The Stage-Gate Model/phase-gate process

Abstract

Developed by Bashir Isse

The stage-gate model which is also called phase-gate process is a project management methodology that is used to create a project from an idea-to-launch in a structured way. The model contains several decision-making points, known as gates and involves senior management that take decisions regarding the course of the project. The stage-gate model is created by Robert G. Cooper in 1980's to help companies manage the product development process more efficiently. The model was adopted to manage a variety of projects like process improvements and process changes and is regarded today as a general project management methodology with multiple variations. The model is today a registered trade mark at Stage Gate Inc. a company founded by Cooper and Edgett. The model is considered the ‘industry standard’ and is the world’s most widely benchmarked, referenced and implemented innovation management model.

Stage gate explained in a nutshell from Planisware channel

The Model

A project is started up with a decision to meet the customer's needs, expectations and requirements. This must be reflected in the specifications provided by the project sponsor in the project objectives that is to be fullfilled by the project. The model that is to be used depends on the composition of requirements. The model specifies the different phases that the work must go through and the requirements that have been set, based on the deliveries that the individual phase must deliver. There should be a working model that ensures the control of the work being carried out. The project manager is responsible for ensuring that the project meets all the requirements that are made, and the project manager is also responsible for proving it. To start a specific phase of a project, there must be a (Gate) which is a decision model that describes how the project should be controlled, to make the right business decisions in and around the project. A project should always have a responsible (project sponsor) for the project's business aspects, which can make the overall decisions regarding the project's limitations and goals. Gate decisions are taken outside the project by the project sponsor. Gate decisions have always higher priority than project decisions taken internally in the project.

Gated processes like the Stage-Gate innovation process primarily focuses on ensuring the best use of limited resources with strategic business investments that are most likely to benefit to companies with ongoing projects:

• It is focused on high-risk, high-uncertainty, complex investment decisions. The processes are of strategic value, knowledge-intensive, and commonly made iteratively to manage risk and complexity.
• Gated processes are deliverable-centric to support good decision-making by requiring the creation of deliverables that contain evidence and business data owned by diverse business teams.
• Gated innovation operations are intrinsically cross-functional which requires a high degree of coordination and communication covering each function of the business (sales & marketing, R&D, operations, finance, etc.) to safeguard alignment and the best decisions.
  

  

  Figure 2: variation types of the process

The model can variate depending on the maturity of a company’s NPI process and the complexity/risk behind the product being introduced, the Stage Gate process can fall into various types, see figure 2.

Preparatory Gate assessment

The project sponsor is responsible for ensuring that the assessment meeting is prepared and implemented. The Assessment team will prepare a recommendation to provide the project sponsor with the right basis for taking the Gate decision. The Project sponsor then plans the assessment well in advance and designates an assessment leader outside the project. The Assessment Manager puts together his team consisting of external experts on all parts of the project. In addition, the project manager seeks to ensure that all relevant documentation is delivered to the project sponsor. To get the right overall picture of the project, the project sponsor also makes sure to supplement with data on the business situation and optimize resources as well as relevant data from other business areas. Another thing that the project sponsor is responsible for is ensuring that the assessment team receives all relevant documentation in good time before the assessment takes place. The time that the team needs to prepare must be aligned with the complexity and size of the project. Furthermore, the project manager presents the project, a general status and a status of the delivered deliveries to the assessment team.

Gate decisions

Gates must have a clear, well-understood criteria so that the gatekeepers can make objective and timely decisions. Criteria must be specific enough to engage management in the decision process and enable them to ascertain the risks and benefits of going forward. Gate scorecards may be used by gatekeepers to compare projects within a program area as appropriate. A gate can only be passed when the following conditions are met:

• The project must have achieved the planned status (requirements, deliveries and progress)
• The project's results will meet the customer's needs, expectations and requirements
• The project complies with the company's business concepts and strategic goals and can show that it provides the expected profit
• The project's estimated result corresponds with the expected resource consumption

Gate assessment

The purpose of holding a Gate Assessment is to make an objective evaluation of the project's status and the expected project results. The assessment is used by the project sponsor to have the correct background knowledge of the project to make the right Gate decision. In the assessment, the project is assessed on three aspects: the status of the project, the use of resources and the commercial consequence of the project's result.

