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The Stage-Gate

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Title: The Stage-Gate


1
The Stage-Gate process
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2
The Goals of an Overhauled New Product Process
  • Goal 1 Exemplary Quality of Execution... Second
    to None
  • A quality-of-execution crisis exists, however, in
    the product innovation process.
  • There exists the need for a more systematic and
    quality approach to the way firms conceive,
    develop, and launch new products.
  • The way to deal with the quality problem is to
    visualize product innovation as a process, and to
    apply process management and quality management
    techniques to this process.
  • Note that any process in business can be managed,
    and managed with a view to quality.
  • Get the details of your processes right, and the
    result will be a high-quality output.

3
Goal 2 Sharper Focus, Better Project
Prioritization
  • A new product funnel builds in tough Go/Kill
    decision points the poor projects are weeded
    out scarce resources are directed toward the
    truly meritorious projects and more focus is the
    result.
  • One funneling method is to build the new product
    process around a set of gates or Go/Kill decision
    points.
  • These gates are the bail-out points where we ask,
    Are we still in the game?
  • They are the quality-control checkpoints in the
    new product process, and check the quality,
    merit, and progress of the project.

4
Goal 3 A Strong Market Orientation
  • If positive new product performance is the goal,
    then a market orientationexecuting the key
    marketing activities in a quality fashion must
    be built into the new product process as a matter
    of routine rather than by exception.
  • Marketing inputs must play a decisive role from
    beginning to end of the project.

5
nine marketing actions
  • Preliminary market assessment
  • Market research to determine user needs and wants
  • Competitive analysis
  • Value-in-use analysis
  • Concept testing
  • Customer reaction and feedback during Development
  • User tests and field trials
  • Test market or trial sell
  • Market Launch based on a solid marketing plan

6
Goal 4 Better Up-Front Homework and Sharp,
Early and Stable Product Definition
  • New product success or failure is largely decided
    in the first few plays of the gamein those
    crucial steps and tasks that precede the actual
    Development of the product.
  • The up-front homework defines the product and
    builds the business case for Development.
  • The ideal new product process ensures that these
    early stages are carried out and that the product
    is fully defined before the project is allowed to
    become a full-fledged Development project.

7
Goal 5 Fast-Paced Parallel Processing
  • In marked contrast to the relay or sequential
    approach, with parallel processing many
    activities are undertaken concurrently rather
    than in series. The appropriate analogy is that
    of a rugby match rather than a relay race.
  • A team (not a single runner) appears on the
    field.
  • A scrum or huddle ensues, after which the ball
    emerges.
  • Players run down the field in parallel with much
    interaction, constantly passing the ball
    laterally After 25 meters or so, the players
    converge for another scrum, huddle, or gate
    review, followed by another stage of activities.

8
Goal 6 A True Cross-Functional Team Approach
  • The new product process is cross-functional it
    requires the input and active participation of
    players from many different functions in the
    organization.
  • The multifunctional nature of innovation coupled
    with the desire for parallel processing means
    that a cross-functional team approach is
    mandatory.

9
Goal 7 Products with Competitive Advantage
  • Ensure that at least some of the criteria at
    every gate focus on product superiority.
  • Require that certain key actions designed to
    deliver product superiority be included in each
    stage of the process.
  • Demand that project teams deliver evidence of
    product superiority to project Go/Kill reviews
    make product superiority an important deliverable
    and issue at such meetings

10
Goal 8 A Fast-Paced and Flexible Process
  • The new product process must be built for speed.
    This means eliminating all the time wasters and
    work that adds no value in your current new
    product process.
  • It also means designing a flexible process, one
    that accommodates the risks and nature of
    different projects.

