extensions; and Stage-

Gate ® Lite (Fig.5) for very small projects, such as simple customer requests.

There is also a version of Stage-Gate ® for Technology Developments, Stage-Gate-TD (Fig.6), where the

immediate deliverable is not a new product or new manufacturing process, but is a new knowledge or a capability that may ultimately spawn new products or services. The gate criteria in Stage-Gate-TD are much less financial and more strategic in nature than for the standard new product process.

Fig. 5 – Stage-Gate ® is scalable to suit different type of projects

Fig. 6 – Stage-Gate-TD: The technology Development Process for Research Projects

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Misconceptions about the Stage-Gate ® process

1,6

1. Myths

It has been reported that many companies get the process very wrong, and implemented it inefficiently. There are frequent ways for people to misunderstand Stage-Gate

® , and following is what

the process should not be:

Not a functional, phased review process. Many companies confuse this process with the traditional “phase review” process of the 1980’s, where activities, from different departments, flow in series with hand-offs all along the process. On the contrary, Stage-Gate

® is a business process, with cross-

functional teams where activities are occurring in parallel.

Not a linear system. Because of its graphic representation, people tend to consider the process as a linear model. However; while the stages are designed linearly, activities within them are much more iterations, looping, back and forth play as the project proceeds. Activities are developed in sequences or in parallel.

Not a rigid, lock-step process or a dated stagnant system. The process is not about always using the same rules, policies or methodologies for any other project. It’s a framework to get from an initial state (idea) to a final one (successful new product). As it is stated before (Fig.4), the process should be adapted depending on the size and the degree of risk related to the project; and is not a rigid one that should be applied in the same fashion for all type of projects. And so far, the process have evolved from its original model and is now has features more suitable for many different type of projects, while including state of the art best practices regarding Lean, Six Sigma and Rapid Product Development.

Not a project control mechanism. Stage-Gate ® is not intended to be a control tool for executives to use

or just manage a project. It should enable teams and team leaders to speed their product to market while making decisions for resources’ allocation.

Not a bureaucratic system. Many managers consider this process as an opportunity to add more administrative tasks to their production system (paperwork, meetings and so on).

Not a data entry scheme. Software can be a valuable tool to the process, since it can make its implementation easier by adding automation; however, but it can’t represent the whole process like some companies are currently using it almost entirely as a computerized method of system design.

2. Criticism about the Stage-Gate ® process

For years, there have been a number of reports about issues with Stage-Gate ® process implementations.

People complain that:

Stage-Gate ® slows projects and has high overhead. It seems like gates are put in place to slow projects,

because a review is required at different steps during the process. And preparing information for these reviews requires working on large amount of paperwork, which disturbs the entire work schedule of team members.

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It emphasizes more form than substance in discussion and decisions. They report that the process is more focused on the flow of activities than their contents, and that decisions relate only to the stages outputs and not on the process details. This is the case only if we have an ineffective implementation of the process.

They treat all the projects and products the same. The process is the same for all size of projects, and does not consider the level of risk or the amount of resources that have to be committed. More often, small projects suffer from this process because it lengthens the project duration.

They kill innovation. The process does not encourage innovation and creativity, for certain. They think that it should allow bringing new ideas all along the process, while modifying the product.

Stage-Gate ® treats all choices as “one off” decisions. They complain that the process doesn’t really

allow coming back on a decision about commitment of resources, once it has been taken.

All these issues and weaknesses reported by number of companies and managers committed to implement the Stage-Gate

® process can be eliminated or reduced; because they are not caused by

something inherent in the definition of the process framework itself, but rather by defective and flawed implementation of it. We will analyze how to avoid these problems by reviewing the best practices of companies that have successfully implemented Stage - Gate

® .

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Stage - Gate ® / Best practices for implementation

How are leading companies winning with their new products? There is only two ways. The first one is: Doing the projects right and the second one is: Doing the right projects. According to a Product Development and Management Association (PDMA) survey, involving winning firms, 60% of them are using some form of Stage-Gate

® process for NPD. What do they do differently in their process that leads

them to success? They have incorporated a number of new practices and the following will present the main ones that make them successful.