Stages

Stages are the elements of a project where analytical research and technology development are performed. The objective is to gather information at each stage which are needed to make the project move to the next stage. Information that are accumulated during each stage is used to reduce levels of technical uncertainty and economic risk. Early stages of research and development typically encounter the highest technical risks. The stages often consist of activities that approximately follow the same course, where the data is firstly collected, integrated and analysed. Cooper (2008) mentions several key characteristics that are to be taken into consideration when identifying the stages:

• 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.

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

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

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

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

The idea of a Stage-Gate Process is that the project is divided into in a prearranged set of stages. These stages are composed of groups of related activities which are often conducted in parallel and end in 'Gates'. Gates are characterized as containing a set of deliverables or inputs, a set of criteria, and an output.

It often provide a point during the process where an assessment of the quality of an idea is undertaken and typically includes three main issues:

Quality of execution: Which checks whether the previous step has been executed in qualitivly. Business rationale: Is the project an attractive idea from an economic and business perspective. Action plan: The proposed action plan and the requested resources reasonable and sound.

Formation of stages & gates

Genarally the Stage-Gate model is composed of four to seven stages and gates and are manned by senior managers who act as gatekeepers. An example of the model can be seen in figure 1

Figure 1: Stages and gates figurized

Discovery stage:

The development process is initiated by a new product idea, which is submitted in Gate 1.

Gate 1: Idea Screen

The idea screen is typically the first decision taken wether resources should be commited by the company to the specific idea of developing a new product. This is generally a soft decision, considering that the uncertainty is still high and will typically be followed by a second screen later in the process. The project is evaluated principally on a criteria about the alignment with the general strategy and the company’s core business, as well as the viability of the idea and the opportunity it offers where the the market attractiveness is taken into consideration. If the decision ends with a GO, it marks the beginning of a new project.

Stage 1: Scoping

The reason for this stage is to make a preparatory assessment of the project, so that a re-evaluation of it can be conducted better at gate 2. During this stage the goal is to evaluate the product and its corresponding market. The assessments at this stage is more qualitative than quantitative. Especially, two types of assessments are essential: a preliminary market assessment and a preliminary technical assessment. Information about the market will be gathered in the market assessment and the potential future market position of the product including the market acceptance and the potential market size. While the technical assessment will respond to questions about the product’s manufacturing viability including an estimation of costs and the time of production. A realization of what is in the market and a determining of the relative level of threat from competitors, enables the management team to recognize whether or not they should go forward with the production of the product.

Gate 2: Second Screen

The second screen decision, resembels the decision on the idea screen gate with the consideration of the most recent information gathered from the stage 1. At this gate supplementary criteria may be added, depending on the stage 1 discoveries, as well as additional achievments for the next gate, should the decision be a GO. At this gate the economic viability of the project is assessed based on the input that is provided and preliminary technical assessment.

Stage 2: Building the business case

At this stage the project is clearly defined, and the business case is built and crucial analysis before the development of the product are taken. These include a detailed market analysis, technical analysis and financial analysis. The market analysis is mainly focused on what the customers prefer and how the new product will satisfy their needs. A complete competitive analysis is undertaken, and concept testing is used to determine the customer acceptance. The technical analysis consists of the definition of all technical requirements for the manufacturing of the product, potentially including some design or laboratory work to completely define the manufacturing viability. A precursory development plan and an operations analysis is executed. Furthermore, investments that are necessary are estimated, both in terms of changes in the current production but also in terms of legal or patent work. The financial analysis should also be detailed including a sensitivity analysis.

