Stage-Gate Product

Development Process

EMGT100 Introduction to Entrepreneurship

Prof. James
 What is Stage-Gate?
• A conceptual and operational map for translating an idea
into a successful commercial product while minimizing
financial risk

• It is a blueprint for managing the new product development

process to improve effectiveness and efficiency

Warning: You need to keep a close eye on “the process”

and “process control zealots” so that Stage-Gate process
does not become a reason to increase product
development cycle times and to delay decision making
 The Product Development Funnel

Many Ideas Go In

One Product Comes Out

Time

How do we make difficult, consensus building, decisions along the way?

How do we reduce the risk of spending too much money on a bad idea?
The Financial Commitment Grows Steadily
as Resources are Added to the Project

$$

Time

Ideas Product
 Developing a Process for Designing
New Products

• Too much process can bring the organization to a

crawl (15 signatures to fix a leaky roof)
• Too little process can lead to product recalls and
liability lawsuits (even the best companies recall
products).
• The Product Development Process should help
answer two fundamental questions:
– How do we make difficult, consensus building, decisions along
the way?
– How do we reduce the risk of spending too much money on a
bad idea?
Reduce the Management Burden and Financial Risk
by Dividing the Funnel into Smaller Pieces

Create Project “Phases” or “Stages”

Stage 0 Stage 1 Stage 2 Stage 3 Stage 4

Build Consensus within the Company by
Making Decisions between Each Phase

Create Project “Gates”

Stage 0 Stage 1 Stage 2 Stage 3 Stage 4

Gate 1 Gate 2 Gate 3 Gate 4

 Companies Use a “Stage-Gate”
Product Development Process
When comparing companies, stages can have different
names and different time periods. This was the Stage-
Gate process used at my company.

Scoping Ideation Concept Development Execution

Gate 1 Gate 2 Gate 3 Gate 4

The funnel may

diverge slightly due
to product “spins”
 Companies Use a “Stage-Gate”
Product Development Process

This is the Stage-Gate process

described in the text book

Discovery Business Development Testing Launch

Scoping
Case

Gate 2 Gate 3 Gate 4 Gate 5

Gate 1
A Comprehensive Stage-Gate Process
 Stages
Discovery (0): Pre-work designed to discover opportunities and
generate ideas i.e. prospecting, with a map

Scoping (1): Preliminary investigation that is largely desk work

Build the Business Case (2): A more detailed investigation of both

market and technical needs (can we make money?)

Development (3): The detailed design (engineering)

Testing and Validation (4): Test trials of the actual product in the lab
and in the marketplace

Launch (5): Full production operations and commercialization

 Gates
Idea Screen (1): First decision point where resources are committed (strategic
alignment, feasibility, attractiveness)

Second Screen (2): Spending increases (customer reaction, financials, “killer” variables,
competitive advantage, technical feasibility). You kill a lot of projects at this
meeting.

Go to Development (3): The “money” gate. Final commitment ramps up quickly. Most
rigorous gate meeting. You do not want to kill many projects after this gate.
Detailed financial, marketing, and technical plans, solid business case.

Go to Tooling (3.5): The “big” meeting for engineers i.e. The Design Review. Present
reasonable evidence that the design meets the product specifications.

Go to Testing (4): Review of development milestones, checkup on financials, customer

interaction to “first shots” off the dies, approval of product spec validation plan.

Go to Launch (5): Rigorous review of validation test results and customer field trials,
intellectual property, financials, marketing segmentation, advertising budget.
Managing Risk with a Stage-Gate Process

Gate 1 • Each stage is designed to gather

information to move the project
forward to a decision point

• There is no R&D stage or Marketing

stage – activities occur in parallel
Stage 0 Stage 1 during each stage

• Gates offer an opportunity to

manage risk before continuing to the
next stage (specific deliverables)
Spiral
• Spiral development keeps the
customer in the loop during all stages
of development
Customer
 Managing Risk
The key to managing financial risk is to have a well defined product
development process with strong gates to manage piece-wise investment

Financial Investment
Increases with Time

With Strong Gates,

Uncertainty Decreases
with Time

Idea Launch
TIME
 Seven Goals of a Stage-Gate System

Goal #1: Quality of Execution

– Recognize that product innovation is a process
– Apply quality control techniques to the process
– Focus on Completeness (do not skip steps)
– Focus on Quality (do it right the first time)
– Focus on the Important (devote attention to
areas that are historically weak i.e. the Front-
End)
 Seven Goals of a Stage-Gate System
Goal #2: Sharper Focus, Better Prioritization
– Avoid the pitfall of too many projects and not
enough resources
– Use strong Go/Kill gates to eliminate the weak
(but often loved) projects i.e. “drown some
puppies”
– Gates require strong objective criteria for
evaluation of projects (gates reduce risk)
– The process is a funnel, not a tunnel (it is
expected that you will kill some ideas/projects)
 Seven Goals of a Stage-Gate System
Goal #3: Fast-Paced Parallel Processing with Spirals
– There is and will always be pressure from top
management to reduce product development
cycle time
– Create a Gantt chart to see what tasks can be
done in parallel – find the critical path
– Use spiral development (build-test-customer
feedback-revise) to reduce risk as you increase
speed
 Seven Goals of a Stage-Gate System
Goal #4: A True Cross-Functional Team Approach
– The NPD process is multifunctional (people with different
educational and experiential backgrounds must work
together)
– Dedicated team members must have “time release” from
their day jobs so they are dedicated to the project
– Tie individual performance reviews (merit pay increases)
to team effort as determined by team members
– Create a bonus structure that depends on success of the
team i.e. no individual bonuses from the “home”
department
 Seven Goals of a Stage-Gate System
Goal #5: A Strong Market Focus with Built-in VoC
– Voice of Customer (VoC) based idea generation
– Preliminary market assessment (any gaps?)
– Identify needs and wants of the customer
– Competitive analysis (price, features, positioning)
– Concept testing (virtual and physical prototypes)
– Spirals to detect customer acceptance during each
Stage of the process
– User tests (field trials) with finished products
– Test market with a trial sell (mini-launch)
– Market launch backed by sufficient resources
 Seven Goals of a Stage-Gate System
Goal #6: Better Front-End Homework
– Initial screening of ideas (sharpen your focus)
– Preliminary technical and marketing assessment
– Technical feasibility study
– Operations assessment (manufacturing, distribution, and
supplier base)
– VoC market studies (very detailed across multiple regions)
– Financial and business analysis (what are the risks?)
– Business case (interplay between financials and market to
see if there is justification for the project)
– Strong gate prior to leaving the front-end work
 Seven Goals of a Stage-Gate System
Goal #7 : Products with a Competitive Advantage
– Differentiated (unique benefits)
– Doing less ho-hum, me-too products
– Gate criteria should include an objective measure
of product superiority i.e. the “wow” factor
– Customer focused ideation
– In addition to detailed product specifications, you
must identify the compelling value proposition
A Comprehensive Stage-Gate Process
 What Stage-Gate is Not
• Not a serial, phased process with tasks assigned to
departments
• Not a rigid, lockstep process (think guidelines, not rules)
• Not a linear process – need to spiral out to the customers
(investigate and iterate)
• Not a project control mechanism i.e. not for the purpose
of auditing a project
• Not a data entry scheme – some companies go too far
with an electronic backbone where every bit of data and
every decision must be submitted electronically
• Not the same as project management – team leadership,
collaboration, and performing to schedule are necessary
for Stage-Gate to be successful
 END

Stage-Gate Product
Development Process
EMGT100 Introduction to Entrepreneurship
Prof. James