Innovation

Stage/gate model for new product development

The stage/gate model is a structured process for managing the development of new products in a corporate setting.

The stage/gate model is a structured process for managing new product development in a corporate setting. It is divided into stages where development work is completed, with a review meeting or 'gate' at the end of each one. The process is intended to help promising ideas get the resources they need to develop while also eliminating ideas that do not have potential.

When to use it

● To improve the structure of your new product development process.
● To assist you in investing in high-potential ideas and eliminating ideas that do not appear promising.
● To provide you with a more complete picture of your overall product pipeline.

Origins

The notion that development projects should be phased over time has a long history. Methodologies for sequencing investment over multiple phases, for example, were developed in the 1950s in the world of chemical and industrial engineering, and NASA had a phased review process in the 1960s. In a completely different context, during the postwar years, the venture capital industry developed its own models for sequential investing, which are now formalised as a series of 'funding rounds.' The pharmaceutical industry has also developed a highly rigorous drug approval process, beginning with pre-clinical development and continuing through four phases of clinical development.

Robert Cooper introduced the stage/gate methodology for new product development in a 1986 article, 'Winning at New Products,' and then in a book of the same name. Cooper formalized many intuitive ideas about the sequencing of investments in new products into a structured methodology that was widely adopted by firms worldwide.

The stage/gate methodology has been criticized for being overly restrictive at times. Alternative approaches to innovation, such as design thinking, have been proposed as providing greater flexibility.

What it is

The stage/gate methodology is a structured process for improving the efficiency of product development. Prior to its implementation, many firms had ad hoc product development processes, which meant that projects were funded based on the political power of whoever was supporting them, and there was little coherence in the overall portfolio of products in development.

From idea to launch, the stage/gate methodology defines a series of stages. Each stage consists of a predefined set of activities that must be successfully completed before moving on to the next stage. Each stage has a gate, which is typically a meeting where progress is reviewed. These meetings give the process control because they allow the senior executives in charge to monitor progress and decide which projects should be continued and which should be canceled.

How to use it

The methodology is divided into five stages and five gates. This description is primarily based on Robert Cooper's methodology, though many other variations have been proposed over the years:

● Discovery: Also known as the "fuzzy front end" of the process, this involves various informal methods of coming up with potential new product or service ideas. It concludes with the first gate, the 'idea screen,' which is typically a cursory assessment of whether the idea appears promising.
● Scoping: This is a quick, preliminary investigation of the project that usually takes no more than a couple of weeks. For example, the project team could look to see if other companies have launched something similar, investigate technical feasibility, or speak with some potential customers.
● Build the business case: This is a much more detailed investigation of the idea's potential, typically involving both marketing and technical people (who examine customer interest) (who dig into technical feasibility).
● Development: entails the detailed design and development of the new product, as well as some simple product tests (to show that there is a viable market opportunity). A production plan and a market launch plan are also implemented here.

● Testing and validation: During this stage, extensive product testing takes place in the marketplace, the R&D lab, and the manufacturing plant.

The stage/gate process is extremely beneficial because it adds structure and discipline to what could otherwise be a chaotic process. It can help prioritize resources toward the most promising products, which can help accelerate product development. It also aids those at the top of the company in maintaining control: they can see how many products are at each stage of the process, and if there are any obvious gaps (in terms of what the market requires), they can be filled either by acquiring what is missing or by accelerating the development of specific products. There are additional advantages in terms of coordination. Many traditional product development processes were carried out in silos, with research handing over their work to development, who then passed it on to marketing. A well-managed stage/gate process ensures cross-functional coordination, for example, by bringing in marketing personnel early in the development process.

The most significant limitation of the stage/gate process is that it can become overly formalized, resulting in both a slowing of the development process as a whole and a very narrow view of what types of products get through. Often, the most innovative projects are killed in such a process because they do not meet the expectations of those conducting the reviews.

Top practical tip

The important thing to remember when using the stage/gate process is that it can both slow you down and speed you up. Most formal processes become a little bit bureaucratic over time, and the people in charge of each review begin to demand more proof before the product idea is allowed to proceed. This can lead to a long and painful development process, which can be demotivating for the project team.

This problem can be solved by switching things around every few years. This could imply combining two stages or putting different people in charge of each process. It may also imply allowing promising projects to skip certain stages.

Top pitfall

The most serious issue with stage/gate processes is that they eliminate the most intriguing and unusual new product ideas. Indeed, many 'disruptive innovations' begin as highly unpromising ideas. To counteract this threat, a number of large corporations have established separate funding vehicles that are specifically designed to invest in things that do not meet the usual criteria set out in a stage/gate process. Shell, for example, has a 'Gamechanger' unit, and Reuters once had a 'Greenhouse fund.' These types of venture units present their own set of managerial challenges, but they are an effective way of providing some initial funding to high-risk projects.

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