Best Practices for Implementing a Gated New Product Development Process
Many companies are familiar with new product development and follow a gated process, but few follow the official Stage-GateⓇ (or Phase-Gate) by the book – it wasn’t designed to be used that way. Companies are encouraged to tailor their gated process to their specific needs (5-gate for new product development, 3-gate for product line extensions, and 1- or 2-gate for product improvements) and desired business outcomes. Those may be anything from reducing time to market or improving product delivery throughput to decreasing development costs.
Planview’s Product Innovation Solution
Se Planviews lösningar för produktinnovation och produktutbudshantering i aktionWatch the product demo • Planview’s Product Innovation Solution
Just like the best practices that dictate the ongoing improvement given to products to garner that “new and improved” label, we must also evolve and grow our new product development processes as maturity increases and the market changes. We live in a world where few things can stay stagnant and survive, let alone thrive. Even an effective new product development process needs refinement, and some would argue that companies should never stop seeking to enhance how they ideate, develop, and launch new products.
If you want to improve the quality of output from the process, you must focus on the process itself. Putting on our agile hat, we should always ask, “What can I do to improve each stage of the gated process to get better continually?”
Developing new products and taking them to market is getting increasingly more complex and expensive throughout each of these Stage-Gate phases:
- Building a Business Case
- Testing and Validation
Product development leaders need visibility into data and opportunities to kill products that will not generate revenue or be successful in the marketplace as early as possible. Only then can they redirect those resources (people and money) to the next innovation that appears to have a better chance of success. Often, as complexity and expenses grow, formulating a new product development process is key to helping them make those critical determinations.
Even departments outside of product development, such as IT and operations, can benefit from the discipline and efficiency offered through the gated process, seeing gate meetings as a valuable step in ensuring projects are on track and resources are available to proceed. In addition to IT incorporating Stage-Gate practices with their projects, product development teams are now implementing Lean and Agile methods, dubbed “Agile Stage-Gate.” In this scenario, they use the iterative components of Agile inside of the stages and still take the project to the gate for resource and money allocation.
In particular, CFOs are under constant pressure to assess the strategic alignment of investments. This pressure point is one area where investing in a new product development process can come into play. Gartner says CFOs now have the added burden of taking on “a more active role in steering their organization to assemble a portfolio of investments that will maximize long-term value for the enterprise.”
Gartner also says, “CFOs who practice capital responsiveness can add 2.5 percentage points to economic value added.” How? By quickly shifting capital away from low-value uses to high-value uses and making significant (not incremental) changes to where capital is allocated. This, in fact, is the exact purpose of Stage-Gate, but it’s clearly not just product development anymore.
“CFOs who practice capital responsiveness can add 2.5 percentage points to economic value added,” says Gartner.
The Stage-Gate Process may be familiar: It allows companies to invite key stakeholders across the enterprise into the decision-making process and divides projects into distinct phases or “stages” separated by decision “gates.” These gates present the opportunity for gatekeepers to review progress, risks, available resources, and strategic value before giving the approval to continue to the next stage. A project leader is granted only enough resources and money for the team to complete a single stage. Resources are only allocated to execute the next stage of work versus committing completely upfront, as with Waterfall.
Stage-Gate is not unlike remodeling a home. You would never give a contractor 100% of their money before they begin work, nor could you imagine every possible requirement and potential roadblock ahead of time. Experienced homeowners know you pay a little upfront, evaluate the work, then give a more significant amount when the contractor executes the project properly. Things may still go awry, but you can at least manage the risk and make changes when you make decisions as needed and take an incremental approach to funding each stage.
The discovery-to-launch process is just one piece of the overall innovation framework
Before embarking on an effort to improve and update your new product development process, it’s helpful to understand the overall context within which the discover-to-launch process fits. This process is part of a larger framework, the Innovation Framework, to advance “organizational innovation capacity to deliver profitable growth and develop an organizational competitive advantage in product innovation.”
