In the third post from our 7-part series exploring Stage and Gate processes, we examine each of the five stages in the Phase Gate process.
The basic idea of stage / gate models is to break the project down into key stages, each with a key focus to help define and progress the development of the new product. Implicit in this is the concept of reducing risk and managing investment as to avoid costly and wasteful mistakes. Between each of the stages are the gates – decision points on whether to allow the project to continue further, into the next stage.
As discussed in our previous Blog Post, Stage Gate Models, a typical process will consist of 5 stages. Here we will be examining each of those 5 stages.
Stage 1 – Feasibility
In the feasibility stage you should be assessing the technical and commercial viability of the initial concept and idea and working this into a definition that has clear potential for success.
The deliverables to the gate typically include the following forms:
- Technical assessment and definition of approach. If you cannot build it, then you cannot sell it.
- Market assessment and evaluation of customer needs, evidence from voice of customer studies, commentary on the market from analysts and other sources. In short, you must gather together sufficient objective evidence that there will be enough demand. You are trying to answer the question: if you build it and offer it for sale, will enough customers want it and be prepared to pay sufficiently for it?
- Risk assessment – What are the principle unknown factors that must be addressed. It is not essential by any means at the feasibility stage to have solved these, but you should at least be able to give a realistic prognosis of how much uncertainty there is.
The deliverables will almost certainly be of a qualitative nature, and any numbers involved are likely to be indicative. Regarding things like market size and trends – be careful of getting too hooked on market sizing studies and reports. These are genuinely useful, but they are mostly based on assumptions. Analyst assumptions behind the forecasts will not include the specific aspects of the product you are planning and is likely to have a few unique effects and possibly disruptive impact on the market.
In the feasibility stage, the definition of the project should include key scoping and objectives statements, such as the following:
- Fit with Strategy
- Compatibility with available resource skills/capabilities
Stage 2 – Business Case
The business case stage is the most significant and important of the planning stages. This is where all the upfront effort needs to be brought to bear, to define the technical, commercial and strategic potential of the project, weighed against a realistic assessment of costs and risk.
This builds on the feasibility stage, and adds more resilient assessment to the following major aspects of defining the project:
Technical approach – An outline development plan, the technical approach, key technologies required or to be developed, and identification of principle uncertainties.
Market approach – How will the product or service or innovation be commercialised? What are the channels? Are these routes new to the company or do they fit very nicely with existing market and commercial capabilities already in existence in the company?
Cost projections – What will it cost to complete the development, test and launch? When carrying out cost forecasting, it is most productive to look at costs involved in each of the following stages of the project – development, test, launch, market build etc. Then, further assess these under different types of cost, such as capital, operating expense, development cost, R&D, production costs, marketing costs. This may seem an onerous task, and indeed it is, but it is vital to pull together a ‘best guess’ view on all of these. To pose the alternative view: why on earth would a company agree to write a blank cheque to fund a development program? There can be genuine circumstances that merit that, but they are specific circumstances – the ‘must do’ projects – often urgent survival or regulatory compliance drivers – and even then, how can there be a truly valid excuse to not try your best at estimating costs, timescales and effort?
Sales projections – Here it is necessary to pull together the outline and essence of a marketing and sales plan. Once again this may seem an onerous task. It is. However, the alternative is to proceed to build and develop something that you really don’t have much idea of how it can be commercialised. The sales projections should be based on clear assumptions, that will inevitably contain risk and uncertainty. The aim here is not to pretend to have access to a magic crystal ball that foretells the future in all its wondrous marketing glory, but to have a good working set of assumptions and forecasts, that can be tested and refined further over time. Sometimes you may hear the excuse – “well it’s a really innovative and transformational new technology, so how can we forecast the sales so early on?” The answer: scenarios and well-defined assumptions that can be tested and refined.
Profit and Loss –Is it appropriate to demand a P&L before you have even developed the new product? The answer – yes, it is. However, it’s only indicative, and will get refined as you learn more from further development work on the product. Then, once you have a suitable cost forecast and sales forecast, you simply need to put the two together to get a project P&L forecast. With that in hand, you can be much more informed as to the commercial viability – and, the key factors that perhaps need more attention during the development phase. For example, it’s very common to see a situation where it becomes apparent that market success will be dependent on achieving the right price point, which means a level of cost of production – and that may well signal the need to consider an alternative technical approach to achieve the required platform to launch.
