Stage-Gate Process

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Developed by Cornelis Johannes Jongenelen

Abstract

The Stage-Gate Process (also referred to as Phase-Gate Process) is a project management tool, dividing the time horizon of a project into several information-gathering stages. These stages are separated by so-called gates, which represent go/kill/recycle/hold decisions for the project. The concept was introduced by R.G. Cooper in his book 'Winning At New Products' (1986).

The central background of the Stage-Gate Process is rooted in the fact that companies have limited resources (e.g. time, money & capital goods). To make effective use of the available resources and to manage risks, a firm has to develop its project portfolio in a manner that only the most promising/beneficial projects are put through. Regular Stage-Gate Processes include 4 to 8 stages, but stages can be skipped depending on the preferences of the company . The evaluation criteria at each gate are discussed upfront with the project group and are acted upon by the gatekeeper during a gate meeting. Each gate decision should be a objective process; anybody in the organization should come to the same conclusion.

A Stage-Gate Process is complementary to project evaluation methods that, for example, analyze resource availability, project-related risks or costs and benefits of the project. The method is also frequently used in combination with other project management tools, like Gantt Charts or Concurrent Engineering theory The process can be used in most project-related contexts, but gained a lot attention in the field of new product development as a strategic pacing method

Basic Elements of the Stage-Gate Process

Figure 1: The Cost-Uncertainty Reduction trade-off visualized

The basic idea of a Stage-Gate Process is that the whole project is divided in a predetermined set of stages. These stages consist of groups of related activities (often conducted in parallel) that end in so-called gates. Gates are characterized as containing a set of deliverables or inputs, a set of criteria, and an output .

Stages

Stages often consist of activities that roughly follow the same trajectory, where first the data is collected, integrated and analysed. Cooper (2008) mentions several key characteristics that need to be taken into account when identifying stages:

A. Each stage should strive to reduce endogenous and exogenous uncertainties and risks. For the stage information requirements guide the team in their way-of-working.

B. Each stage is more costly than the preceding one. Combined with the element (1) above, this means that there exists a trade-off between uncertainties and risks on the one hand, and costs on the other hand (see figure 1)

C. Activities within stages are undertaken in parallel (as much as possible)

D. Activities are conducted by a diverse team of people from different backgrounds

E. Each stage is cross-functional; so no departmental focuses are present

Formation of Stages

Several authors emphasize a standardized selection of stages that can provide the basis for implementing a Stage-Gate Process . Cooper (1990) emphasized the following 5 stages, that roughly reflect the different phases of a (new product development) process (see figure 2):

Figure 2: Visualization of the Standardized Steps for using the Stage-Gate Process as defined by Cooper (2008)

1. Preliminary Assessment: here the project's technical and marketplace dynamics are explored. Often this stage is conducted internal to the firm at low cost and in a short term. For this assessment mostly qualitative analysis will be conducted to determine the gate outcome.

2. Definition: here the product characteristics are defined and the attractiveness needs to be verified. This is the last stage, before the company starts spending large amount of money developing the product. Compared to the first stage, this stage contains relatively more quantitative analysis activities.

3. Development: here the product takes shape, is tested, is marketed, and where operations are set-up. The initial financial assessment is extended to also include new information such as information about intellectual property (IP).

4. Validation: here the entire viability of the project is assessed, including the production process, user acceptance, and costs and benefits. Activities within this stage include in-house product tests, user/field trials, trail/pilot production, or a pre-test market.

5. Commercialization: here the marketing launch plan and operations plan are put to work. Other authors refer to this stage as the "launch" phase.

Gates

Where stages represent a longer period of time (weeks or months); gates represent meetings with a time-span of several hours. At each gate the following elements are relevant to keep in mind :

A. Inputs/Deliverables: the deliverables that the project team and leader must bring to the gate

B. Criteria: which are the items upon the input will be judged.

C. Outputs: the decisions at the gate, and possible the approval of an action plan for the next stage

Gate Decisions

Figure 3: Visualization of decisions at the gates of the Stage-Gate Process

Senior managers man the gates, and act as so-called gatekeepers. This group is diverse in nature and each member has the power to approve the resources needed for continuation of the project . During the gate meeting the gatekeepers meet to discuss the future of a project. The decision they make is objective; in other words, it is fully based on the ability of the team to meet the gate criteria. The following outputs can be generated during the gate meeting (see figure 3) :

1. Go: here the input created by the project team is sufficient. The next step is to proceed with the next stage.

2. Kill: here the input created by the project team is insufficient or the results imply that the project will not be able to yield the desired benefits. The next step is to terminate the project, and review the process.

