An overview into the Stage-Gate Process and Risk Management from ‘Winning at New Products’ by Robert G. Cooper
I always wondered if there is a playbook for how to go about winning new products (idea-to-launch). If there isn’t one then companies should have one.
In today’s rapidly evolving business landscape, innovation is the key to staying competitive. Organizations constantly strive to develop new products and bring them to market successfully. However, the journey from idea to market can be treacherous without a structured approach.
Stage-Gate Process, a groundbreaking methodology which can help in driving innovation and ensuring a higher probability of success.
Stage-Gate (Idea-to-Launch) Process Demystified
What is STAGE-GATE?
Stage-Gate is a conceptual and operational map for moving new products from Idea to launch and beyond. It is a blueprint for managing new product development process to improve effectiveness and efficiency.
It maps out, play by play, huddle by huddle as well as how to do it in order to win the game. Stage-gate is based on the premise that can set best practices into process on how to win. Indeed, Stage-Gate was originally developed from research that modeled what the winning teams that undertake bold innovation projects do. It is a systematic framework for managing the innovation process. It divides innovation into distinct stages or phases, each with a corresponding gate that serves as a decision point. This approach provides organizations with the structure and discipline needed to transform ideas into profitable products.
It is often found after closer inspection that failed projects are plagued by missing steps and activities, poor organizational designs and lack of direction and support from top leadership, inadequate quality of execution, unreliable data, missed timelines. So these teams and projects need help. Help in the form of a playbook based on what winning teams should do. And Stage-Gate is simply that playbook.
Examples of companies who have implemented Stage-Gate:
- 3Ms secret to success is the stage-and gate system of managing it’s innovation process. It’s NPI (new product innovation) which is a five-stage system for new products and NTI (New Technology Innovation) is a three-stage process that is more iterative for technology innovation.
- LEGO a successful Danish company replaces one-third of it’s product line every year with new items. In order to accomplish this raid introduction year after year, it relies on a Stage-Gate new — product process
- ITT calls its Stage-Gate process as Value -Based Product Development (VBPD).
Quality of execution is key to NPD and more specifically an ideal playbook should include this. Another challenge most companies have is too many projects and not enough resources to execute.
Adequate resources are principle drivers of companies new-product performance; but lack of resources plagues too many firms’ development efforts.
Fundamental questions for companies to ask:
- Are we doing the project right?
- Are we doing the right project?
With facing increased pressure to reduce cycle time yet improve new product success rates, stage gate will help. It helps moving a new product project through various stages and steps from idea tp launch.
Let’s delve into the key components of the Stage-Gate Process:
Idea Generation: The process begins with idea generation. This is where creative concepts and potential innovations are born. Ideas can come from various sources, including employees, customers, market trends, and technology breakthroughs.
Stage Definition: Once an idea gains traction, it moves to the stage definition phase. Here, organizations define the scope, objectives, and resources required for the project. This stage serves as a foundation for the subsequent phases.
Idea Screening: Not every idea is worth pursuing. Idea screening involves evaluating the feasibility, market potential, and alignment with organizational goals. Only the most promising ideas advance to the next stage.
Business Case Development: In this phase, a detailed business case is developed for the selected idea. It includes market research, financial projections, resource requirements, and a risk assessment. A solid business case is essential for securing the necessary funding and support.
Development: With the green light from the gate, the project moves into the development stage. This is where the idea is transformed into a tangible product or service. Prototyping, testing, and refinement occur during this phase.
Testing and Validation: Once the product is developed, it undergoes rigorous testing and validation to ensure it meets customer needs and performs as expected. This phase helps identify any necessary adjustments or improvements.
Launch: The final gate represents the decision to launch the product to the market. A well-executed launch plan is crucial for achieving commercial success. Marketing, sales, and distribution strategies are finalized, and the product is introduced to customers.
Post-Launch Review: Even after the product is in the market, the Stage-Gate Process continues. Organizations conduct post-launch reviews to assess performance, gather customer feedback, and make adjustments as necessary. This information informs future innovation efforts.
Benefits of the Stage-Gate Process
Implementing the Stage-Gate Process offers several key benefits:
Risk Reduction: By systematically evaluating and filtering ideas at each gate, organizations reduce the risk of investing resources in low-potential projects.
Resource Allocation: The process helps allocate resources efficiently, ensuring that only the most promising projects receive funding and attention.
Improved Decision-Making: Clear criteria and gatekeepers facilitate informed decision-making throughout the innovation journey.
Enhanced Innovation Culture: The Stage-Gate Process encourages a culture of innovation by providing a structured framework for idea generation and development.
Innovation is a high-stakes game. Organizations that excel in developing new products can gain a significant competitive edge. However, innovation isn’t without its challenges and uncertainties.
How to manage risks?
A playbook must be designed to manage risks. A high-risk situation is one in which much is at stake (for example, the project involves a lot of money or strategically critical for the business) and the outcome is uncertain (not certain that product will be technically feasible or will do well in the marketplace). The components of risks are: amounts at stake and uncertainties.
In the beginning of the project, the amounts at stake are usually low, and the uncertainty of the outcome is very high. As project progresses, the cost of the project and thus the amounts at stake begin to increase. If risk is to be managed successfully, the uncertainties of outcomes must be deliberately driven down as stakes increase. Further, the stakes must not be allowed to increase unless the uncertainties do come down. Thus uncertainties and amounts at stake must be kept in balance.
As launch nears, amounts at stake have increased, uncertainty remains high, and the risk level is unacceptably high.
5 Gambling rules for managing risks
- When uncertainties of new-product are high (when prospects of success are uncertain), keep the amounts/costs at stake low. When you are not sure on where you are going, take small steps — buy a series of options rather than investing the entire amount
- As uncertainties decrease, let the amount at stake increase. As you learn more about where you are going, take bigger steps
- Incrementalize the new-product process into a series of steps or stages. Each step should be of more cost than the one before
- Each stage should be viewed in terms of reducing uncertainties. It can be through validations, and knocking off key assumptions in all areas, whether it is solution hypothesis assumptions or pricing/WTP
- Less uncertain more is the clarity to make investments
- Do timely evaluation, decisions and get-out points. Decision points (or gates) pull together all new information from the previous stage and pose questions, “Are you still in the game? Should you process to the next stage, or Kill the project now?”
These apply to any high-risk situation. Does your company follow them in its day-to-day management practices? Review your firm’s new-product practices, perhaps using an actual case, and assess whether your management group is handling risk appropriately.
Please share your experiences dealing with these as product leaders.