Chapter 18

Stage-Gate model

The big picture

The Stage-Gate model, also referred to as the Phase-Gate model, takes the often complex and chaotic process of developing an idea (e.g. for a new technology, a new product or a process improvement) from inception to launch and divides it into stages or phases (where project activities are conducted), separated by gates (where business evaluations and ‘go/kill’ decisions are made). At each gate, the continuation of the process is decided on. Originating in the chemical industry, the use of funnel tools in decision-making when dealing with new technology and product development was further developed by institutions like NASA. In the mid-1990s, Robert Cooper and Scott Edgett, two Canadian scholars, developed the Stage-Gate model as it is known today (Figure 18.1).

When to use it

The Stage-Gate model is based on the belief that product innovation begins with ideas and ends once a product is successfully launched into the market. In its entirety, Stage-Gate incorporates pre-development activities (business justification and preliminary feasibilities), development activities (technical, marketing and operations development) and commercialisation activities (market launch and post-launch learning) into one complete, robust process. Most firms suffer from having far too many projects in their product and technology development pipelines for the limited resources available. A structured approach with clearly stated stages and gates at which a project can be stopped helps to prune the development portfolio of weak projects and deal with a gridlocked pipeline. In particular, the gates serve as quality control checkpoints in the process. They contribute to three goals: ensuring quality of execution, evaluating business rationale and allocating resources. In this way, the Stage-Gate model tries to ensure the right projects are done correctly.

How to use it

A generic Stage-Gate model has five phases and five gates. Ahead of the first phase is a preliminary or ideation phase called discovery. The result of this phase is an idea for a new technology or new product to be developed. This idea is then presented at the first gate: the initial screen. When it meets the requirements set at this gate, such as relevance to the company’s aspired market position and/or complementarity within the product portfolio, the idea is taken on and a project is formulated. This project then – generically – moves through five phases:

• Scoping – stating the project definition, project justification and the proposed plan for development. Also, stating the initial thoughts on application(s) of, target customers for and benefits from the idea.
• Build business case – once past the second gate, the business rationale of the project is to be proven. By investigating the potential market(s) and potential application(s), the potential benefits offered by the idea (e.g. for a new technology or product) to potential customers are outlined. The comparative advantage over the competition and substitutes should also be stated. The feasibility of the new product and technology is also to be proven.
• Development – after passing the third gate, where management has reviewed the business rationale of the project, the actual detailed design and development of the new product or new technology take place. This often includes the design of the operations or production process required for eventual full-scale production.
• Testing and validation – after passing the fourth gate, where the technical feasibility (proof-of-concept and/or prototypes) is reviewed, tests or trials in the marketplace, laboratory and plant take place to verify and validate the proposed new product or technology and its associated brand/marketing plan and production/operations plan.
• Launch – once past the fifth gate, where the commercial feasibility (of the validated product) is reviewed, the new product or technology is commercialised and operations or production, marketing and selling start at full scale.

Often after the fifth phase there is an evaluation of the development process and of the launch. This evaluation is also known as the post-launch or post-implementation review.

The final analysis

The Stage-Gate model has a number of advantages that typically result from its ability to identify problems and assess progress before the project’s conclusion. Poor projects can be quickly rejected by disciplined use of the model.

The Stage-Gate model can easily be used in conjunction with financial (project) valuation methods such as net present value (see Chapter 9) and technology assessment methods such as technology readiness levels to base decision-making on quantitative analysis of the feasibility and attractiveness of developing potential product ideas. Another advantage of the model is that, at each gate, there is an opportunity to interact with the project’s executive sponsors and other stakeholders with regard to the progress and importance of a project.

An inherent disadvantage of the Stage-Gate model is that it structures the process of new product or technology development, which might interfere with creativity and innovation. The model regards these processes as linear, although in reality many creative and research-driven projects are largely iterative processes.

References

Cooper, R.G., Edgett, S.J. and Kleinschmidt, E.J. (2002) Portfolio Management for New Products. Reading: Perseus Books.

Cooper, R.G. (2011) Winning at New Products: Creating Value through Innovation, 3rd edn. Philadelphia PA: Basic Books.

European Industrial Research Management Association (EIRMA) (2002) No. 59: Project Portfolio Management. Paris: EIRMA.

Stage-Gate International: www.stage-gate.com