3. Recycle: here the input created by the project team is insufficient, but the project still has potential to yield benefits. The next step is to restart the current stage, and update the inputs.

4. Hold: here the input created by the project team is insufficient. The gatekeepers decide to delay their decision, and wait until inputs of parallel projects are provided at the next gate. Based on the input of these processes a decision will be made about stopping or recycling the project.

Cooper (2008) stresses that one of the main challenges faced by firm implementing the Stage-Gate Process, is making the gates work . He identifies two gate characteristics that could be optimized:

A. Gates with no teeth: when gates are almost non-existent or lack clear decision-making, it may end up with project rarely being killed at gates. After defining the gate criteria, it is important that these criteria will be key in determining the future of the project. This may also be the result of (influential) gate keepers having so-called "pet projects", which they personally prefer over others.

B. Hollow decisions at gates: here the gatekeepers decide to continue the project, but do not provide the resources necessary for completing the next stage. If managers do not decide and provide it will result in a full project pipeline where all products take forever to get to market. Hollow decisions also create difficulties in the field of resource management, where it becomes unknown if the current firm activities can be completed using the available resources (see Resource Allocation in Project Management )

Application areas for the Stage-Gate Process

Cooper's original publication on the Stage-Gate Process focused itself on applications within the field of new product development . He positioned his theory as a method to reduce cycle time and improve new product "hit rate". Over the years academics and professionals tuned the model to make it even more efficient in the field of new product development, and even used it to research other project-related environments. These developments are summarized by Cooper (2008) in his work about 'the Next-Generation Stage-Gate, he emphasizes the following elements :

A. Scaled to Suit Different Risk-Level Projects: the Stage-Gate Process has become a scale-able process. Firms are able to adjust the method for different types of risk levels of projects; ranging from radical new product solutions to lower-risk line extensions.

B. Flexible Process: after more information about the Stage-Gate Process became available, academics started to experiment with more flexible versions of the tool. The key is, however, that the process suggests best practices, but nothing is mandatory. Activities can be conducted simultaneously and stages can be skipped.

C. Adaptable Process: not only can stages be skipped, they can also be adjusted to a firm's specific needs. An example is provided below in the 'Possible Theoretical Synergies' section, emphasizing the combination of Agile Project Management methods with the Stage-Gate Process.

Application Areas other than New Product Development

Application in Life-Cycle Management

Coulson (2010) stressed the use of the Stage-Gate Process in the field of life cycle management (see Life Cycle Model) . To fit the purpose, she added two stages providing after sales product maintenance and product obsolescence, and emphasized that a share of the project responsibilities in pharmaceutical and biomedical environments are positioned in after-sales activities. Coulson's work emphasizes the flexibility and adaptability of the overall formation of the Stage-Gate process and she stresses the possibilities of the method in the broader system of product innovation.

Application in Technology Development

Högman & Johannesson (2013) researched the effects of the use of the Stage-Gate Process in technology development . An important finding of their research was the fact that the level of uncertainty in technology development greatly determined the need for flexibility in the Stage-Gate Process. One of limitations mentioned in literature it the fact that iterations are hard to incorporate in the Stage-Gate Process, and are related to high costs and planning problems . It is found that these negative effects are mitigated in technology development projects, compared to new product development projects. Högman & Johanneson (2013) prove that other development processes (like technology development processes) may be positively influenced by the use of Stage-Gate Processes.

Application in Manufacturing and Assembly Management

More recently Wuest et al. (2014) researched the effects of using the Stage-Gate Process in manufacturing and assembly systems Their main finding is that, if adapted to the project scenario, the Stage-Gate Process could be beneficial for companies in manufacturing and assembly industries. The goal of their research was to identify flaws in manufacturing/assembly systems early on, to make sure that they do not amount to bigger problems. For these processes it is important to identify problems as fast as possible, to minimize the chance of costly redesign in the later phases. In other words, the cost-risk trade-off as can be identified in the new product development process is also present when considering manufacturing and assembly systems. The research by Wuest et al. (2014) emphasizes not only the possibilities of extending the Stage-Gate process, but also emphasize its relevance in contexts other than new product development projects.