The Stage-Gate Innovation Performance Framework consists of four key drivers to give organizations a competitive advantage in new product innovation, and you need all four to have a thriving innovation practice within your company:
- Discovery-to-Launch Process
- Product + Technology Strategy
- Portfolio Optimization
- Culture Leadership
The Discovery-to-Launch Process was coined by the inventors of Stage-Gate, Dr. Bob Cooper and Dr. Scott Edgett, and is considered “the industry standard for managing innovation.” The process involves an Agile-like approach with cross-team collaboration with a high degree of visibility, leveraging the attention and skills of multiple functional areas to strategically move a product or initiative through the innovation pipeline with a greater chance of success.
The gates that give the “go” approval to proceed to the next stage give gatekeepers opportunities to evaluate project activities in incremental phases throughout the project’s lifecycle. They may give the project the green light to continue, pause it for more information or additional effort, reprioritize it for a product development project of greater value, or kill it altogether. Gatekeepers do not make these decisions through assumptions or favoritism, they are objective, based on agreed-upon criteria built into the process.
This visual pipeline serves as the roadmap and the record keeper of progress, risks, roadblocks, and responsibilities. An indicator that your new product development process could use an update is if all projects are getting approved at each gate. Companies can track this information and give the gates “teeth,” as Dr. Cooper calls it. New product development software shines here, providing historical visibility, configurable and automated workflow capabilities, and gated controls so your company can speed time to market and invest in the right projects at the right time with less risk.
Best Practices: Design different gated processes for different types of projects and products. Additionally, use software to provide transparency in discovery-to-launch reporting.
An indicator that your new product development process could use an update is if all projects are getting approved at each gate.
Product + Technology Strategy
Before an organization even begins to think about Stage 0 Discovery activities, it’s critical to understand the overall strategy for the company or brand. A company that has an objective to be first to market with innovative, category-changing products will operate much differently than a company that wants to be a fast-following, low-cost provider. Product Development leaders need to be in agreement about how they intend to create value for customers and shareholders, increase revenue, and improve their market position.
Dynamic planning allows for transparency and change when it comes to current business capabilities, dependencies, and priorities. You must be able to answer which products and processes are critical and whether the portfolio can deliver on new strategies and priorities when needed. The product and technology strategies as well as their supporting roadmaps must be in alignment to support business goals.
Best Practices: Conduct regular strategic “realignment” exercises that support dynamic planning. And with the increasing introduction of smart, connected products, aligning the product and technology roadmaps to strategy is critical to consider for delivering innovation.
Just as with a financial portfolio, individual “investments” (projects) make up the project portfolio, each with its risks and opportunities. But as a whole, the portfolio should create a strong roadmap to achieve the strategic goals of the organization. The new product development process is further streamlined and simplified using software to identify which projects are worth investing in, and each gate provides the oversight to make that clearer. Only the best projects advance and receive the proper resources – those that continue to be aligned with strategic priorities and deliver value.
The goal of portfolio optimization is to maximize the overall value of your portfolio by balancing key factors like:
- Project timelines
- Profitability targets
- Effective resource utilization
These key factors, amongst others, then must become aligned with strategic priorities. Too few projects may mean innovation is waning. Too many projects can spread resources thin, leading to delays, a clogged new product development pipeline, overspending, and subpar quality. Most companies have limited resources, and an optimized portfolio maximizes resources across all approved projects. While it may seem illogical, this sometimes means approving fewer new product development projects in the portfolio at one time in order to increase throughput and on-time product delivery.
Best Practices: Portfolio optimization should work in tandem with the gated process. It doesn’t help to streamline the process if you’re working on lower-value projects. Establish a regular cadence for portfolio optimization (industry leaders review and adjust strategies, funding, and portfolios continually, but quarterly and biannually are both considered good practices) and establish clear criteria for portfolio optimization to keep opinions and biases out of the process – it must be data-driven, not personality-driven.
The most successful companies have established a culture of innovation. KPMG estimates 70 percent of the impact on culture comes from leadership decisions, guidance, and modeled behaviors, while the remaining 30 percent is driven by elements such as training and engagement programs.
