- Stage–gate model
A stage–gate model, also referred to as a phase–gate process, is a project management technique in which an initiative or project (e.g., new product development, process improvement, business change) is divided into stages (or phases) separated by gates. At each gate, the continuation of the process is decided by (typically) a manager or a steering committee. The decision is based on the information available at the time, including the business case, risk analysis, and availability of necessary resources (e.g., money, people with correct competencies). The stage–gate model may also be known as stage-limited commitment or creeping commitment.
Phased scope development and investment decision is a fundamental concept of chemical engineering and engineering economics, particularly since the 1940s as chemical complexity and scale of chemical processes grew. One source describes 8 phases in the development of a chemical product starting with research, economic study, scale-up (pilot plant) and design leading to full funds authorization. In 1958, the American Association of Cost Engineers (now AACE International) created four standard cost estimate type classifications to match these development and approval stages. Other industries with complex products and projects picked up on the process. For example, the National Aeronautics and Space Administration (NASA) practiced the concept of staged development in the 1960s with its phased project planning or what is often called phased review process. The phased review process was intended to break up the development of any project into a series of phases that could be individually reviewed in sequence. Review points at the end of each phase required that a number of criteria be met before the project could progress to the next phase. The phased review process consisted of five phases (Preliminary Analysis, Definition, Design, Development, Operations) with periodic development reviews between phases. NASA's phased review process is considered a first generation process because it did not take into consideration the analysis of external markets in new product development.
A version of the process called the stage–gate model was developed by Robert G. Cooper (McMaster University) in his book Winning at New Products, published in 1986. The stage-gate model is based on empirical findings of numerous "NewProd" Studies conducted by Cooper (e.g. 1985, 1992, 1994).
The stage–gate model refers to the use of funnel tools in decision making when dealing with new product development. “Gates” or decision points are placed at places in the product development process that are most beneficial to making decisions regarding continuance of product development. These production areas between the gates are idea generation, establishment of feasibility, development of capability, testing and validation and product launch. At the conclusion of each of these areas of development of a new product, it is the responsibility of senior management to make a decision as to whether or not the product should continue to be developed. The passing of gate to gate can be accomplished either formally, with some sort of documentation, or informally, decided upon based on the preferences and culture of the organization.
In the chemical engineering world, and engineering and construction industry, phase-gate processes are often called front-end loading. Stage–gate is the particular version and terminology elaborated in the following discussion.
A common model is composed of the following stages: ideation, preliminary analysis, business case, development, testing, launch. A stage–gate model is a conceptual and operational road map for moving a new project from idea to launch – a blueprint for managing the new-product process to improve effectiveness and efficiency. The traditional Stage-Gate process has five stages and five gates. The stages are:
- Build business case
- Testing and validation
Conventionally, the gates between stages have the same number as the stage following them.
Ahead of this process there is often a preliminary or ideation phase called discovery, and after the 5th stage the process ends with the post-launch review. Major new product projects go through the full five-stage process. Moderate risk projects, including extensions, modification and improvements, use the short XPress version. Very minor changes (e.g. sales force and marketing requests) may be executed using a lighter process (stage–gate lite). Each stage consists of a set of prescribed, cross-functional, and parallel activities undertaken by a team of people from different functional areas. Stages have a common structure and consist of three main elements: a) Activities, b) Integrated Analysis, and c) Deliverables. Activities consist mainly in information gathering by the project team to reduce key project uncertainties and risks. An integrated analysis of the results of the activities is undertaken by the project team. Deliverables of stages are the results of integrated analysis that are used as input for the next Gate.
Gates provide various points during the process where an assessment of the quality of an idea is undertaken. It includes three main issues:
- Quality of execution: Checks whether the previous step is executed in a quality fashion.
- Business rationale: Does the project continue to look like an attractive idea from an economic and business perspective.
- Action plan: The proposed action plan and the requested resources reasonable and sound.
A gate meeting can lead to four results: go, kill, hold, or recycle.
Gates have a common structure and consist of three main elements:
- Deliverables: What the project manager and team deliver to the decision point. These deliverables are decided at the output of the previous gate,and are based on a standard menu of deliverables for each gate.
- Criteria: Questions or metrics on which the project is judged in order to determine a result (go/kill/hold/recycle) and make a prioritization decision.
