bringing value to life: gated process basics and beyond

Bringing Value to Life

Chief Technology Officer

Paul Heller #NPDSuccess

Gated Process Basics & Beyond

© Copyright Sopheon plc. Sopheon Confidential

• How, if executed correctly, gated decision-making can reduce risk and create funnels not tunnels, challenge status quo processes that need to evolve to be more adaptable, and infuse “Lean” processes into innovation planning.

• The importance of optimizing scorecards cross-functionally and how to evaluate them, plus why skipping post-launch reviews is detrimental to capturing learnings for the future.

• How to recognize and avoid a financially-biased motivation to get a product launched.• How the Accolade® enterprise innovation management solution’s easy-to-use tools with

embedded proven best practices enable you to focus on key projects that have the greatest strategic fit and value.

What We’ll Cover Today

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© Copyright Sopheon plc. Sopheon Confidential 3

Sustainable Innovation

High Margins

Differentiation

Innovation

Shrinking Profits

Commoditization

Shareholder Value


12.4 12

7.2

16.5

0

2

4

6

8

10

12

14

16

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All Innovators Americas Europe APAC

% of shareholder return premium for innovative companies compared to industry peers (over three-year period)

Innovative Companies Outperform Industry Peers

Across the globe, more innovative companies outperform their peers by 12% for Shareholder Return.

2010 BCG Senior Executive Innovation Survey


Barriers to Sustainable Market Differentiation

Innovation Execution

Portfolio “Bad Bets”

Too Few Good Ideas

Lack of Alignment

54%Most companies have gated innovation processes, but only 54% have processes that are ‘really’ used.

Product Development Institute

41%41% of products miss product launch deadlines.

Aberdeen Group

50%Across industries, only 50% of new products are profitable.

40%Across industries, 40% of resources spent are wasted on unsuccessful products.


79%79% of top managers say their company doesn’t have enough high-value projects in their portfolio.


2xAcross industries, low-performing companies introduce 2x as many incremental products as high performers.

Research & Technology Executive Council

80%80% of executives say they have a gap in alignment between strategy and product development activity.

Gartner Research

27%Most companies identify “areas of strategic focus” for innovation, but only 27% connect those to resource allocation.



• Phases of work followed by formal checkpoints• One that reduces risk• Common Examples

• Stage-Gate• Phase-Gate

What is a Gated Process?

Stage 1Define

Concept

ConceptReview

Go to Dev

Stage 2Build Business

Case

Stage 3Development

Stage 4Test/Validate, Launch Prep

Stage 5Launch Execution

Go to Test/Val

Go To Launch

Stage 1Define

Concept

Initiation DeliveryStartup

PlanningMonitoring

& Controlling

Initiation Closing

Measure AnalyzeDefine Improve Control

6

• Other examples• Six Sigma• PRINCE2• PMI PMBOK• Other


• Decision makers are defined• Expectations are clear

• Purpose of the checkpoint• Responsibility of the decision makers

• Decision criteria are defined and well understood• Outcomes are defined and well understood

What Do We Mean by “Formal Checkpoints”?

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Rules of Governance

• What decisions will be made? • Who will make them?• What decision rules will be

followed?• What criteria will be used for

decisions?• What analyses must be made

available to the decision makers?


• It is a point in time for a Go/No Go decision to move to the next stage (and only the next stage)

• It is a decision to fund the next stage• Funding = resources: money, people, equipment, etc.• Gate keepers need to be sure to bring their check books (for you Europeans, that means a cheque

book)

• The decision is made by cross-functional representatives from different parts of the business who are responsible for evaluating inputs to the gate from their particular points of view

What is a Gate?

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• A clearly defined segment of work with well-defined outputs (deliverables) that gate keepers can use to evaluate and make a Go/No Go decision to move to the next phase

• Breaks the work in a series of simple, manageable steps• Contains recommended and mandatory actions• Comprises work that is cross-functional• Generates work outputs that are key to good decisions

• Based on best practices

What is a Stage (Phase)?

