Stage-Gate Model

For every large organization or company it is essential to have a strong Project Portfolio Management (PPM) that works to its purpose. In order to achieve this, it is critical for the company to have implemented the Stage-Gate Model, with the necessary guidelines on how the process is formal structured.

Stage-Gate was developed by Robert G. Cooper in the 1980´s. The model works as a structured method for product innovation, program or project, bringing ideas from concept to launch. Stage-Gate consists of five different stages and between each of these stages, there is gates. Gates works as “decision points”, or milestones, where the deliverables is brought up for quality control. This is most likely to be done by the top management, or a decision-making team. When evaluating the deliverables, they can either decide if the project should go forward, stop, hold or redo the current stage. Stages can be seen as a set of activities. Every stage consist of different activities that must be done, in order to move on to the next stage. Moreover can these activities be done in parallel with each other and often involves help from different departments. Working together as a cross-functional team will also contribute to increasing efficiency and effectiveness. The model also take risk and uncertainty in to account as these are decreasing the longer out in the process the project gets, while costs for the project are increasing. The five different stages in the model is:

1. Scope
2. Building Business Case
3. Development
4. Testing & Validation
5. Launch

The intention of this article is to share light on using Stage-Gate Model in Portfolio Management, describing the process and explain which criteria that must be fulfilled in order to achieve success. Further, a walkthrough of the application is given, showing which activities that must be performed in the stages. To sum up this article, strengths and weaknesses will be discussed.

Introduction

It is well known that many of the world’s biggest firm benefits from using the Stage-Gate when dealing with idea conceptualization and bringing new products to market. The first Stage-Gate model was developed by Robert G. Cooper in the 1980´s. Today, about 75% of all companies in U.S are using some sort of Stage-Gate when working with product innovation. The Stage-Gate is meant to be a playbook for best practice on how to bring ideas from concept to launching, bringing the project through five different stages and between each of these stages, there is gates. Gates are evaluating meetings where the deliverables from the previous stage is brought up for quality control. Further, it describes how a successful Stage-Gate process works in practice and how to managed it.

Today, the Stage-Gate model have been modified and adjusted, for the purpose of fitting all the new business models who have been developed through the recent years. Companies are calling this model NexGen Stage-Gate, where Cooper have implemented and taking in to account different concepts such as making the process LEAN, as well as agile development and making the process more adaptable for open innovation.

Big idea

Figure 1: [Stage-Gate Process]

In order to make the Stage-Gate Model process work properly, it is critical that the company have set up the condition for this to work. The company must have defined a group of people that consist of key stakeholders from different departments and from the top management. This group will be the gatekeepers, the once who are doing the quality control and decide if the project should advance to the next stage. Since the workload increases by stage to stage, one may consider having mid-management as gatekeepers for the two first gates, and when the project is becoming more complexed and evolves, the senior managers take over to act as gatekeepers. A reason for this, is because almost all senior managers have limited with time, and therefore, should they be brought into the projects when it is necessary for them to participate with their knowledge and power.

The project team in charge of bringing the idea from concept to launch must consist of a group of cross-functional colleagues, in order to be effectiveness and efficiency, when managing the Stage-Gate process. Developing a new product is not a one department show, it is needed skills and competencies from other departments, hence being cross-functional. The project team should therefore consist of people who have the necessary skills in R&D, marketing, production, business and engineering. To ensure that the project team is focusing on the right things, the company must have implemented best practices and “how to” perform key tasks in each of the different stages. This is especially important for the project team, when gathering data integrity. It is crucial that this process is solid, in order to collect the data in the most effective way, with the least waste of time and effort. This will ensure that the data collected is not inconsistent and that it is gathered the same way in all kinds of projects. As a result of this, managing the portfolio will become much more effective.

Gates

Figure 2: [Gates]

As mention earlier, the purpose with gates is to evaluate the deliverables from the project team. Moreover, when evaluating the deliverables, the gatekeepers have the opportunity to shut down projects, following “fail fast” philosophy, hence avoiding using unnecessary resources. All the gates are structured in the same way, consisting of three main elements:

• Deliverables: Evaluate deliverables that the project team brings to the gate, to see if it is performed after acceptable standards. Deliverables are containing results of all the activities that have been performed during the stage.
• Criteria: Each gate has a checklist of different criteria, which the project is judge after. Some of these are “make it or break it”, meaning if they do not meet these criteria the project will be killed.
• Outputs: The output from the gates decides if the project are giving green light, red light, hold, or recycle. In addition to deciding on the outcome of the project, the project team must provide an action plan for the activities which are going to be carried out in the next stage, as well as a list of the next deliverables, which is going to be evaluated on the next gate.

Stages

The main idea with the stages is to break product innovation into smaller pieces, doing one thing at the time. Each stage consists of activities, which are described in advance and should follow the companies best practice templates on how to perform these. The first process in the Stage-Gate model is initiated before stage 1, starting with an idea conceptualization, where the goals is to generate new ideas and/or business opportunities.

Stage 1 - Scope

Figure 3: [Stages]

The purpose in this stage is to scope the project, without spending too much time and money, applying front-end analysis. The technical aspects of the project are looked into, as well as the market prospects. Further, a quick assessment is done to determine what resources the project may need, and whether the project will be valuable for the company.