- Outputs: Results of the gate review—a decision (go/kill/hold/recycle), along with an approved action plan for the next gate, and a list of deliverables and date for the next gate.
The stages in more detail
Discovery (stage 0)
The discovery stage is the first part of any product development whether or not the stage gate model is being utilized. During this basic stage the development team is simply deciding what projects the company wants and is capable to pursue. During this stage it is common for companies to take part in idea generation activities such as brainstorming or other group thinking exercises. Once the idea generation team has selected a project that they would like to go forward with, it must be passed on to the first gate and therefore screened by the organization’s decision makers. When searching for new product ideas it is beneficial for an organization to look to the outside world to suggest business opportunities. Using methods such as those found in empathic design can be quite helpful. Communicating with customers to understand how and why they use products can produce great strides in idea generation. Specifically, communicating with lead users can provide great feedback to the developers, as these customers are most likely to feel most passionately about the product. In addition to communication with lead users, it may be helpful for developers to communicate with suppliers. By understanding all of the types of business that their materials are being used for, developers may be able to act upon previously untapped possibilities.
Scoping (stage 1)
The second stage of the product development process is scoping. During this step the main goal is to evaluate the product and its corresponding market. The researchers must recognize the strengths and weaknesses of the product and what it is going to offer to the potential consumer. The competition must also be evaluated during this stage. It is important for the researchers to understand who and what is already in the market as well as what can potentially be developed. By determining the relative level of threat from competitors, the management team will be able to recognize whether or not they should go forward with the production of the product.
Building the business case and plan (stage 2)
Once the new product passes through gate one after the scoping phase, the next phase in the stage-gate model is building the business case and plan. This stage is the last stage of concept development where it is crucial for companies to perform a solid analysis before they begin developing the product. In comparison to the other stages in the stage-gate model this phase is generally difficult, complex, and resource-intensive. However, companies must put forth a strong effort in this stage for it is directly related to the success and development of a new product. There are four main steps that comprise this stage: product definition and analysis, building the business case, building the project plan, and feasibility review.
Product definition and analysis
The first step, product definition and analysis, is composed of a series of activities that will provide the information to define and justify the development of a new product. One of the first of these activities is the user needs and wants study where customer value is determined. This addresses questions about the product such as what benefits does the product provide and what features should the product have. During this time the company should conduct surveys and interviews with existing and potential customers, along with staff members. Next, the company must conduct a market analysis. They must determine the market size and segmentation, rate of growth, customer trends and behavior, and what channels reach these customers. Once the market analysis is complete the company must then conduct a competitive analysis. It is important to know how your competitors operate in addition to their strengths and weaknesses. This will not only help you build a great product, but will also help in determining how and where to launch your new product. Together these activities will help define the product and provide a foundation for the marketing strategy. Next, the company must build a technically feasible product concept, which includes the substance and methods needed to produce the new product. Once this is completed the company can then produce a production and operations cost analysis along with a market and launch costs analysis. Next, the company can begin to test the concept they have developed. This is when early prototypes are developed and presented to staff and consumers to gain feedback and gauge customer reaction. From this the company can make the necessary changes and see the sales potential of the product. This feedback will also help the company build a solid product definition. Lastly, the company will then conduct the business analysis, risk analysis, and financial analysis of the new product.
Building the business case
The business case is a document that defines the product and provides the rationale for developing it. This document will vary in format amongst companies, but the primary components are the following: results of the activities of product definition and analysis; legal and regulatory requirements; safety, health, and environmental considerations; assumptions needed to draw the conclusions made, and why it is believed they are valid and reasonable; and out-of-bounds criteria that indicate certain changes/events which will mandate an emergency business case review. This document will be referred to throughout the development process and edited when necessary.
Building the project plan
The project plan includes: a scheduled list of tasks and events along with timelines for milestones throughout the development process; the personnel, time, and financial resources needed to complete the project; and an expected launch date for the release of the new product.
The last step of building the business case and plan is the feasibility review. This is when management, along with other departments of the company, reviews the rationale for pursuing the product. They analyze the information provided by the previous steps in this process to decide whether or not the product should move forward. If it is decided to be pursued then it passes through gate two and moves on to the product development stage.