Theoretical Synergies

Synergies in Project Formalization

One of the main theoretical synergies that have been discovered by Sommer & Cooper (2016), who combined the Agile Project Management with the Stage-Gate Process . For information technology (IT) companies both methods were already beneficial and the use the developed the Agile-Stage-Gate Hybrid Model should bring companies even more benefits, namely :

1. Faster and more adaptive response to changing customer needs

2. Better integration of the voice-of-the-customer

3. Better team communication

4. Improved development productivity

5. Shorter time-to-market

Another theoretical synergy was identified by Thamhain (1996), who combined the Stage-Gate Process with a Concurrent Engineering. This method focuses on in-parallel execution of project activities and phases with the objective of minimizing overall project cycle time . This combination is already emphasized in Cooper's later work, where he stresses the relevance of cross-functional work and the use of parallel activities within stages.

It should also be considered that project planning methods are often compatible with Stage-Gate Processes. An example would be the Gantt Chart and related Work Breakdown Structure (WBS), which can map the different stages, their activities, and the gates (included as milestones). Another relevant method that can provide the basis of a well-organized Stage-Gate Process is Scenario Planning Strategy. The company can use Scenario Planning methods to effectively deal with uncertainties at the gates. A result will be more flexible gate criteria, which actively incorporate the plausible scenarios that can be encountered during the lifespan of the project. Another relevant combination of the Scenario Planning and the Stage-Gate theory is in the field of portfolio management, where different portfolio decisions may lead to different project-combination scenarios (see figure 4, in Scenario Planning Strategy).

Synergies in Project Execution

A lot of companies have made their Stage-Gate Process lean. This is done by enriching their Stage-Gate Process with elements from Value Stream Analysis and Mapping for Project Management . When analyzing the value stream, the stages are kept in mind and the criteria at each gate are adapted to the insights gained. The goal is to optimize the Stage-Gate Process by assessing if all stages are relevant and efficient.

Cooper (2008) also emphasize several governance methods that be combined with the Stage-Gate Process to optimize decision making :

A. The use of scorecards (see Implementing KPIs section Scorecards and Dashboards) or success criteria to optimize go/kill/recycle/hold decisions. The method can be used to formalize the gate meetings and secure that gate keepers only keep relevant criteria in mind.

B. An extension to the point mentioned above is the inclusion of self-evaluation scorecards as an input to the gate. Here the scorecards of projects members are used as valuable input for the gate decision.

Developments in the field of project management have led to the introduction of alternative collaboration methods, like self-managed teams or virtual teams . These theories led to the development of self-managed gates, where teams act as their own gatekeepers, and virtual gates, where collaboration within the stages as well as gate meetings at the gate are conducted via digital media.

Synergies in Portfolio Management

Firms often use Stage-Gate Process methods in portfolio management (see Portfolio Management and complexity in organizations). Here the gates are replaced by portfolio reviews. Portfolio reviews are conducted periodically and discuss the mix and balance of projects in the firm's portfolio. Connecting the Stage-Gate Process with the concept of portfolio management describes the link between the method and its implications for firm strategy. It is important that firms consider the (possible) influence of portfolio management practices in gate decisions when setting-up the gate criteria; simply because project team members cannot influence portfolio strategy in their activities.

Due to the lack of influence of the project team of reaching portfolio review criteria, communication is important . A lack of communication of senior management about the project's position in the portfolio may result in unexpected gate outputs. The unexpected stop of a project diminishes the relevance of using the Stage-Gate Process, and may result in a great decrease of motivation for project members to participate in future projects.

When considering the concept of portfolio reviews, the importance of the 'hold' gate output can be stressed. The output of portfolio reviews is dependent on the firm's available resources, the relative potential of each project and the desired distribution of project-types within the portfolio (see Project Portfolio Management Vs. Programme Management section 'Portfolio Management'). The hold decision is often used to temporary stop projects which characteristics do not fit the portfolio or might not be promising enough for the allocation of additional resources.

Limitations of Using the Stage-Gate Process

The Stage-Gate Process has been linked with several limitations, some of them have already been solved over time. Below you find a list of limitations/problems that are still present after applying Stage-Gate processes:

A. The effectiveness of the method highly depends on the behavior of senior management members that are appointed as gatekeepers. Cases exist where gatekeepers did not objectively decide on the gate output, or where personal prioritization was given for certain criteria .