1. Reinforce or add a Discovery stage to the front end of their process

Currently best practices companies, replace their ideation process by a more proactive “Discovery Stage”, including:

 An idea capture and handling system, where new ideas from inside and outside the company are provided to a focal person (generally the new product process manager). The focal person brings these new ideas to gate 1 where they are analyzed. Those that fit the company strategy will go to stage 1 and the others will go to an idea vault or bank (other person in the company) which contains ideas on hold and dead ideas. Then feedback is provided to all ideas submitters. This process enables the company to seek for differentiated and superior products with unique customer benefit. A good idea has a strong chance to yield a successful product, while a bad one will never turn into an acceptable product later in the process.

 Voice of the Customer Research to uncover new opportunities.” Big ideas are solution to solve big problems. Therefore, one way to begin is by focusing on your customer’s problems”. Winning companies dedicated themselves to record the voice of the customer, generally through the marketing department. Good interviews are very important; however, since customer rarely know exactly what they want, it is important to tackle their problems and their issues instead of asking about functionality and performance. One solution is to have the customer analyze a current product and determine all that is wrong with it, without being influencing by the company.

 Ethno-graphic research, where the company observes the customer using the product at its limits, and experiencing their frustrations about them. All departments are represented, in order to capture all kind of issues.

 Working with innovative customers, they are those who can perform the best analysis and provide the company with the best ideas.

 Establish valuable scenario of both present and future, and from them determine alternate scenario as well analyzing market change or market evolution that can partially or totally affect customer desires and therefore product requirements. Alternative scenarios should be assessed in term of best or worst one in the future, the different possible ones, and the type of technology they would require.

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2. Harnessing the creative ability of your entire organization

In order to integrate a successful Stage-Gate ® process, the executives must “know” their company. It is

important to acknowledge the strengths and weaknesses of the company in order to define a strategy which should serve as a reference and baseline for the NPD process, where a many commitments and decisions will be handled. The company must evaluate the quantity and quality of resources, before making commitments for the new project. It is also important to understand the culture of the company, track past performance and determine the habits from the past that should be reintegrated or rejected.

It is usually advised that the company held an MRG (Major Revenue Generator) event, an off-site event designed to determine and assessed the capacities that influences the most successful product, its core competencies. It is also important to analyze the market share for both present and future. Teams from different areas of the company work together during these days to identify: the current and future opportunities suggested by customer needs, how these needs will affect the market, and how it will impact the strategy of the company. These aspects are very important because the strategy will impact both the decision process at gates, and the company portfolio management; but also evaluate the impact of the company on the customer. MRG event cost money, but are fruitful for the company since 4 to 5 key opportunities will be identified.

3. Revitalize fundamental research by making it more productive.

Corporations should integrate a “value-producing research” activity in order innovate with their products. Today, most research department has been dismantled and researchers are parceled out in departments throughout the company. A good tip to revitalize a research lab is to regroup scientists, making them working together and introduce the concept of Stage-Gate process for Science and technology, Stage-Gate TD (Fig. 6) that will deliver new knowledge or new capacity for the company.

4. Improve the effectiveness of Gates (Go/Kill decision points)

Why so many companies implementing Stage-Gate ® complain later that their products are not

successful and put the blame on the process? The main issue is that their gates are not really a business decision point. These companies use the process as a tunnel and not as a funnel, like it should be the case. They rarely kill projects at gates, which results in too many projects and not enough resources and time to allow for a particular project coming from an outstanding idea. Following are some solutions that could reinforce gates and make them more profitable and useful in the process.

 Establish a customer request project. Often the company can receive a request suitable only for a particular customer that it doesn’t want to lose. Often there are many of these customers; so, while these projects are very small, but collectively consume a big part of the available resources. Therefore, it is important for the company to introduce a customer request process, which can be done with less formality than for the big projects. Then carefully make decisions about the amount of resources to commit to these projects and use a stage-gate process, because even if the projects are small, they require decisions.

 Incorporate tough gates. Insert “gates with teeth”, which means gates with tough criteria where the product capability and suitability to the business orientation is strongly assessed.