From the top-down, everyone must be rowing in the same direction, know their purpose and value, and feel motivated to contribute in their own way. They can work together to execute, sharing data and ideas in a free-flowing, collaborative atmosphere that rewards creativity and risk-taking because controls keep things in check.
Building an innovative culture must be deliberate. It’s not just going to “happen.” When innovation is everyone’s job, it’s no one’s job, so leadership must lead the charge, encouraging people to think outside the box, making it clear that failure can be a path toward incredible innovation.
Best Practices: Celebrate kills and encourage “fast fails” to show the executive team encourages exploring new ideas. Consider introducing a Shark Tank/Dragon’s Den (UK) Week across the company as a highly visible way to establish an innovative culture driven by leadership. Applying learnings forward is also a key component of an innovation culture.
When innovation is everyone’s job, it’s no one’s job, so leadership must lead the charge, encouraging people to think outside the box, making it clear that failure can be a path toward incredible innovation.
Making the Stage-Gate process your own
No one uses Stage-Gate out of the box. “Have it your way” is more like it, offering the freedom to design and adjust a gated process that supports your company and process. However, this doesn’t give license to create a shadow of the Stage-Gate process and loosely call it a gated one.
While customizing the new product development process to fit your business requirements is normal, an effective gated process contains a few basic principles. Stages have defined purposes and activities to be completed in order to be effectively assessed at the gate meeting. Gates provide quality-control checkpoints from a cross-functional group of leaders representing different departments that will touch the product in some way on its journey to the store shelf or website for purchase.
These Gatekeepers often include decision-makers and resource owners from:
- Juridisk information
- Product management
Their job is to ensure (eventual) customer satisfaction, strategic alignment, product efficacy, quality, value, etc. Nothing progresses past the gate until predetermined qualifications are met. This iterative process allows for changes or kills before too many resources and money have been allocated, keeping the pipeline flowing and products being delivered to market.
A standardized tool and processes with clearly defined expectations and roles present a visible way to track progress. People have greater confidence and direction when seeing the product roadmap knowing it has been thoroughly vetted. The highest value projects get the budget and people they need to deliver, while the projects that fall short have a path to redemption or the graveyard.
Trends around Stage-Gate
Product development organizations use Stage-Gate as the defacto methodology. In IT and software development, Agile is the methodology of choice. But in the past five years, each department has been borrowing from each other, giving them the best of both worlds using the new Agile Stage-Gate hybrid approach.
It’s no surprise integrating the two has come to the forefront of development practices. Connected products have been the trend over the last five years. Smart products have taught us that complementary technology can greatly enhance traditional products like a thermostat with a mobile app and a refrigerator alerting you when you’re almost out of milk. Today, product development teams are incorporating more Agile practices into their new product development phases, and it’s quickly becoming a best practice.
There are additional benefits of allowing teams to work with the methodology that they’re most comfortable with, particularly when it comes to smart, connected products. These products have both a physical aspect (leaning on traditional Stage-Gate processes) and a connected (software) aspect. Software engineers can continue to use Agile and the overall product development team (and physical component) can use Stage-Gate, collaborating to deliver a common roadmap.
As the Stage-Gate process divides projects into distinct phases with decision gates that determine further movement, the Agile methodology is all about iterative and incremental progress as well. The gated approach can act as the big picture view and plan, while the Agile methodology can provide the more detailed project management portion within each stage.
Combined, the Agile Stage-Gate hybrid model aims to maintain oversight throughout the discovery-to-launch process while allowing dedicated teams the flexibility to experiment, obtain feedback, and pivot when necessary. This new product development model, albeit somewhat groundbreaking, is not a one-size-fits-all process but should be customized per company and per project type.
