The Stage Gate process: A powerful method used for efficient project management

Developed by DTU student, Lillian Nygaard

Abstract

When it comes to achieving a successful project with regard to new product development, efficient project management is a key factor. A simple method to secure this is by executing projects through a Stage-Gate process. The Stage-Gate process is method that guides a project from discovery to launch in an organized and efficient manner. It involves breaking down the project into stages which are separated by gates. The gates are used to decide whether or not the project should proceed into the following stages. The Stage Gate process was developed by Dr. Robert G. Cooper and presented in the book 'Winning At New Products' in 1986. Dr. Robert G. Cooper’s developed process is implemented by more than 80% of the companies in North America and the implementation of the process worldwide is growing as companies are pursuing to develop their innovation competences. The Stage Gate process include five stages that the project must proceed through:

1. Preliminary Assesment
2. Business Case Preparation
3. Development
4. Testing & Validation
5. Full Production & Market Launch

Each stage is created to acquire information for the purpose of the project to proceed into the next stage. The five stages are characterized by specific activities that must be accomplished within each stage. To expedite the project’s progression towards the next stage, the activities are completed in parallel in the different departments within each stage. These activities are intended to acquire knowledge about the project while increasingly reducing ambiguity and risk. The outcome of the activities becomes the foundation for the so called ‘’gatekeepers’’ to decide whether to maintain investment or to kill the project. The main advantage of implementing the Stage Gate process is increased efficiency in new product development. The process is making it possible for companies to evaluate their project through the stages and efficiently manage their resources and minimizing potential risks. The result of this is that the companies will manage to produce superior products with reduced mistakes. The purpose of this wiki article is to demonstrate how the Stage Gate process can be used as a powerful method for efficient project management. Furthermore, the stages and gates will be described.

Description

The Stage Gate process

The Stage Gate process is an innovation methodology used in project management to assist firms through the process of developing a new idea or product and processing it into a final launch. The process is created to manage all forms of projects simple to complex. The advantage of the process is that it is divides the project into steps where different activities must be completed in order for the project to move further in the process. Throughout the whole process decisions are to be made whether if it is efficient to progress or simply stop the project. The following picuture illustrates an owerview of the Stage Gate process from discovery to launch.

Figure 1: An Overview of the Stage-Gate process by Dr. Cooper.

Stages

Figure 2: Overview of a Stage.

The stages are divided in five different stages from 1 to 5. Every stage is an individual step in the process each designed to gather enough information to transfer the project into the following stage. All stages are different but structured in a similar way consisting of the following:

1. Activities

2. Analysis

3. Deliverables

When looking at every individual stage, they all have different purposes. The stages have their own activities that need to be accomplished in order to get the stage to a gate. The actives within each stage are completed in parallel in the different departments to expedite the project’s progression towards the next stage. These activities are intended to acquire knowledge about the project while increasingly reducing uncertainty and risk the project might endure. The outcome of the activities becomes the foundation for the stage to progress into a gate where the purpose is to decide whether or not to maintain investment or to kill the project. As the stages progress, the departments are expanding to create organizational adaptability. The cost of each stage increases gradually as the team develops to ensure organizational preparedness and alignment and to encourage market adoption of the new product development.

Gates

Figure 3: Overview of a Gate.

Through the process, there are five gates that the stages are acquired to go through in order to launch the project. The gates work as a decision point where the leaders from top management consider the information gathered from the previous stage and decide to either maintain investment or to kill the project. The gates are designed to secure the quality of the project as it progresses. Furthermore, the gages are providing the opportunity for companies to evaluate their project, in the current state and efficiently manage their resources and minimizing potential risks. The gates simply transfer the project safely into the next stage. All gates are different but structured in a similar way consisting of the following:

1. Deliverables: The information gathered from the previous stage is presented to the top management or the so called ‘’Gatekeepers’’.

2. Criteria: The project is evaluated in contradiction to a predefined collection of success criteria which are applied on all new product projects. The success criteria are proven to seek out winning products and is a powerful tool determine whether the project is suitable to progress. The Stage Gate process involve measuring the project against six success criteria which are the following:

• Strategic Fit
• Product and Competitive Advantage
• Market Attractiveness
• Technical Feasibility
• Synergies/Core Competencies
• Financial Reward/Risk
  

3. Output: When the information from the previous stage is presented and the project is measured against the success criteria, the Gatekeepers are responsible for making a decision regarding the project. The decision must be one of the following:

• Go
• Kill
• Hold
• Recycle

The decision that the Gatekeepers rule on will determine the outcome and if the project will proceed through the gate and into the next stage.

Application

In the following section, the application of the Stage Gate process with regard to new product development is described and which activities that are required to complete each stage to get to a gate where a decision must be made. It it important to note that depending on the project, product or concept the process can deviate.