Development (stage 3)
During the development phase of the stage-gate process, plans from previous steps are actually executed. The product’s design and development is carried out, including some early, simple tests of the product and perhaps some early customer testing. The product's marketing and production plans are also developed during this stage. It is important that the company adheres to their overall goal of the project, which is reflected in these production and marketing plans. Doing this will allow them to definitively decide who they will market their product to and how they will get the product to that target audience. The development team maps out a realistic timeline with specific milestones that are described as SMART: specific, measurable, actionable, realistic, and time-bound. The timeline is frequently reviewed and updated, helping the team stay on task and giving management information about the product's progress. The development stage is when the product truly builds momentum as the company commits more resources to the project and makes full use of cross-functional teamwork as the marketing, technical, manufacturing, and sales departments all come together to offer their expert opinions. Having a diverse development stage ensures that the product continues to meet the company's technical and financial goals. A diverse team allows specific roles and leadership positions to develop as team members make contributions using their strongest attributes. With members having clearly defined roles, tasks can be performed concurrently ensuring a much more efficient development process. The ultimate deliverable of the development stage is the prototype, which will undergo extensive testing and evaluation in the next stage of the process.
Testing and validation (stage 4)
The purpose of this stage is to provide validation for the entire project. Areas that will be evaluated include: the product itself, the production/manufacturing process, customer acceptance, and the financial merit of the project. This stage is broken up into 3 phases of testing: near testing, field testing, and market testing.
The main objective of near testing is to find any bugs or issues with a product. A key point to remember here is that the product is no longer a prototype and that it has almost all the features of the commercial model. Testing will be done initially by in-house staff, and customers and partners who are close to the firm. It is important to ensure that those testing have an understanding of how the product should perform, so they know what it should or shouldn’t be doing. Members of the research and development team are usually present to observe the participants using the product and take any notes or data that may be useful.
Field testing, or beta testing, is done by those who can provide valuable feedback on the product. This usually lasts a long period of time and the participants can include customers, partners, or anyone who is not familiar with the producing company. At this juncture the product fully resembles its planned launch model in all aspects; therefore the participants' interaction rate will be higher because they know all the features and benefits. During this phase there are three primary objectives to be achieved. The first objective is to see how much the participant is interested. It is also worthwhile to note which individual attribute they prefer and if they would buy the product. Next, determine how the customer uses the product and evaluate its durability. Confirm the environment in which the customers will be using the product. Recording and analyzing customer feedback is the final step in the field testing phase. This feedback may be used to help inform any minor design improvements that need to be made. The sales and marketing team will also be a beneficiary of field testing feedback; they can use this information to help focus their sales presentation.
The last phase of the testing and validation stage is market testing. Unlike the other two phases, this one is considered optional. A solid marketing and launch plan along with confidence in the product's ability to sell helps to inform the key decision makers at the test and validation gate. If there is any uncertainty in the marketing or launch plans there are two options to consider. First, a simulated market test may be run, in which customers will be exposed to new products in a staged advertising and purchasing situation. The goal of this test is to obtain an early forecast of sales and make any necessary adjustments to the marketing plan. The second test involves trial sales, and is done through specific channels, regions, or consumer demographics.
Product launch (stage 5)
The product launch is the fifth and final stage of the stage-gate process and is the culmination of the product having passed all previous gates. The producer must come up with a marketing strategy to generate customer demand for the product. The producer must also decide how large they anticipate the market for a new product to be and thus determine the size of their starting volume production. Part of the launch stage is training sales and support personnel to be familiar with the product so that they can assist in sales of this product. Setting a product price is an aspect of the product launch that the producer must consider. They should avoid either undershooting or overpricing the potential market. Finally, distribution is a major decision making part of the launch process. Selecting a distributor or value-added reseller for a product must be done with careful though and potential sales in mind.
Having a smooth launch process that includes effective marketing and a knowledgeable and prepared sales force may result in faster time to profit due to early customer acceptance.
