The Key to Faster, Better Decisions in New Product Development

by | Mar 14, 2024 | Blog Post

Organizations today have access to more data and better analytics. So why is there a growing level of frustration and dissatisfaction among senior decision-makers?

A study by McKinsey found that managers at a typical Fortune 500 company may waste more than 500,000 days a year on ineffective decision-making, equivalent to some $250 million in wages annually. In the study, decision-makers complained of a lack of real debate, convoluted processes, an overreliance on consensus and death by committee, unclear organizational roles, information overload (and the inability to separate signal from noise), and company cultures that lack empowerment. One healthcare executive told McKinsey that he sat through the same 90-minute proposal three times on separate committees because no one knew who was authorized to approve the decision.

So, what’s the solution?

Big-bet decisions shape the future of corporations and are the most important decisions that leaders can make. Yet McKinsey’s study suggests that these decisions receive much less scrutiny than they should, and the dynamic inside many business meetings doesn’t help. In some organizations, meetings consist of simply sharing a snappy PowerPoint presentation summarising relevant information, followed by a quick question and answer session. This, however, does not provide nearly enough insight to allow decision-makers to make big-bet decisions. Instead, you need a rigorous and well-coordinated process that helps clarify objectives, measures, targets, and roles.

What does a well-coordinated process entail?

In the world of new product development, the Stage and Gate (also known as Phase Gate) Process has been the accepted best practice for new product development for the past 20 years. This structured method of progressive new product development and project deployment has been tested on thousands of new product launches and is recognized worldwide as the best approach to accelerate new products to market, successfully. Stage and Gate style processes are increasingly important to successful innovation and help to aid those big-bet decisions. Technology consultancy Booz Allen Hamilton recently highlighted the fact that every organization listed in its ‘Global 1,000 Innovators’ report has a disciplined Stage and Gate process in place. 

Although having the right process is incredibly important, the key to making better and faster decisions is how well you deploy it. Good decision-making also requires discipline, effective communication, collaboration, and the right organizational structure.

Effective Meeting Descipline

Let’s start with good meeting discipline – poor decision-making can still be related to the lack of rigor with which executives run important meetings. McKinsey found that in some companies, the members of the executive team only speak up if their particular area is being discussed, whilst others stay silent, even if they’ve had years of experience and input. Yet, involving more people in this process, and doing so effectively, is one of the best ways to improve quality and accelerate the pace of a project. Alan Mulally, former Executive Vice President of Boeing and then CEO of Ford Motor Company said when describing the development of the company’s new 777 aircraft, “We can’t make a better airplane unless we can figure how to get everybody’s knowledge included in the design.”

The importance of a cross-functional Project Team

Product innovation is very much a team effort, and the lack of a true cross-functional project team is one of the reasons many new-product projects fail. There is a strong correlation between an effective cross-functional team and a faster cycle time. McKinsey found that the presence of high-quality interactions and debate were the factors most predictive of whether companies make good, fast, big-bet decisions. They also noticed that “Minimizing the numbers of debate participants to speed up decision-making could harm decision quality. As many studies show, greater diversity brings greater collective wisdom and expertise, along with better performance.”

Encourage Debate

McKinsey also suggests that companies need to overcome the “conspiracy of approval” approach to group discussions. It’s helpful for senior participants to ask questions instead of expressing opinions, and to actively encourage dissenting views.  Stephen Bridge, a Senior Consultant at GenSight commented, “My observation is that in some organizations, a senior Gatekeeper (e.g. the Chief Executive) may express their own view first, and this frames the debate and sets the tone for the discussion. This can be problematic – if the Chief Executive or general manager expresses their opinion before anybody else, then others may feel obliged to go along with the same opinion, no matter what they think. Often, if the CEO approves, everyone else feels like they must also approve. This is something organizations and CEOs should be mindful of.”

McKinsey points out that “Productive debate is essentially a form of conflict – a healthy form – so senior executives will need to devote time to building trust and giving permission to dissent, irrespective of the organizational hierarchy in the room.” The climate of trust and openness these sessions encourage has translated into better ideas, including practical lessons that have helped companies speed up the release of new products. For a Stage and Gate process to work well, it is necessary to encourage objectivity, realism, and openness to discuss issues that may well invoke opposing views.  Meetings should involve proper discussion and should not just be some box-ticking exercise.

Who is accountable?

It is also imperative to have an assigned team of players, all with clearly designated roles and commitments to the project, with a team leader who oversees the project from beginning to end. It is also imperative to make the project team ultimately accountable for their achievement. According to Harvard Business Review, “Decisions are the coin of the realm in business. Every success, every mishap, every opportunity seized or missed stems from a decision someone made or failed to make. Yet, in many firms, decisions routinely stall inside the organization, hurting the entire company’s performance. The culprit? Ambiguity over who’s accountable for which decisions.”

Dysfunctional project teams, a lack of cohesiveness, and poor organizational design and leadership are some of the reasons many new products fail. Instead, you need the right organizational structure with clearly assigned and accountable team members, on the team from beginning to end, and led by a highly visible team leader. Ensuring that the right people are assigned as team leaders or Gatekeepers is vital. This necessitates a close examination of the organizational structure to identify the appropriate individuals who should be involved at each stage/gate of the process. This evaluation should encompass all significant cross-functional areas, including finance, marketing, technology, legal/regulatory affairs, business units, sales functions, and so forth.

McKinsey noted that in their experience, “Ensuring that responsibility for delegated decisions is firmly in the hands of those closest to the work, typically delivers faster, better, and more efficiently executed outcomes, while also enhancing engagement and accountability”.

Effective Governance

The Project Management Institute describes good project governance as the secret weapon of effective project-based organizations: “A key element of project governance addresses how decision rights and accountabilities are disseminated and assigned between the project team and executives. Poor governance can put the organization at risk of commercial failure, pecuniary and regulatory problems, or allow the organization to lose sight of its objectives and responsibilities to its stakeholders, who benefit from its success. Project governance extends the premise of governance into both the management of individual projects via governance structures and the management of projects at the business level through coordination, planning, and control.”

Conclusion

From the outset, it’s imperative to have the appropriate process and leadership in place to ensure the project’s success and prompt decision-making. Collaboration and communication play pivotal roles in this endeavor, along with fostering accountability and commitment to decisions, rather than mere consensus. Individuals vested with decision-making authority must possess the requisite skills and knowledge to act decisively, while also promoting collaboration and constructive debate within the team. Moreover, decisions must be thoroughly and efficiently implemented, demanding both commitment and accountability.

For more information on implementing a Stage and Gate style process that works for you, please get in touch. We are happy to discuss your needs and arrange a product demonstration.

References:

De Smet, A. Jost, G and Weiss, L (2019). Three keys to faster, better decisions. Available at: https://www.mckinsey.com/business-functions/organization/our-insights/three-keys-to-faster-better-decisions (Accessed July 2019).

Related Reading:

Stage Gate and Decision Making

Managing Risk in New Product Development

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