Idea:
When a new product idea is established, the Stage Gate process is set in motion by submitting the idea to the first gate of the process.

Gate 1: Initial Screen
The first step of the process is to do an initial screening of the project to determine its viability for investment. If it is decided to proceed, the project enters the Preliminary Assessment stage. The initial screening is the start of the process where the project is subjected to key criteria. The criteria relate to if the project is a strategic fit with the company and if the project is feasible. The Initial Screen does not include any financial criteria but is a foundation to determine the potential of the project in an early phase.

Stage 1: Preliminary Assessment
In the first stage, the projects technological and commercial advantages is determined. The preliminary assessment includes gathering information provided by economical tasks such as literature research, reaching out to stakeholders, organizing the focus groups, or creating a rapid product test and presenting it to a selected group of individuals to assess the products feasibility. The purpose is to analyze the market size, the potential, and the probable level of acceptance of the concept or product. Simultaneously an internal preliminary technological assessment is performed of the proposed concept or product. The objective is to evaluate whether the development and manufacturing of the product is feasible, as well as potential expenses and timelines for the execution. When the information regarding the technicality and market is determined in Stage 1 the project can proceed into Gate 2.

Gate 2: Second Screen
Gate 2 is somehow a repetition of Gate 1 where the project is analyzed and evaluated from the new information gathered from Stage 1. If the choice is to proceed with the project, the next stage will be much more expensive. When the project meets Gate 2, there are the same set of "must meet" and "should meet" criteria which were in Gate 1. The "should meet" criteria which are to be addressed now are regarding the performance of the sales team and the response of customers to the product proposal. These criteria are made due to the new information gathered throughout Stage 1. After the criteria are met the project once again go through a decision-making process. The Gate 2 is where the project gets evaluated through a financial point of view and where a simple calculation of the payback period is made.

Stage 2: Business Case Preparation
Stage 2 is the last stage the project is going through before the start of product development. In this stage the project should be well defined. A verification of the projects appeal needs to be considered before larger investment is to be made and a competitive analysis must be conducted. A research of the market should also be done in this stage to establish the information on the costumers preferences to make sure that the new product is gonna be a succes. In this stage the concept should be tested on possible costumers to evaluate the acceptance of the product. A technical evaluation should also be done of the project to make the costumers wishes transferred into effective solutions with feasibility. To be able to make these solutions it can be necessary to create an initial design of the product. An evaluation of operations within the project such as production feasibility, manufacturing expenses, and necessary investments should be carefully examined. Finally, if necessary, work of legal considerations associated with patents and copyrights should begin in this stage. When all these assignments have been completed a financial analysis should be performed to enter Gate 3, which usually include performing a discounted cash flow method and a sensitivity analysis.

Gate 3: Decision on Business Case
Gate 3 is the last gate before product development and is the last chance for the project to be killed, if necessary, prior to entering a large investment. When the project reaches Gate 3, there will be new criteria of "must meet" and "should meet". Furthermore, a critical evaluation of the activities and information obtained in Stage 2 is to be made. It is important to make sure that all activities that was set to be made was completed successfully and the results from Stage 2 was progressive. Another important part of Gate 3 is to analyze is the results of the financial analysis made in Stage 2. The results are essential because if the project gets a ‘’Go’’ in Gate 3, the heavy investments will begin. As said Gate 3 is the last Gate before the project goes into product development and this means that the definitions of the project must be decided which involve:

• Target market to identify potential customers.

• Product concept where the purpose, scope, and objectives of the product is clearly defined.

• A description of the product positioning strategy.

• A description of the product benefits that needs to be produced.

• A settlement on important and wanted features, attributes, and descriptions of the product.

When the above is completed and approved and if the decision of project is a ‘’Go’’ the project is moving into a new stage which is Stage 3.

Stage 3: Development
When the project reaches Stage 3 the product development begins, where testing, marketing and operation plans are prepared. In this stage it is necessary to make sure an updated version of the financial analysis is completed. All legal matters associated with patents and copyrights that was ongoing in Stage 2 should be completed in in Stage 3.

Gate 4: Post-Development Review
When reaching Gate 4, the project must go through a Post Development Review, where all the development made in Stage 3 is evaluated critically and confirming that project and product is still appealing and progressing in the right direction. The financial analysis update made in Stage 3 is evaluated and the testing, marketing and operation plans that were prepared in Stage 3 are also evaluated for upcoming implementation.

Stage 4: Testing & Validation
Stage 4 is a validation stage where the project is validated to ensure the project is feasible. The testing and validation start with the product, then the process of the manufacturing part, the approval of the costumers and lastly the financial parts of the project. Furthermore, the following activities of Stage 4 are:

• Internal testing of the product securing that the quality and performance of the product is aligned with the expectations.