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 Make real decisions at gates. Often the criteria are correctly assessed and a Go decision is made, but the resources are not committed on time to the team. It happens when senior management doesn’t really understand that a go decision at a gate means that a commitment to make resources available had been taken.

 Use scorecards to rate and rank projects. Define clear and visible criteria allowing senior management to take decisions. They must be operational (easy to use), realistic (use available information), discriminating (differentiate the good projects from the bad ones). Classify them as Must Meet (if not project is killed) and Should Meet (highly desirable characteristics). (Fig. 7)

 Engage senior management. Senior management must be engaged in the NPD process and give visible and meaningful leadership support. Anything important for the leadership team will be important to everyone else. They should fulfill the role of gatekeepers and make the go/kill decisions. Fig. 8 describes the gatekeeper rules of engagement that winning companies use in order to maintain the objectivity and effectiveness of this role, usually undertaken by the leadership team of the corporation, a cross-functional group consisting of the head of marketing, sales, technical, production, and finance.

Fig. 7 – Must Meet and Should Meet gate criteria

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Fig. 8 – Gatekeepers rules of engagement

 Deal with the geographic and time pressure of gates. Often, decision meetings are impossible or weak because of the lack of availability of the gatekeepers, who usually travels all over the country or the world. To deal with these time and travel pressures faced by senior gatekeepers, it is recommended to use :

. Virtual gates, where no one is physically at the gate meeting except the project team. The gatekeepers receives the deliverables of stages ahead of time, prepare their scores electronically (e-scores). The meeting itself will be a video conference where the scores are gathered electronically, are analyzed then a go/kill decision is effectively made at the end of the video conference.

.Self managed gates. For project small and low risk projects, certain gates can be managed by the development team itself, who will use the same criteria and deliverables to make decisions. It is encouraged to invite some colleagues outside of the project to conduct a “peer review” of the situation.

.Team recommendation is often used as some companies where senior managers only give a second approbation and don’t have to work ahead on too many details.

5. Integrate portfolio management into the gating process

Portfolio management is one way “to do the projects right and do the right projects”. Stage-Gate ®

implementation is not totally effective without portfolio management because the former can be applied well on many projects, but if resources are improperly managed, the NPD will not be successful. The main goals of portfolio management:

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 Maximize the value of the portfolio. It is important to ensure that the total worth of new products projects in the development pipeline returns maximum value to the company. Project selection is based on the availability and analysis of solid market and technical data, making “up-front homework” very important to the process. The Discovery stage is one of the activities that support portfolio management.

 Achieve the right balance of projects. It is recommended to analyze charts comparing previous projects and resources being committed, determine the balance of the portfolio and take the right decisions about adding, holding or killing projects based on the business strategy.

 Resource balancing - Selecting the right number of projects. Often, firms have too many projects for the limited resources available. It results in: defective projects, shut downed projects after making large commitments, schedule and financial issues. Best practices companies ranks projects according to criteria and assign resources until depletion. Projects past this limit are either killed or put on hold.

 Strategically aligned portfolio. Projects and resources selection should be done accordingly to the strategic plan of the business. Therefore, including strategic criteria on the gate scorecard model, use strategic buckets (classify resource allocation by project types, market sectors and product groups) and develop product roadmaps can be useful to ensure that the choices been made in the portfolio drives the business to the strategic goal.

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References

1. Robert G. Cooper, Product Leadership – Pathways to Profitable Innovation, 2005

2. Dr. Robert G. Cooper, Perspective: The Stage-Gate Idea-to-Launch Process – Update, What’s new and NexGen Systems

3. Product Development Institute Inc., Optimizing the Stage-Gate Process: What best practice companies are doing – Part One, 2009

4. Product Development Institute Inc., Optimizing the Stage-Gate Process: What best practice companies are doing – Part Two, 2009

5. Product Development Institute Inc,Ten tips for successfully implementing a Stage-Gate ® Product

Innovation process

6. Bob Becker, Re-Thinking the Stage-Gate ® process - a reply to the critics, 2006

7. Robert G. Cooper, How companies are reinventing their idea-to-launch methodologies, 2009

8. Robert G. Cooper, Doing it right/Winning with new products

9. www.stage-gate.com and www.prod-dev.com