10 Lessons Learned When Implementing a Stage-Gate® Process for New Product Development
Projects can represent an investment of billions of $US over a development period that can be as long as five or more years. With such large investments at stake, it’s important to use a well-integrated set of best-in-class tools and methodologies to reduce the risk of either a less-than-projected return on investment, or worse, a total failure. If the chosen approach can also reduce the new product development (NPD) cycle time, its value is even greater.
Many large organizations have adopted a gated approach to reduce NPD risk. One of the key features of such an approach is a set of “go/no-go” decision gates which, in principle, ensures that each project remains aligned with its original strategic intent and its value remains high enough to justify its continuation to the next stage of development.
As well as processes and methodologies, there are a few fundamentals that companies must remain true to when developing new products: call them best practice or just plain common sense. Sometimes small deviations from these fundamentals cause problems. On the other hand, small modifications may be identified that make the process work even better in situations that are a little different from the usual.
The message here is flexibility: while adhering to the process and fundamentals of NPD, keep an eye out for situations that demand something a little different—some nuanced modification that improves the process.
The following are 10 lessons learned when the business units of one of the world’s leading Oil & Gas upstream services companies, with over $20B in annual revenue, decided to revisit their processes to optimize the return on investment of individual NPD projects. The process used, Stage-Gate®, is time tested and well understood, but a focus on the business case, risk management, cross-functional collaboration, and integrated launch planning, versus just “following the process,” provided the fundamentals necessary for success. And a handful of other practices that were added made a critical difference in ensuring NPD went off with fewer problems and surprises.
One important conclusion resulting from using the gated NPD process implementation is that there are five distinct components, all of which must be embedded in any NPD methodology to maximize its effectiveness. They are:
- A robust business case
- A strong risk-management approach
- A comprehensive integrated launch plan
- A governance discipline where leaders are genuinely engaged and accountable
- Clear ownership of and accountability for the NPD process
The Second Half of Best Practices for NPD Success
But what are some best practices beyond these five well-known known components? Here are five more:
1. Don’t ignore (proven) advice
Few organizations want to deliberately ignore lessons learned from others who have executed similar initiatives. For example, there are 10 tips for successful implementation of Stage-Gate that 2 of its leading experts have shared. But what happens when a company only heeds eight out of the 10 and, further, does not fully follow those they do “adhere” to?
Often, the lessons not followed lead to gaps and weak points in execution. In this Oil & Gas company’s Stage-Gate implementation, the leadership’s conscious choice not to emphasize change management and internal communication delayed the adoption timeframe by up to six months And the final outcome? The organization had to double back to address the large implementation gaps created.
2. Avoid overkill
When this initiative started, the gated approach was defined in full-blown form, describing the process that the largest, most complex, and highest-risk NPD projects would follow. After an initial set of large-scale projects (roughly one per business unit) went through a pilot phase of the Stage-Gate process, demand for the use of the gated approach for a wider range of projects grew. However, it quickly became apparent to many of those who wanted to apply Stage-Gate that it would be overly burdensome for smaller, less risky projects to adopt the same level of detailed documentation and governance oversight.
Fortunately, others external to this organization had already developed a set of best practices for scaling the Stage-Gate process for projects of different sizes and degrees of risk. Drawing from that work, three versions of the Stage-Gate process are now used, differentiated not by their relative degree of rigor, since that is the same for all three processes, but by the management level of the members of the governance committee, the degree of formality of some specific gate reviews, and the level of detail of the documentation required. Along with the scaled processes, a set of criteria for determining which process a particular project should follow is also in place. The organization based those criteria on the level of risk and complexity and the magnitude of the financial investment required for each project.
3. Understand the process
If the Stage-Gate process is a framework that overlays an existing NPD process, then a primary exercise in implementing that framework is to align stages and gates to the existing process. This presupposes that the existing NPD process is well understood and well documented.
But, as was found in this instance, trouble will ensue when each business unit’s understanding of the process resides primarily in the heads of veteran employees, and those NPD processes, because of the numerous known or suspected gaps and deficiencies aren’t necessarily what the organization’s leadership wants to see emulated.
With this in mind, it shouldn’t be surprising that one of the most powerful exercises carried out during the Stage-Gate deployment discussed was the development of detailed process maps representing all major work streams within the entire end-to-end NPD process.
While the maps are valuable in and of themselves, the numerous tools being developed using the information contained in the maps, such as role and responsibility matrices (a detailed RACI matrix), deliverable matrices (who owes what to whom when, using what template), etc., will be even more valuable since they will be used in day-to-day project execution. In addition, discussions among representatives from the numerous business units at each process-mapping session were important because they enabled shared insights and created the opportunity to develop working relationships with those in similar roles.
4. Use Flexibility
Another best practice that emerged is “Flexibility”—a disciplined process for allowing project-specific deviations from the baseline Stage-Gate approach adopted within each business unit. (The baseline in this case is the Stage-Gate process as customized by the business unit in the process mapping sessions.)
Flexibility consists of three elements: (1) justification for the proposed deviation, (2) identification and rating of the associated risks and, if needed, risk-mitigation actions and contingency planning, and (3) approval by the project’s governance committee for the proposed deviation.
The recognition of the need for Flexibility first emerged when a high-risk project was launched at the request of a specific customer who needed the product quickly. Missing the deadline would lead to significant financial penalties. For that reason, the decision was made to adjust certain elements of the Stage-Gate process to enable shorter execution time. Among the adjustments was the elimination of the marketing work stream, which was justified by the existence from the outset of a paying customer.
5. Prepare a software infrastructure
In the implementation described here, a comprehensive yet low-cost infrastructure was created in Microsoft SharePoint. This infrastructure significantly improved the outcome of Stage-Gate-based NPD efforts by enabling collaboration and transparency in project execution and alignment of work with the Stage-Gate framework. Among the components of this infrastructure are tools to:
- Manage and share documents across all work streams and through all stages
- Manage action items and deliverables
- Identify, track, and manage risks
- Facilitate gathering data for gate reviews
- Record and communicate gate review decisions and feedback
- Capture and share lessons learned
When the Stage-Gate implementation initiative started, the development of such an infrastructure was not part of the near-term plan. However, it was quickly clear that its absence was a hindrance to project execution as well as to cross-work stream collaboration. Once deployed, this software infrastructure, which was designed to facilitate each project teams’ ability to follow the Stage-Gate methodology, was quickly adopted.
Conclusions
Every company strives to consistently deliver new products that address customer needs cost effectively while achieving reliability, quality, safety, and other important customer goals. While challenging, there are a number of critical success factors that can greatly improve the odds of success.
If several components are embedded in the gated NPD approach, the chance of success of programs executed using it will increase considerably. Yet, it stands to reason that likelihood of successful products will be further enhanced by applying what others have learned the hard way—the second half of best practices described above.
Don’t forget to leave your comments below.
References
Edgett, Scott J., and Jones, L. Michelle, “Ten Tips for Successfully Implementing a Stage-Gate® Product Innovation Process,” Reference Paper #33, Stage-Gate International and Product Development Institute Inc., 2012.
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