11
Stage-GateTM Process
  • The Stage-GateTM new product approach is a
    conceptual and operational model for moving a
    new product project from idea to Launch.
  • It is a blueprint for managing the new product
    process to improve effectiveness and efficiency.
  • Stage-GateTM methods break the innovation process
    into a predetermined set of stages, each stage
    consisting of a set of prescribed,
    cross-functional, and parallel activities.
  • The entrance to each stage is a gate these gates
    control the process and serve as the
    quality-control and Go/Kill checkpoints.
  • This stage-and-gate format leads to the name
    Stage- Gate process.

12
The Stage-Gate process
13
The Stages
  • The Stage-GateTM process breaks the new product
    project into discrete and identifiable stages,
    typically four, five, or six in number (Figure
    4.1)
  • Each stage consists of a set of parallel
    activities undertaken by people from different
    functional areas within the firm. In most firms
    Stage-GateTM methods, stages lay out a list of
    prescribed or highly recommended actions and best
    practices.
  • Each stage is designed to gather information
    needed to advance the project to the next gate or
    decision point.
  • Each stage is cross-functional, and no stage is
    owned by a functional area or department there
    is no RD stage or marketing stage!

14
The Gates
  • Preceding each stage is a gate or a Go/Kill
    decision point.
  • The gates are the scrums or huddles on the rugby
    or football field.
  • They are the points during the game where the
    team converges and where all new information is
    brought together.
  • Gates serve as quality-control checkpoints, as
    Go/Kill and prioritization decision points, and
    as points where the path forward for the next
    play or stage of the process is decided.

15
Idea Generation (or Ideation)
  • Ideas are the feedstock or trigger to the
    process, and they make or break the process.
  • Dont expect a superb new product process to
    overcome a deficiency in good new product ideas.
  • The need for great ideas coupled with high
    attrition rate of ideas means that the idea
    generation stage is pivotal
  • you need great ideas and lots of them.

16
Gate 1 Initial Screen
  •  Initial screening is the first decision to
    commit resources to the project the project is
    born at this point.
  • If the decision is Go, the project moves into the
    preliminary investigation stage.
  • Thus, Gate 1 signals a preliminary but tentative
    commitment to the project a flickering green
    light.

17
Gate 1
  • Gate 1 is a gentle screen and amounts to
    subjecting the project to a handful of key
    must-meet and should-meet criteria.
  • These criteria often deal with strategic
    alignment, project feasibility, magnitude of
    opportunity and market attractiveness,
    competitive advantage, synergy with the
    businesss resources, and fit with company
    policies.
  • Financial criteria are typically not part of this
    first screen.
  • A checklist for the must-meet criteria and a
    scoring model (weighted rating scales) for the
    should-meet criteria can be used to help focus
    the discussion and rank projects in this early
    screen.

18
The Stage-Gate process
19
Stage I Preliminary Investigation
  •  This first and inexpensive stage has the
    objective of determining the projects technical
    and marketplace merits.
  • Key activities in Stage 1 include
  • Preliminary market assessment
  • Preliminary technical assessment
  • Preliminary business assessment

20
Gate 2 Second Screen
  • This gate is essentially a repeat of Gate 1 the
    project is reevaluated in the light of the new
    information obtained in Stage 1.
  • If the decision is Go at this point, the project
    moves into a heavier spending stage.
  • At Gate 2, the project is again subjected to the
    original set of must-meet and should-meet
    criteria used at Gate 1.

21
Gate 2 Second Screen
  • Here additional criteria may be considered,
    dealing with sales force and customer response to
    the proposed product, potential legal, technical,
    and regulatory killer variablesall the result
    of new data gathered during Stage 1.
  • Again, a checklist and scoring model facilitate
    this gate decision.
  • The financial return is assessed at Gate 2, but
    only via a quick and simple financial
    calculation.

22
Stage 2 Detailed Investigation (Build the
Business Case)
  • The business case opens the door to product
    development.
  • Stage 2 is where the business case is
    constructed this stage is a detailed
    investigation stage that clearly defines the
    product and verifies the attractiveness of the
    project prior to heavy spending.
  • It is also the critical homework stagethe one
    found to be so often weakly handled.