Timing – How long will it take, what are the key milestones? Yes, this means a project plan for the remainder of the project, including the key deliverables, dependencies and tasks – at an appropriate level of detail. Appropriate is the key word. The nature of innovation is uncertain, so it’s often rather pointless, and demotivating, to expect a project manager to pull together an ultra-detailed project plan with critical path analysis, when the tasks themselves may well involve things you just don’t know how to do yet. Finding the right balance is key – setting milestones, clear assignment of people, roles, goals – and recognising risk and uncertainty for what it is and setting out to reduce that uncertainty as early as possible in the development process. It’s often very helpful to specifically set the objectives of tasks as ‘reducing uncertainty’.
Resources – What people and skills are required, when, and for how long? Once again, the level of detail should be appropriate to the level of uncertainty. But it’s important to put in place some outline plan of what resources will be required. It is helpful to link this to the stages of the project – development, testing, commercialisation, launch etc.
Cross functional working – Its quite evident that the business case is a multi-faceted assessment. It is vital for the project manager to involve and engage a broad range of perspectives, to help give a reasonable and broad-based view. This alone can offset so much future wasted effort. Talk to colleagues early. Get cross functional inputs – technical, commercial, marketing, legal, safety, production, channels, customers – it all helps to reduce risk and to offset future problems.
Stage 3 – Development
Once a project has had its initial business case approved, then it can proceed to development. This is typically the longest and most expensive of the project’s phases. The work here will frequently be highly technical, pursuing solutions to complex issues, creative, innovative, and again should be cross functional in terms of steering the whole development path. The likelihood, for anything other than simple straightforward developments, is that the plan will need to be adjusted or altered in some way. Discoveries made can alter the trajectory of a project. When this happens, the business case should be refreshed, and then possibly re-assessed. The notion of ‘spiralling back’ to the previous gate is an approach often used. However, the iterative nature of innovation needs to be respected and accommodated within the process. Most importantly, don’t just proceed blindly with a project, regardless of the significance of ongoing discoveries.
Project tracking, reporting and managing are vital during the development phases. Not only are you monitoring risks and issues, you are also seeking solutions for them.
Stage 4 – Testing
During the testing phase you are really looking for broad based evidence that the business case you now have (revised and updated from the earliest one) is resilient, well founded and realistic. This means validating across several perspectives – and certainly does not mean simply testing the new product from a technical capability’s perspective. Instead, it includes a whole range of validations:
- Technical validation – this includes performance, reliability, availability, functionality and ease of use.
- Prototyping – to refine, see and validate the development.
- Production testing – pilot production runs, assessing scalability, yield rates, quality, production cost validation, production rates, volumes etc.
- Field testing – how well does it work in practice?
- Market testing – Customers, what do they think, how do they respond to a prototype of the new product? What can you learn and refine? If the product is not one that will be launched onto a market, then there will still be some equivalent- the broad idea being the arena, process or target usage that will generate the value and return to recoup the investment. It may be an internal market.
Stage 5 – Launch
This stage is more than just launch, it is also about implementation, scaling up for launch, and making it all happen. If it’s a physical product, then manufacturing is clearly a major element of this. If it’s a software product, or a digital product, then launch is really about a release plan, a roadmap of stepwise releases and launches, and versions.
The rollout plan is a key part of the launch phase. For a global product, this will certainly follow a logic of regional or geographic aspects. Depending on your industry – this may be discreet logical step-wise rollout in a regional cascade; Or, it could be the extreme opposite of a big bang global blockbuster launch on a mega scale.
Post Launch reviews, in market assessment and product lifecycle management. Yes, it all starts all over again. What ideas, problems, opportunities come to light. These spawn fresh ideas, fixes, resolutions, new releases, the next blockbuster.
In next week’s post, we will be exploring the gates and how to operate them.
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