Stage 2 – Building Business Case

Moving in to the Building the Business Case stage, which is the most important and critical phase in the Stage-Gate Model. To make sure that the project is going to be successful, a lot of time and energy must be put down developing the Business Case. It is in this stage the project team will need the most resources. The Business Case must include a description of the product and project definition, project justification and a project plan. Strategic goals are also decided upon, in order to achieve competitive advantages in the market, which also includes analysis of competitors.

Stage 3 – Development

Development of the product. First thing to do is designing the product, and is it very important that the design is as detailed as possible, before it is produced. This including all the different specifications and customer needs. Simultaneously, market strategies and plans for launching the product is developed, as well as plans for testing the product, which is some of the deliverables needed in the next stage.

Stage 4 – Testing and Validation

The product is to be tested too, which can be very time consuming and contains several different testing stages. The necessary testing will cover performance and functionality tests, which are to be tested after given criteria’s and given requirements. The purpose is to detect faults and quality deviations that could lead to the need for changes. Besides testing, stage 4 also cover validation of the whole project, including the work process up to this stage. When validating the process, the project team will try to overcome possible group thinking, trying to raise awareness of possible threats, conflicts and opposing viewpoints on the project.

Stage 5 – Launch

The finale stage, launching the product into the market. Starting processes such as production, commercials, marketing, sales and operation.

Application – A walkthrough of the process

This section will show an example on how organizations can apply Stage-Gate model in their business. The focus here is not to go through the different stages, as was explained earlier, but moreover on which kind of activities that must be performed during the different stages. The example will be a bit superficial, because there are so many different methods that can be applied. Stage-Gate Model is initiated in gate 1 where the main focus is on generating ideas. This is usually done with different brainstorming techniques to get the ideas flowing. The best idea is then brought to decision makers for their evaluation before it is brought into stage 1.

Stage 1 - Scope

Mostly, the project starts with preliminary analysis. This include looking into the industry, market, economics and the consumer. To help determine whether the concept is feasible, a SWOT analysis (strengths, weaknesses, opportunities, threats) are carried out in order to investigate the projects strengths and weaknesses. While a market analysis is done to help the team to see growing opportunities, state of the market, potential niche environments and possible threats. Once the scoping is done, the results is brought up to gatekeepers.

Stage 2 – Building Business Case

As mentioned before, building the good business case is vital for the project success. Some key elements that should be integrated in the business case is:

• Business and financial analysis
• Concept testing
• Risk management
• Market analysis and operations plan, including looking at user’s needs and preferences.
• Manufacturing plan
• Strategy
• Net Present Value (NPV)

Stage 3 – Development

Throughout the development stage, the project team execute plans from earlier stages, in order to physical develop the product. The development process includes three activities that can be characterized as: 1. Rapid protocept and test. 2. First protocept and test. 3. Next protocept and test.

As these tests are carried out, activities in parallel are also being carried out, such as costumer-feedback. The feedback act as an iterative process, going back and forth in-between the development stage, to secure that the opinion from the customer have been taking into account while producing the product.

Stage 4 – Testing and Validation

When the product is developed, it must be tested and validated. Not only the product, but the feasibility of the project. This includes activities such as:

• 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

Stage5 – Launch

Launching of the product into the market, but also implementation of the production plan produced in the previous stages.

Strengths and weaknesses

It is difficult to point out some weaknesses or limitation directly linked to the model, since it is supposed to act as a playbook for how to successfully take ideas and develop them to products. Companies who are failing to achieve success with product development using Stage-Gate model is often not failing because of the model itself. As a matter of fact, firms are failing because of how they are managing the process. Therefore are potential pitfalls and strengths listed below, gathered from an analysis carried out by Cooper, Edgett & Kleinschmidt (2002b, 2005).

Strengths and Weaknesses

Strengths	Weaknesses
In order to have an effective portfolio management, it is necessary to have implemented the Stage-Gate Model.	Gates are not function as they should, which leads to too many poor projects being carried out. The analysis shows that only 33% of companies actually have properly functional gates. Moreover, it also shows that gates lacks of teeth, and as a consequence of this is, projects are rarely killed at the gates. Further, will this lead to poor project passing through, and taking up unnecessary resources from the company.
Accelerates product to market.	Lack of defining gatekeepers.
Helps the firm concentrate on the right projects, or readdress poor projects, thus increasing likelihood of success.	Gatekeepers behaving poorly.
Defining expectations at an early stage, hence, fewer mistakes is made, improved success rates, early detection of errors and shorter cycle times.	Being too much bureaucratic. Means, having meetings, procedures and mandatory activities that has nothing or little to do with the project.
Contribute to efficient and effective allocation of recourses.	Defining the product and making the business case is the most critical part of the model, and it is in this stage most people lack of knowledge.
Systematizes a normally chaotic process.	Overkill in deliverables or data integrity.
Break product innovation down in smaller pieces.	Not following the concept of the model, for example doing different stages at the same time.
Having a holistic view on the process, hence having cross-functional teams to perform the needed activities
Increase efficiency, reduce risk of redundancy and ensure that projects do not fall off the course during its development.