23
key actions of Stage 2
  • User needs-and-wants studies
  • Value-in-use studies
  • Competitive analysis
  • Concept testing
  • Detailed technical assessment
  • A manufacturing (or operations) appraisal
  • Finally, a detailed financial analysis

24
three crucial elements of Stage 2
  • 1. What is the product and who will it be sold
    to?
  • The product definition is developed and agreed
    to.
  • 2. Why invest in this project?
  • A thorough project justification is developed.
  • 3. How will it be undertaken, when, by whom, and
    how much will it cost?
  • A project plan is developed.

25
The Stage-Gate process
26
Gate 3 Decision on the Business Case
  • Gate 3 is often called the money gate.
  • This is the final gate prior to the Development
    stage, the last point at which the project can be
    killed before entering heavy spending.
  • Once past Gate 3, financial commitments are
    substantial.
  • In effect, Gate 3 means go to a heavy spend.
  • Gate 3 also yields a sign-off on product
    definition.
  • Because of its importance, the Gate 3 gatekeepers
    are usually the leadership team of the business.

27
Gate 3
  • The qualitative side of this evaluation involves
    a review of each of the activities in Stage 2.
  • It checks that the activities are undertaken, the
    quality of execution is sound, and the results
    are positive.
  • Next, Gate 3 subjects the project once again to
    the set of must-meet and should-meet criteria
    used at Gate 2, but they are more rigorously
    applied at Gate 3.
  • Finally, because a heavy spending commitment is
    the result of a Go decision at Gate 3, the
    results of the financial analysis are an
    important part of this gate decision

28
Sample Deliverables to Gate 3
  • Strategic fit confirmed
  • Detailed market assessment
  • Detailed technical/manufacturing assessment
  • Resource constraints (capital, people)
  • Detailed financial assessment
  • Detailed legal/regulatory assessment
  • Potential killer variables addressed
  • Critical success factors are understood and
    feasible to achieve
  • Recommendations to proceed, hold, or kill
  • Detailed plan for Stage 3 (Development)
  • High-level plan for remaining stages

29
Gate 3
  • If the decision is Go, Gate 3 sees commitment to
    the product definition and agreement on the
    project plan that charts the path forward the
    Development plan and the preliminary operations
    and marketing plans are reviewed and approved at
    this gate.
  • The full project teaman empowered,
    cross-functional team headed by a leader with
    authorityis designated.
  • The resourcesboth people and moneyare
    committed. And a list of deliverables for the
    next gate is agreed to.

30
Stage 3 Development
  • Stage 3 witnesses the implementation of the
    Development plan and the physical development of
    the product.
  • Some in-house or lab testing usually occurs in
    this stage as well.
  • The main deliverable at the end of Stage 3 is a
    prototype productone that has been lab- or
    in-housetested, and also has undergone some
    preliminary customer tests (feedback from
    customers has been received).

31
Development plan consists of
  • a chronological listing of activities, actions,
    and tasks
  • a timeline or time schedule, showing beginning
    and end points of these actions
  • resources required for each action or task,
    notably personnel, person-days and money and
  • milestones to be achieved throughout the
    Development phase.

32
Stage 3 is on technical work
  • The emphasis in Stage 3 is on technical work.
  • That is, technical work proceeds to develop rapid
    prototypes and then the final prototype.
  • Some lab or engineering and in-house testing
    takes place here as well.
  • Marketing and manufacturing activities also
    proceed in parallel.
  • For example, market analysis and customer
    feedback work continue concurrently with the
    technical development, with constant customer
    opinion sought on the product as it takes shape
    during Development.
  • These activities are back-and-forth or iterative,
    with each development resultfor example, rapid
    prototype, working model, first prototype, and so
    ontaken to the customer for assessment and
    feedback.