• External testing of the product securing that the product is functioning properly when used and gathering of feedback from costumers.

• Testing the production process to optimize the production and establish more accurate costs and rates.

• Testing of the market where trial sells are made to evaluate the efficiency of the launch plan and to establish an estimation of the market share and profits.

Gate 5: Pre-Commercialization Business Analysis
Gate 5 is now the final Gate where a pre-commercialization business analysis is carried out. The main focus of Gate 5 is to verify the efficiency of the of the previous activities completed in the Testing & Validation stage. An evaluation of the economic part of the project is also carried out to be able to make one last decision to get the project into the next stage. Gate 5 is the last gate which the project can be killed. The plans for operation and marketing completed prior are examined in Gate 5 and must be approved upon to be executed in the next stage. When Gate 5 is completed the commercialization of the project can begin.

Stage 5: Full Production & Market Launch
Stage 5 is the last stage in the process and includes an execution of the full production and market launch.

Post-Implementation Review
When the project has gone through all the stages and gates the process is finished and the product or project should be evaluated to understand how the product has been performing. All information including costs, profits, revenues are reviewed and evaluated. Furthermore, the strength and weaknesses of the project is reviewed. All this is carried out to obtain information about the process and to learn from the project to be able to carry out an even better project the next time. The Post-Implementation Review is the last part and end of the Stage Gate process.

Limitations

Even though a lot of organizations have implemented the Stage Gate process for new product development, some seem to experience difficulties and drawbacks in the process. There are certain limitations regarding the use of the Stage Gate process. Some of them can be when the performance of the different stages and gates are not done properly. This can lead to a critical outcome of the process. Some of the most common mistakes made when using the Stage Gate process experiencing are described in the following:

Gates with no teeth:
A common mistake that organizations tend to make when implementing the Stage Gate process is having Gates with no teeth. What this means is that projects often progress past a gate despite the lack of performance in the previous stage. In other words – the gates have no teeth, and once the projects have been given the green light they are rarely killed, despite poor performance.

The Gatekeepers:
When it comes to gatekeepers it is often seen that companies have difficulty with defining the actual gatekeepers. A problem that arises is often that a lot of senior managers have the opinion that they should be a part of the decision-making process and be a gatekeeper. The consequence of this is that the number of gatekeepers is way too high which often results in pour decision-making in the Go/Kill decisions simply because there are too many people involved. Another problem often seen is that people working as project managers also works as gatekeeper which again results in poor decision-making.

Deliverables overkill:
A lot of companies make the mistake of delivering way too much information to the gatekeepers at the different gates. This overkill of deliverables from the different project teams makes it very difficult for the gatekeepers to decide if the project should progress to the next stage. The workload the project teams experience can also lead to poor information gathered simply because there is too much work to be done. The following indicate certain reasons that cause these deliverables overkills:

• When there is poor information presented to the project team on what needs to be analyzed and delivered during the stages and gates it eventually results over-delivering. This makes it hard for the gatekeepers to get an understanding of the material that they need to go through to make a decision whether to go through with the project or not. This results in overload of work for both the project teams and the gatekeepers. It is very important the correct information is presented to the project team so there are no misunderstandings and that the activities that needs to be performed are clear. This makes the process quick and efficient for everyone.

• Another reason for overkill of deliverables can be that the firm is following a Stage-Gate process that is not designed completely for the purpose of company’s project. A lot of companies make poor decisions of running the project through process of detailed templates that should have been adjusted to the specific project which results in overkill of deliverables that may not even be important for the project.
  

Annotated bibliography

The following are additional annotated bibliography regarding the Stage Gate process.

• Grönlund, J & Sjödin, R.D & Frishammar, J, 2010, ‘’Open Innovation and the Stage-Gate Process: A Revised Model for New Product Development’’, California Management Review.

• O’Connor, P, 2003, ‘’Implementing a Stage-Gate Process: A Multi-Company Perspective’’, Journal of Product Innovation Management.

• Cooper, R.G, 2014, “The next stage for Stage-Gate”, Pragmatic Marketer.

• Cooper, R.G, 2016, “Agile-Stage-Gate Hybrids: The next stage for product development”, Research-Technology Management.

• Cooper, R.G & Sommer, A.F, 2016, “The Agile–Stage-Gate Hybrid Model: A Promising New Approach and a New Research Opportunity”, Journal of Product Innovation Management.

• Cooper, R.G. 2009, “How companies are re-inventing their idea-to-launch methodologies,” Research-Technology Management.

• Cooper, R.G, & Edgett, 2008, S.J, “Maximizing productivity in product innovation,” Research Technology Management.