Gate 3: Go to development

Gate 3 is of a great significance which is a very important decision gate as it is the final checkpoint before the development phase. A substantial amount of resources is required at this gate. Moreover, a careful examination of all the information is conducted which includes the validity of the information that have been submitted. if a GO decision is selected it must also be followed by strategic decisions regarding potential choices about the new product e.g. about the final features of the product, the market segment that is the target and so on.

Stage 3: Development

At this stage plans from previous stages are executed where the development of the product takes place, so potential authorizations are granted (legal, patents, etc.), detailed plans are also produced, and actual financial/cost analysis is completed. Testing plans are also prepared to be examined at the upcoming gate. A frequent update and review of the timeline is executed, helping the team stay on task and giving management information about the product's progress. Team-members have clearly defined roles where tasks can be performed concurrently ensuring a much more efficient development process.

Gate 4: Go to testing

At this point the development process is assessed and it is certified that the new product lives up to the existing quality and plans. Necessary changes are determined at this point, concerning the development process but also in terms of the financial analysis.

Stage 4: Testing and Validation

The entire project is validated and tested. The aim here is that the product is of a certain quality that the expectations of the customers as defined at the design and plan of the previous stages are met. Several testing are also undertaken in this stage which include; near testing which includes in-house testing, field testing, market testing. In addition, if it is considered essential a revision of the financial analysis is conducted. At this stage a detailed marketing plan is also completed.

Gate 5: Go to Launch

This is the final approval before launching the product. At gate 5 the results from validation and testing are revised and the quality of the validation and testing stage is approved. ultimately, the detailed marketing plan as well as the operations plan are approved at this gate.

Stage 5: Launch

The commercialization of the product is realized at this stage and all plans are put into motion.

Post launch review:

The whole process is reviewed in the post launch review and the new product which becomes now part of the product portfolio of the company. An internal audit is executed to evaluate the product development process and to pinpoint its strengths and weaknesses, so that the process can be improved in the future. Lessons learned are gathered and stored. Moreover, a complete review of the new product and its launch are completed. Financial, market and performance data are gathered and compared with the analysis predictions from the previous phases. The first three Gates should as a minimum always be incorporated into a company that works with projects:

Application - The stage Gate process

How organizations can apply the model will be highlighted in this section. The focus here is not to explain the stages as done in above sections but to go through the different stages, as was explained earlier, but more on which kind of activities that must be performed during the different stages. The methods to apply the model are vast and hence the example here is a bit superficial. The model is usually generated at gate 1. Here the focus is on generating ideas which is often done with severell brainstorming techniques to get the ideas flowing. After that then the best idea is brought to decision makers to evaluate it before it proceeds to stage 1.

Stage 1

Often projects begin with a preliminary analysis and includes frequently an investigation of the industry, market, economics and consumers. To understand and get a solid idea of whether the concept is feasible, a SWOT analysis (strengths, weaknesses, opportunities, threats) are often carried out in order to investigate the strengths and weaknesses of the project. An analysis of the market is also carried out to better help teams seeing growing opportunities, state of the market, potential niche environments and possible threats. When the scoping part is done the achieved results are then brought to the gatekeepers.

Stage 2

Building a good business case is vital for the success of the project. Hence following should always be integrated into the business case:

• Business & financial analysis
• Testing of concept
• Risk management
• Market analysis and operations plan, a study of user preferences and needs.
• Manufacturing plan
• Strategy
• Net Present Value (NPV)

Stage 3

Throughout the development stage, the project team executes plans from earlier stages. When developing the product, the process can include following three activities:

• Rapid prototype and test.
• First prototype and test.
• Next prototype and test.

As abovementioned tests are carried out, activities that are run in parallel like consumer feedback are also carried out. This acts as an iterative process which goes back and forth in-between the development stage, to ensure that the costumers’ opinions are taken into consideration in the development of the product.

