What are the keys to effective decision making? In the fifth blog post of our Stage Gate series, we explore each of them in turn.
Decision making is hard, and it is a natural human condition to have perceptual bias. It may be a little bias, or it may be a lot, but we all do it at some point. The way a project is presented, the passion and evangelism of a project manager, all act as an influence on how decisions are made. Indeed, these influences are valid, you want project managers to have belief, vision and an articulate argument – but only if the underlying opportunity is a good one. The history books of business are full of cases where passion and vision simply blindside some fairly obvious failings. So, it is vital to make decisions with a measured stance. But how to do that?
This is important from a business portfolio perspective, but also by its very nature encourages greater objectivity. It is all too easy to be drawn into the belief system that a project is going to be a massive success – but this can be tempered by making comparisons. When you think something looks good, it makes the shift to the perspective of “compared to what?” Prioritisation is also a fundamental driver of getting the best return on resources, managing risk, and keeping the right balance of return verses risk in your portfolio of new product developments.
In order to prioritise, you must have some agreed basis on which the prioritisation will be made. The criteria are many, and the key is that you should consciously debate and decide what they are, and possibly weight them in importance. Typical criteria to consider are:
- Technical risk
- Commercial risk
- Market Attractiveness
- Customer Value
- Strategic Alignment
- Competitive Advantage
- Innovation Longevity
- Financial Return
- Resource fit/availability
- Portfolio Impact
Portfolio impact is an interesting one and shifts the mindset up a level. Not just: Is this a good project… But, how will it fit and alter the mix and balance of what we already have in the portfolio?
The criteria provide the framework. Information is what makes the framework useful. The information you need to make good decisions should be contained in the business case – if it is not, then reassess the format of the business case template.
Information must be collected, validated and critically appraised. Just because a project manager believes that there is a big market is not enough. We can all do make believe. What you need are meaningful supportive pieces of evidence, validation or anything that genuinely adds credibility to an estimate.
In the world of innovation, you are fundamentally making decisions under conditions of uncertainty. This means that all information should really be regarded as qualitative. The fact that a particular analyst rates a market segment as growing and of a substantial size only means that it’s a fact that the analyst believes that. It is not necessarily a numerical fact, and the best you can do is critically bring judgement to bear and decide for yourself how all of the information you have to hand really relates to the very specific aspects of the innovation project you are assessing. Customers opinions must be sought out and considered, absolutely, but then they don’t always truly know what they want from a really new product until they get it. Data and judgement must be used in combination.
To know but not to act really is a sin. If a project is looking rather shaky in its justification, don’t just proceed because it’s the easy path. Sometimes bold decisions are required. They may not be popular, and in extremes can even be career testing! When the signals are really genuinely there, then read them, re-read them, and then act accordingly. Preferably sooner rather than later.
Once a decision is made, it’s obviously got to be communicated. If a project is approved at a gate, then it’s pretty easy – share the good news, celebrate – and then get on with the good work of the next stage. But it shouldn’t stop there – there is peripheral communication – newsletters, blogs, corporate intranet – that can build on that to explain the strategic direction, the vision, and all that stuff that can encourage more good innovation.
And then there are the tough decisions, when a project is killed or put on hold. Communication then should be clear as to why, and what the strategy is requiring, and why this particular development was not right.
Although the core principles of a stage gate process are quite simple, to make it work well in practice is quite hard and requires a process that is carefully matched to the business environment and culture. In our next blog post, we will be exploring the implementation of stage gate and discussing several areas and types of criteria that should be considered.
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