Within this best practice is another: Finding a single software solution that allows Agile to coexist within your gated new product development process. Product development managers and team members can implement software that:
- Automates the discovery-to-launch process
- Aligns the product portfolio to the overall company strategy
- Ensures resource availability while avoiding overallocation
- Centralizes analytics as a single source of truth
- Enables teams to work using their preferred methodology
Key Considerations for New Product Development Process Software
When considering new product development software, you’ll find similar tools on the market that can automate the gated process with similar features and benefits. But there are things to consider as key differentiators:
People work in different ways today, and you want to encourage people to keep the methodology they’re already using so they don’t have to change to accommodate the implementation of software – rather the software should support the way teams work today. In a world with so many ways of working, your company and the software used inside of the organization need to support multiple methodologies natively.
Choosing a software solution that embraces the changing world of work, and supports a wide variety of process methodologies like Stage-Gate, Agile, collaborative, or waterfall, is a smart choice. Offering this flexibility will increase adoption and ensure different teams can work collaboratively in the same tool with real-time visibility, helping you drive organizational alignment and business objectives.
Analyser och rapporter
Being able to make good, timely decisions based on accurate data is an essential component of prioritizing the product portfolio and the many new product development projects being managed within it. The analytics, reports, and dashboards that enable those decisions must be easy, transparent, and configurable. Spreadsheets and manual report generation have no place here due to the ever-changing marketplace, competitive landscape, and customer needs.
You need software that offers a simplified way for people to work together to choose the highest value products for a balanced portfolio and monitor them in real-time to address issues before the project goes sideways. It must go beyond the simple management of the new product development process to provide resource capacity and financial planning so leaders can strategically allocate money and people while understanding dependencies and risk. They need historical actuals and predictive forecasting to learn from the past and prepare for the future.
The analytics, reports, and dashboards that enable those decisions must be easy, transparent, and configurable. Spreadsheets and manual report generation have no place here.
Ultimately, your company needs a solution to speed decisions and manage the new product development process from beginning to end. With all of the data consolidated in one place around a gated process, the software you select will be your single source of truth, so choose a scalable solution with a proven track record in the industry that you can trust.
The new product development process requires copious amounts of data at every stage, yet many companies still operate in silos, keeping each other locked out of critical information for execution and strategic decision making. Disparate systems are why manual reporting is still prevalent.
Select software that was built to integrate with other business systems to pull information in and push it out automatically into customized reports. Avoid duplicate entry at all costs to win the hearts and minds of end-users.
The efficiencies these integrations afford cannot be understated and the ROI is easily calculated. For instance, how much time would it save gatekeepers if they could see and analyze all information needed to go to gate in Outlook without logging into another system? That’s easy math.
Besides Outlook, you may want to integrate your product development software into Jira or SAP. Once again, integrations enable you to honor how people work without asking them to change systems or manually enter data from one system into another. If this is going to be your source of record, don’t you want to trust the data and make it easy for people to access it?
The new product development process is changing for the better but it’s up to you to continually modify your process to drive efficiencies and improvements. It requires leadership buy-in and a culture of innovation that extends beyond products to the process behind developing and launching those products.
As you advance your new product development process, consider the Agile Stage-Gate hybrid model so your company has the flexibility to learn as it goes. Remove the pressure and risk of thinking through everything on the front end. Today, your company has the luxury of making adjustments when change happens.
This new, more adaptive approach allows for exploration and experimentation in the discovery phase, understanding the market and competition in the scoping stage, and building a solid business case and plan after careful (yet not overdone) analysis. The right software will pull all of this data together in one place and offer critical business functionality to take it to the next level. Your company will have the visibility and transparency it needs to mature its product development process and deliver higher-value products to market faster, more cost-effectively, and with less risk.
Building a new product development process can be a substantial undertaking. In this short product portfolio management demo, see how with the right solution at your side, you can quickly turn that investment into long-term results.
To strengthen your understanding of how the discover-to-launch process fits inside the larger Stage-Gate Innovation Framework to aid in innovation we have provided the following:
On this page you can gain a high-level perspective of the Stage-Gate Innovation Framework as well as an explanation on the four driving practices that make up the model.