Stage 4

The product must be tested and validated when it is developed. It is also imperative that the feasibility of the project also be tested and can include by following activities:

• Lab tests to confirm quality and performance
• User trials
• Pilot production
• Pre-test market, simulated test market, full test market
• New business and financial analysis

Stage 5

In this stage the product can be launched into the market and the production plans produced in previos stages can be implemented hence targeting the costumers.

Benefits of the Model

Figure 3: Risk

The benefits of The Stage-Gate process are plenty. The most important being that the process provides a consistent set of guidelines and definitions for each stage of research that can be communicated across the project decision-making. This will eventually allow for a better control of the project quality as well as research outcomes. The stage gate process encourages a meaningful end-user involvement and provides a parallel multi-functional approach to R&D where an evaluation of the projects are done in multiple areas such as technical performance, market potential, economics, and environmental impacts. By using the Stage-Gate process, risk that is inherent to research can be managed. Each stage of the model is designed to reduce levels of uncertainty and risk. As information and data is assimilated at each stage of research where risk and uncertainty are lowered. With enough information, project team can make sound technical and business decisions to control or eliminate risks. It is evident from Figure 3 that the highest technical risk is encountered in the early stages of research and development. The greatest business risks are faced in the later stages of development. At this time, the commercialization partner takes the lead. The technical and business risks must be addressed by the project team in order to reduce project uncertainty, even as the investments at stake continue to increase.

Limitations

Although some of the limitations by applying the model have been solved over time, the stage gate model has been linked with some limitations. Some of those are listed below:

1. The methods effectiveness depends highly on the senior management members behavior, who are also the gatekeepers. There can exist cases where gatekeepers do not decide objectively on the gate output, or where personal prioritization has been given for certain criteria .

2. A certain organizational mindset is required in the method, where "homework" must be done. Companies do a research, the criteria at the gates are determined and have to keep track on the availability of resource across the time-span of the projects. By using a Stage-Gate Process success is not guaranteed, the Value depends heavily on the right use of other tools .

3. Cross-functional activities during each stage will reduce risks optimally is assumed by the method. However, research emphasizes the relevance of risk management practices in the success of new product development (NPD) projects. It is suggested in research in the field of risk management, that risk reduction in project environments is more composite than is suggested in the Stage-Gate Process model.

Annotated bibliography

[1] R. G. Cooper, “Stage-gate systems: A new tool for managing new products,” Bus. Horiz., vol. 33, no. 3, pp. 44–54, 1990.

Cooper explains in the paper, the best practices of the best innovators in the 1980s. Through a study of the top performing companies the stage-gate model emerged. The model is explained deeply in the paper.

[2] R. G. Cooper, “Invited Article: What’s Next?: After Stage-Gate,” Res. Manag., vol. 57, no. 1, pp. 20–31, 2014.

Triple-A system is described in detail by Copper. Why each attribute is necessary is explaiened by Cooper and how the industry has modified the Stage Gate model to meet the needs of new product development.

[3] US department of energy Stage-Gate Innovation Management Guidelines at the webpage https://www.energy.gov/sites/prod/files/2015/05/f22/itp_stage_gate_overview.pdf explains the model very well and managing risk through structured project decision-making.

Annotated Figures

Figure 1: Shows the Scalable Stage-Gate system and the different Gates/stages they go through when dealing with minor projects, moderate risk projects and major projects. The figure was adapted from R. G. Cooper, “Invited Article: What’s Next?: After Stage-Gate,” Res. Manag., vol. 57, no. 1, pp. 20–31, 2014

Figure 2: Illustrates complexity of projects in terms of risk wether it be low, moderate or high and the gates/stages that are to be followed. The figure was adapted from the webpage http://www.bpminstitute.org/resources/articles/stage-gate-process-tools-techniques-within-enterprise-excellence [accessed 03-03-2019] --

Figure 3: Illustrates Project Risk Over Time and was adapted from the webpage https://www.energy.gov/sites/prod/files/2015/05/f22/itp_stage_gate_overview.pdf [accessed 03-03-2019]