9


Best practice companies succeed where others fail

The Objective is to Create a Funnel

Typical Companies Best Practice CompaniesIdeas In Ideas In

23%

12%

5%

2.5%

Percent of ideas that make it to feasibility

Percent of ideas that make it to development

46%

25%

20%

49%

Overall percent of resources spent on project failures

Percent of revenue from products introduced in the past 5 years

Resource & cost savings

ASK YOURSELF…

Does your company have a Stage-Gate system or a “Flood-Gate” system”?

Source: PDMA, PDI, Cap Gemini


Challenges are About Idea Quality, Not Just Quantity

Discovery ScopingBuild

BusinessCase

Development Testing &Validation Launch

Gate 0 Gate 1 Gate 2 Gate 3 Gate 4 Gate 5

Idea Development Concept Development Concept-to-Launch

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“We Don’t Have the Courage to

Make a Kill Decision.”

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Common Problems With Gated Process Execution

“Our Process Takes Too Much Time and Keeps Me From my

‘Day Job.’”

“We Fail to Learn From Our

Process Missteps.”

“Our Cross-Functional Silos

Prevent Effective Teamwork.”

“We Never Kill Projects in Gate

Meetings.”

“We Don’t Have Enough Ideas to

Feed the Funnel.” “We’re Not Clear on the Purpose of

the Gate.”


But Wait, There’s More…There’s one last thing that causes gated processes to break down that is often overlooked

There is too much focus on getting work done and

not enough on making good decisions

• Focus on the gate as well as the stage• This is not a project management problem• Project plans are about doing things, getting work done• Gates are about stopping “bad things” and only progressing with “good things”


• How many of your organizations reward getting work done?

• Who wants to work on something that gets killed?

• Who wants to admit that money was spent on a bad idea?

A Product Development/Project Management Balancing Act

• How many of your organizations reward killing a bad project?

• Who wants to work on something that should be killed?

• Who wants to invest in losers?


Make cross-functional teamwork real

Eliminate friction to ensure adoption

Gate decisions with “teeth”

Measure processes for continuous improvement

Four Principles of Effective Gated Processes

1.2.3.4.


Four Principles of Effective Gated Processes1. Make cross-functional teamwork real

Retire

New Product Strategy

New Product Concept

Idea Campaign

Market Assessment

Discovery

Gate 1 Presentation

Technical Assessment

Product Definition

Business Case &

Scorecard

Scoping

Gate 2 Presentation

Market Assessment

Updated Product

Definition

Business Case &

Scorecard

Business Case

Gate 3 Presentation

Development Project Plan

CAD Design/ Recipe/BOM

Business Case & Scorecard

Development

Gate 4 Presentation

Testing Project Plan

Product Lifecycle Plan

MFG/Supply Chain Plan

Testing

Gate 5 Presentation

Market Launch Project Plan

Updated Volume Forecast


Launch

Product Life-Cycle Plan

Post-Launch Review

Actual Sales

Customer Feedback

Post-Launch

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Four Principles of Effective Gated Processes2. Eliminate friction to ensure adoption

Retire


New Product Concept

Idea Campaign

Market Assessment

Discovery

Gate 1 Presentation


Product Definition

Business Case &

Scorecard

Scoping

Gate 2 Presentation

Market Assessment

Updated Product

Definition

Business Case &

Scorecard

Business Case

Gate 3 Presentation




Development

Gate 4 Presentation




Testing

Gate 5 Presentation




Launch


Post-Launch Review

Actual Sales

Customer Feedback

Post-Launch



3. Gate meetings with “teeth”Business-Centric Gate Criteria• Does it fit our strategy?• Is the market attractive?• Can we compete?• Is the reward worth the risk?

“Companies with rigid stage gates average 130% more new product revenue than companies with loose processes.”