Most firms suffer from having far too many projects in their product development pipelines, for the limited resources available. "Gates with teeth" help to prune the development portfolio of weak projects and deal with a gridlocked pipeline. Also, a robust innovation strategy, coupled with strategic buckets, refocuses resources on high value development initiatives. Note that gates are not merely project review points, status reports or information updates. Rather, they are tough decision meetings, where the critical go/kill and prioritization decisions are made on projects. Thus the gates become the quality control check points in the process ensuring that you do the right projects and also do the projects right. Gates must have clear and visible criteria so that senior managers can make go/kill and prioritization decisions objectively. Most importantly, these criteria must be effective—that is, they must be operational (easy to use), realistic (make use of available information) and discriminating (differentiate the good projects from the mediocre ones). These criteria can be
- Must meet: Knock-out questions in a check list, designed to kil poor projects outright
- Should meet: Highly desirable characteristics which are rated and added in a point-count scheme
A sample list of criteria is shown below, from which a scorecard can be developed that can then be used to score projects at a gate meeting.
- Must meet (checklist – yes/no)
- Should meet (scored on 0–10 scale)
- Degree to which projects aligns with business unit strategy
- Strategic importance
- Product advantage
- Unique benefits
- Meets customer needs better than existing or competing product
- Value for money
- Market attractiveness
- Market size
- Market growth
- Competitive situation
- Synergies (leverages core competencies)
- Marketing synergies
- Technological synergies
- Manufacturing / processing synergies
- Technical feasibility
- Technical gap
- Technical uncertainty
- Risk versus return
If the answers were “no” or “low” to any of these questions, the decision certainly would not be to kill the project – hence they’re poor go/kill criteria.[vague]
Advantages and disadvantages
There are many benefits to using the stage-gate model for product development. The efficacy of a producer’s innovation process may provide a competitive advantage, as other companies may not be able to come up with products with the same rapidity and quality level. Poor projects are quickly rejected by disciplined use of the model, resulting in a fast paced development track for those products which may be more successful. When using the stage-gate model on a large project, the model can help reduce complexity of what could be a large and limiting innovation process into a straightforward rule-based approach which allows an organization to demonstrate prioritization and focus into their development process. When a stage-gate model incorporates cost and fiscal analysis tools such as net present value, the organization can potentially be provided with quantitative information regarding the feasibility of developing potential product ideas. Finally, the stage-gate model is an opportunity to validate the updated business case by a project’s executive sponsors.
Other benefits of using a stage-gate model may include:
- Reduced time-to-market
- Increased likelihood of product success
- Improved discipline over a complex and potentially chaotic process
- Reduced re-work efforts
- Efficient and effective allocation of scarce resources
One problem with the stage-gate process is the potential for structural organization to interfere with creativity, as overly structured processes may cause creativity to be reduced in importance.
The stage-gate process needs to be modified to include a top-down link to the business strategy if applied to software and other non-product development projects.
- ^ Chemical and Engineering News, Vol 29, pg 3246, 1951
- ^ AACE Bulletin, April 1958
- ^ Hine, D. and Kapeleris, J., Innovation and Entrepreneurship in Biotechnology, An International Perspective: Concepts, Theories and Cases, 2006, p.225
- ^ Chao, L.P., Tumer, I., and Ishii, K., 2005, “Design Process Error-Proofing: Benchmarking Gate and Phased Review Life-Cycle Models” Proceedings of the ASME Design Engineering Technical Conference: Long Beach, CA.
- ^ Hine, D. and Kapeleris, J., Innovation and Entrepreneurship in Biotechnology, An International Perspective: Concepts, Theories and Cases, 2006, p.225
- ^ Cooper, Robert G. (1986) Winning at New Products, Addison-Wesley, 273 pages
- ^ Cooper, 1985. Cooper, Robert G. Selecting winning new product projects: Using the NewProd System, in: Journal of Product Innovation Management, 1985, Vol. 2, pp.34–44
- ^ Cooper (1992) Cooper, Robert G. The NewProd System: The Industry Experience, in: Journal of Product Innovation Management, 1992, Vol.9, pp.113–127
- ^ Cooper (1994) Cooper, Robert, G. New Products: The Factors that Drive Success, in: International Marketing Review, 1994, Vol.11, pp.60–76
- ^ Cooper, Robert G. (1993). Winning at New Products: Accelerating the Process from Idea to Launch. 2nd Ed.,Cambridge, Mass: Addison-Wesley
- ^ Conducting Successful Gate Meetings
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