33
The Stage-Gate process
34
Gate 4 Post-Development Review
  • The post-Development review is a check on the
    progress and the continued attractiveness of the
    product and project.
  • Development work is reviewed and checked,
    ensuring that the work has been completed in a
    quality fashion, and that the developed product
    is indeed consistent with the original definition
    specified at Gate 3.
  • This gate also revisits the economic issues via a
    revised financial analysis based on new and more
    accurate data.

35
How well is the project unfolding
  • By Gate 4, the decision emphasis has shifted from
    the main question at the earlier gates, namely,
    Should you invest in this project? to How well
    is the project unfoldingis it on track?
  • Certainly, the Gate 3 criteria that deal with
    strategic fit and financial performance are
    revisited, but now most of the gate questions
    focus on the successful completion of tasks, and
    the fact that positive results are being
    achievedthat the deliverables are in place and
    positive.

36
Stage 4 Testing and Validation
  • This stage tests and validates the entire
    commercial viability of the project
  • the product itself,
  • the production process,
  • customer acceptance, and
  • the economics of the project.

37
activities are undertaken at Stage 4
  1. In-house product tests extended lab tests to
    check on product quality and product performance
    under controlled or lab conditions.
  2. User tests or field trials of the product to
    verify that the product functions under actual
    use conditions, and also to gauge
    potentialcustomers responses to the productto
    confirm purchase intent and market acceptance.
  3. Trial, limited, or pilot production to test,
    debug, and prove the production process, and to
    determine more precise production costs and
    throughputs.
  4. Pretest market, test market, or trial sell a
    mini launch of the product in a limited
    geographic area or single sales territory. This
    is a test of all elements of the marketing mix,
    including the product itself, and gauges customer
    response, measures the effectiveness of the
    Launch plan, and determines expected market share
    and revenues.
  5. Revised financial analysis to check on the
    continued economic viability of the project,
    based on new and more accurate revenue and cost
    data.

38
Gate 5 Precommercialization Business Analysis
  • This gate opens the door to full
    commercialization market Launch and full
    production or operations starts up.
  • It is the final point at which the project can
    still be killed.
  • Although some managements consider this gate
    largely a formality, note that this gate is
    important because it signifies that the
    leadership team of the business is 100 percent
    aligned and in support of the commercial Launch
    of the product.

39
The Stage-Gate process
40
Gate 5
  • This gate scrutinizes the quality of the
    activities at the testing and validation stage
    and their results.
  • Criteria for passing the gate focus largely on
    expected financial return and appropriateness of
    the launch and operations start-up plans.
  • The operations and marketing plans are reviewed
    and approved for implementation in Stage 5.

41
Stage 5 Full Production and Market Launch
  • This final stage involves implementation of both
    the marketing Launch plan and the production or
    operations plan.
  • Other supporting plans, such as the
    distribution/logistics plan and the quality
    assurance plans, are also executed.
  • The post-Launch monitoring plan kicks in early in
    the Launch stage, where the projects performance
    on key metrics takes place, and the project team
    responds with necessary action.
  • Finally, some elements of the longer term Life
    Cycle Plan begin to be implementedfor example,
    needed improvements and new variants of the
    product.

42
Post Implementation Review
  • At some point following commercialization (often
    six to 18 months after), the new product project
    must be terminated.
  • The project team is disbanded, and the product
    becomes a regular product in the firms product
    line.
  • This is also the point where the project and
    products performance is reviewed.

43
the end of the project
  • The latest data on revenues, costs, expenditures,
    profits, and timing are compared to projections
    to gauge performance.
  • Gaps or variances between actual performance and
    projected performance are identified, and
    reasons for these gaps are explored.
  • Finally a postaudit is carried out a critical
    assessment of the projects strengths and
    weaknesses, what you can learn from this project,
    and how your business can do the next one better.
  • This review marks the end of the project.

44
The Stage-Gate process
45
  • The End
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