2010 Nielsen Study

Retire


New Product Concept

Idea Campaign

Market Assessment

Discovery

Gate 1 Presentation


Product Definition

Business Case &

Scorecard

Scoping

Gate 2 Presentation

Market Assessment

Updated Product

Definition

Business Case &

Scorecard

Business Case

Gate 3 Presentation




Development

Gate 4 Presentation




Testing

Gate 5 Presentation




Launch


Post-Launch Review

Actual Sales

Customer Feedback

Post-Launch



4. Measure outcomes for continuous improvementProcess Effectiveness Metrics↑ Early-stage project “kill rate”↑ New product success rate↓ Average stage durations↓ Percent of project late to market

“You can’t improve what

you don’t measure”

Business-Centric Gate Criteria• Does it fit our strategy?• Is the market attractive?• Can we compete?• Is the reward worth the risk?

Retire


New Product Concept

Idea Campaign

Market Assessment

Discovery

Gate 1 Presentation


Product Definition

Business Case &

Scorecard

Scoping

Gate 2 Presentation

Market Assessment

Updated Product

Definition

Business Case &

Scorecard

Business Case

Gate 3 Presentation




Development

Gate 4 Presentation




Testing

Gate 5 Presentation




Launch


Post-Launch Review

Actual Sales

Customer Feedback

Post-Launch


Determined by Corporate Culture

Governance that is Documented and Communicated Provides a Framework for Choice and Behaviors

Internal Governance

Codes of Conduct, Organizational Culture,

Ethics, Principles & Standards

Decision GovernanceStrategy and

Execution Decision Making

Operational Governance

Gate/Decision Meetings, Portfolio Reviews,

Strategy &Planning

External Governance

Industry Standards, Government

Requirements & Regulations

How is decision making managed?

What operational processes are used?

What external requirements must we fulfill?

What behaviors do we expect?

Individuals ProcessesChoices Organization

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How do you vet the financials?• You vet not just revenue, but all aspects of

the project in the gate meetings• Risks and critical success factors• Feasibility• Business case assumptions

• Gatekeepers need to look for bias• Apply business experience and expertise

• A key agenda for the gate meeting should be assessment of the data quality

• Preparation is critical. You can’t just show up…

• What project team does not want to make the financials look great?

• It’s human nature, especially when competing for resources

• Remember the culture aspect

What About Those Financials?


• What are the assumptions/critical success factors that underpin your financials?

• Do you have an approach for monitoring those assumptions and tracking any changes – good or bad?

• How do you manage the impact of critical success factors changing? • Do you have an escalation management process in place?

Avoid the “Set It and Forget It” Approach


Companies achieving high alignment between innovation strategy, business strategy & culture enjoy superior financial performance

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Alignment of Business Strategy and Innovation Matters

33% higher

enterprise value growth

17% higherprofit

growth

The Culture of Innovation, Booz & Co., March 2012

Business Strategy

Innovation Strategy

Culture


Scorecards Reinforce Business Criteria

EXECUTIVES/GATEKEEPERS Review deliverables, evaluate projects, and make go/kill decisions during gate meetings

GATE SCORECARDS Used by decision-makers to ensure assessment of projects on standardized, best-practice criteria.

Benefit: Make better gate decisions, based on consistent, strategic, market-based criteria


Better use of resourcesLess time spent working on bad ideasKill projects early on

One Goal of a Gated Process is to Increase Velocity


People in the process know exactly what to do, what is expected of them

• Team members working in the stages• Gate keepers making the decisions

Create Even More Velocity With a CLEARLY DEFINED Gated Process


You Cannot Improve Performance that You Don’t Measure

15%-30%Reduced

Time to Market

Up to

50%Improvement in

Success Rate

75%-100%Increased New Product Value

10%-20%Increased

Throughput

+Cost

Avoidance/Cost Savings

Improved pipeline throughput via time-

savings for innovation teams and lower R&D costs

Delivering on financial targets (volume, revenue, profit) and increased in-

market sustainability

Optimal resource utilization and reduction

of process delays; first mover advantage

Achieving price premium for higher-value/disruptive

new products; market share expansion


Disrupters Driving Need for Speed and Business Agility

Power of the Consumer

Global Digitization

InnovationPerformance

Teams

Agility

Speed

Velocity


Process improvement

Lean

Learnings

Adaptive processes

How to Increase Speed and Effectiveness Even Further?