B. The method requires a certain organizational mindset, where "homework" has to be done. In other words, companies have to do research when determining criteria at the gates and have to keep track of resource availability across the time-span of the projects. Using a Stage-Gate Process does not guarantee success, where its added value depends heavily on the right use of other tools .

C. The method assumes that cross-functional activities during each stage will reduce risks optimally. However, research emphasizes the relevance of risk management practices in the success of new product development (NPD) projects. Research in the field of risk management suggest that risk reduction in project environments is more complex than is suggested in the Stage-Gate Process model.

D. Some projects require a more flexible framework. For designers it is often hard to follow a linear progress. For these projects the structural characteristics of the Stage-Gate Approach will not provide as much added value. Boland & Collopy (2004) stresses the relevance of designing outside of existing company systems in a free-space . Using the Stage-Gate Process may provide too much restrictions for team members in certain product development scenarios, where (senior) managers require the approach for decision-making.

E. Another limitation regarding flexibility is emphasized by Lenfle & Loch (2010) who emphasize that iterations of stages ("recycling" stages) is paired with high costs and planning issues . For new product development processes requiring high flexibility and (therefore) a number of iterations, formalization of the process may emphasize the loss of time and money too much. This might result in a negative attitude of the gatekeepers towards recycling of gates.

F. The last element relating to the flexibility of using the Stage-Gate Process is emphasized by Sethi & Iqbal (2008) . They emphasized a paradox which finds its origin in inflexible criteria defined at gates. They emphasize that this scenario leads to learning failure. This failure originates from not being able to change stage activities/gate criteria during the projects development. Learning failure may then influence market performance of novel new products, which (in turn) is not desirable for (senior) management.

G. Where the Stage-Gate Process allows many other tools to be incorporated within the framework, no clear guidelines are given on possible limitations or guidelines for implementation. Cooper (2008) already emphasized that firms occasionally use cost-cutting models in the wrong manner within Stage-Gate Processes . Ringen and Welo (2016) emphasize the fact that the Stage-Gate Process is not really a "process", but more of a governance concept

Key References

1. Virtual Issue Introduction: We've Come a Long Way Baby - Cooper, R.G. (2017)

In this article Robert G. Cooper provides a more holistic approach to the new product development process for which he once developed the Stage-Gate Approach. Using 4 dimensions, Cooper explains how all major tools and methods in innovation management can be used to create an overarching framework called the Innovation Diamond. Using the information presented above, it can be concluded that effective use of the Stage-Gate Process can be linked to all aspects of innovation management best practices. Cooper's most recent article therefore still emphasizes the relevance of the Stage-Gate Process, not only in project management, but also in the broader field of innovation management.

2. Stage-gate Project Management Processes as Professional Communication Practice: Connecting Technical and Marketing Communication in New Product Development - Berggreen, L. & Kampf, C. (2016)

Berggreen and Kampf stress the relevance of the Stage-Gate Process in communication in new product development scenarios. The concept of the Marketing Circle is introduced, describing that technical communication is situated in a field connecting technical communication, marketing, and business process understanding. For engineering students, it is relevant to know how projects are managed and how the Stage-Gate Approach can be employed to connect the relevant fields (mentioned above). Students in the field of engineering will be confronted with project environments in the future, and should know how business processes are relevant for designing new products. Basic knowledge about the Stage-Gate Process is important to gain this knowledge. The article emphasizes the relevance of the Stage-Gate Process as one of the main methods to be mastered in teaching the basics on project management.

3. Towards a More Event-Driven NPD Process: First Experiences with Attempts of Implementation in the Front-End Phase - Ringen, G. & Welo, T. (2016)

The work by Ringen and Welo (2016) has been emphasized above in the 'limitations' section, and deserves extra attention regarding their distinction between event-driven new product development (NPD) guidance and Stage-Gate Process use in NPD projects. The authors emphasize the need for guidance in process prioritization based on knowledge gaps identified during the project. Their main reason for supporting this need is the fact that, although Stage-Gate Process has been used for 30 year, no real progress has been made on NPD project effectiveness (70 to 98% of the projects still fail). Several tools are introduced to reach their goal, including visual planning and management, stand-up meetings, and learning cycles. This article emphasizes that the Stage-Gate Process is only a planning and decision-making tool, the efficiency and effectiveness of the project still depend on complementary methods to be employed.