1.2.3.4.


Process Improvement

Best-Practice Process Effectiveness Metrics

• Length of time per stage• Percentage of projects late to

market or over budget• Number of “Recycle” decisions

in gate meetings• Average time of gate meetings

• Targeted number of projects per stage (funnel/tunnel)

• “Kill rate” of early-stage projects• Total value of new product portfolio• Accuracy of revenue, budget,

resource forecasts

“Accolade will help us capture the metrics needed to track and evaluate the efficiency and predictability of our process and the business value of the projects that pass through it.”

Roy PhillippsR&D Director


Are We Reducing Time to Market?

DIRECTOR OF INNOVATIONCorporate leader on point to design, maintain and mature the innovation processes of the business

PROCESS METRICS enable assessment of trends in innovation cycle time.

Benefit: Reduce the effort to assess the value your company is achieving with the process


Stage 1Define

Concept

ConceptReview

Go to Dev

Stage 2Build Business

Case

Stage 3Development



Go to Test/Val

Go To Launch

Full Stage-Gate Process

“Just Do It” ProcessStages 2-4

Develop, Test,Launch

Reduce Friction:By Aligning Process to Risk/Reward of Project

Fast-Track ProcessStage 2-3

Business Case & Development



Go to Intent to Launch

Go toLaunch

Low Risk/Complexity

Moderate Risk/Complexity

High Risk/Complexity


Go toLaunch

Stage 1 Go to Project

Idea Process

Stage 1Define

Concept

Stage 1Discovery

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• Many processes have too much in them• Long lists of required tasks in each stage• Long lists of deliverables with many templates

• Remove non-value added work• What work gets done in the stage?• How is our quality of execution? What goes wrong? Why?• Can we eliminate the work, or streamline it?

• Automate gates, decisions, approvals where possible• Allow team-driven gate decisions for simpler projects

• Identify where allowed• Provide guardrails for the team

Lean

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• Post launch review• Post stage review• Project startup – tapping into legacy successes and failures• Continual

• Identify• What went well and what did not• Assess and identify new best practices

• Perform a lean assessment• What work was done in each stage?• How was our quality of execution? What went wrong? Why? What went well? Why?• Can we eliminate work or streamline it?

Continual Learning

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Adaptive Processes

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Agility Embedded in Gated Process

Definition

Go to Configuration

Go to Validation Go to Deployment

Close

Configuration Validation Deployment


Dynamic Process

Definition

Go to Configuration


Close



Hybrid Stage-Gate

Definition

Go to Configuration


Close



Interactive Learning

Definition

Go to Configuration


Close



How Software Can Help

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The Accolade® enterprise innovation management solution’s easy-to-use tools with embedded proven best practices enable you to focus on key projects that have the greatest strategic fit and value


Accolade was built through exclusive partnership with Dr. Robert Cooper• World-renowned authority on product development and portfolio management• Father of the Stage-Gate® process• Author of NPD classic “Winning at New Products”• Co-founder of Product Development Institute

Longstanding Partnership with Dr. Robert Cooper

“… automating your process will provide even greater benefit. Sopheon’s Accolade provides a flexible framework for streamlining the Stage-Gate process. Accolade is the only one I believe in.”

- Dr. Robert CooperProduct Development Institute

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Sopheon scored a perfect 100% score against all criteria in every categoryincluding new category for Innovation Team Agility

Accolade is Certified on Stage-Gate Ready Version 4 Criteria


1. Single source of truth for cross-functional, data-driven decision making

2. Automated gated processes that evolve

3.“Smart” gate deliverables reduce the prep time from hours to minutes

4. Documents, activities and learnings become assets for re-use

5. Living business cases with Critical Success Factor monitoring

6. Priority-based gate decisions through online scorecarding

7. Best-practice innovation process models and deliverable templates

8. Best-practice process effectiveness metrics and views

Gated Process Execution Differentiators

Thank you for your attentionAny questions?
