7.2 Stage gate models in detail and practice

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En provenance du cours de Erasmus University Rotterdam

Innovation Management

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Erasmus University Rotterdam

Innovation Management

547 notes

What is innovation management? How do firms bring in new business models and get new products and services to the market? Go on a nine-week journey through innovation management concepts, theories of idea generation, selection, strategy formulation and implementation in this MOOC in Innovation Management. In it, you will also learn the tools for implementing innovation projects yourself. Guided by world-class academics, you will develop an innovative mindset and expertise in how firms successfully create new ideas for marketing new products. The syllabus also includes sessions about innovation strategy, idea management and social networks. During this course, you will learn how to: • use the main innovation management terminology and concepts • explain the adoption life cycle and innovation adoption at the individual level • define creativity and explain how creativity can be stimulated • recognise and describe three types of idea management systems • explain what an innovation strategy is and why it is important • describe what a product portfolio is • explain how innovation projects should be selected and managed • explain the importance of teams, team structures and networks for innovation. Rotterdam School of Management, Erasmus University (RSM) is one of Europe’s leading business schools, and ranked among the top three for research. RSM’s primary focus is on developing business leaders with international careers who carry their innovative mindset into a sustainable future. Go to www.rsm.nl for more information. This nine-week MOOC in Innovation Management is taught in English. There is no fee to participate in the programme.

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Execution - Implementing Innovation

By studying the materials of this week and doing the associated exercise you will learn how innovation projects can be managed. You will understand and describe the different elements of stage-gate models. Also, you will familiarise yourself with the concepts of experimentation and enlightened experimentation within the context of innovation project management. As a result, you will be equipped with an understanding of the peculiarities of innovation projects, and how companies deal with these peculiarities.

7.1 Why stage gate models are important10:45

7.2 Stage gate models in detail and practice13:36

Casestudy: Casserole Homecooker5:33

7.3 Managing innovation projects: enlightened experimentation14:30

Rencontrer les enseignants

Serge Rijsdijk
Assistant Professor
Rotterdam School of Management, Erasmus University
Jan van den Ende
Professor
Rotterdam School of Management, Erasmus University
Sandra Langeveld
Teaching and research coordinator
Rotterdam School of Management, Erasmus University
Murat Tarakci
Assistant Professor
Rotterdam School of Management, Erasmus University
Stefano Tasselli
Assistant Professor
Rotterdam School of Management, Erasmus University
Daan Stam
Associate Professor
Rotterdam School of Management, Erasmus University
Dirk Deichmann
Assistant Professor
Rotterdam School of Management, Erasmus University

Hi welcome back, we will now take a more detailed look at Stage Gate Models.

You may remember this representation of a Stage Gate Model from the previous video.

Now let's move from a vertical representation of a stage gate model,

in which projects move from the top to the bottom,

to a horizontal representation in which projects move from left to right.

Another new thing about this figure is that there are names for

each stage and at each gate.

Another difference is that this representation has five stages,

while the previous picture showed a model with four stages.

Well they are are both stage gate models, because they both have gates and stages.

Some stage gate models have just two stages, while others maybe have 14 or

20 stages.

The number of stages varies from firm to firm.

For example, later on we will see the stage gate

model of the design agencies park that consists of six phases.

But let's take a look at the general principle

of stage gate models using this five stage gate model as an example.

Now how does a Stage Gate model work?

Each gate has deliverables.

So let's say in this example on the left side of this model,

the discovery stage R and D department may have an interesting technology.

Perhaps someone from the marketing department thinks that this is

an interesting technology because it could be applied in a certain market.

The combination of this technology and the market may be an attractive innovation.

So, at Gate One the first idea is being screened.

At this gate there is going to be a formal decision

about the whether this innovation can move into the scoping stage, stage one.

The decisions made at such gates are supposed to be based on formal

evaluation criteria.

Also, decisions should be made by people that are not directly involved

in the project that they are evaluating.

Often the people evaluating projects are senior managers

from different departments in the firm who have different views on the projects.

A kill decision would mean that the project is completely stopped and

that they going to forget about it.

In case of a stop decision the project is stopped and

put on the shelf and people maybe continue with it later on.

And another option would be to move a project back in the stage gate model

because it needs some rework.

And the go means that the project can proceed to the next stage.

Once a project can proceed to the following stage, it is also decided what

kind of deliverables should be there at the next gate.

So once a project passes through for example, gate one,

the review committee makes a plan on what should be done during stage one and

which criteria should be met by the project once it reaches gate two.

Now, taking this step by step approach is useful.

Because the costs that are made for

a project increase as the project moves forward through the stage gate model.

Each phase requires new investments.

At the same time, uncertainty about whether the innovation will

be technologically and commercially successful decreases.

Now, why does uncertainty decrease as the project moves forward through the state

gate model?

First, the project gets closer towards the moment of launch into the marketplace,

so this means that the business environment and

the available information is more closely related

to what things will be like at the actual moment of a product launch.

In other words, the validity of the information on the environment is higher.

Second, once you move from the left side to

the right side of your stage gate model, products further develop and take shape.

As products become more fully developed,

it is also easier to get valid responses on the product from customers for example.

In the early stages one might just have a paper drawing.

And asking the customers to respond to that, is of course possible and

informative, but their responses might have little predicted power.

In later stages you may have a working prototype and customer responses to such

a prototype are likely to have a higher predictive validity.

Now, as mentioned earlier, as the project moves on through the stage gate model

from left to right, the investments in the project increase.

This goes hand and hand perfectly with the reduction of uncertainty,

as uncertainty decreases the decisions made on whether projects should move

to the next stage or not are based on more valid predictions.

As such the risk of investing in projects becomes smaller.

Now let's go through the different stages.

The general idea is that on the left side things are being done more roughly.

In stage one you just have an idea,

and one does an early assessment of the markets, and early technical assessment,

can we produce it or not?

And then early financial and business assessment are also made.

Finally a plan on what you've been done during stage two is produced as well.

As you can see from the descriptions of the actions taken in this first stage,

all these actions are relatively general, rough, and fast.

Then you move on to building a business case in which you become more thorough

in the information that you collect.

So you deliberately investigate and

research customer needs, you get earlier customer feedback on your idea,

you are going to look at what competitors do, etcetera.

You actually define your value proposition more clearly and

also the product definition becomes more clear.

You simply become more thorough and you also do another financial analysis.

The technical feasibility is more thorough reviewed than in stage two, and

you may remember that the investments in a project increase

when moving from the left to right.

Now, we also see why.

The actions conducted in the later stages simply require larger investments.

Stage three concerns the development stage.

In this stage, firms will produce the first version of the actual product.

They will build machines that enable the technical development of the products.

They will build prototypes and engage in product testing.

Generally, firms start to think about what the operation should look like for

the specific product that they are going to launch.

In this stage firms also design plans on how to launch the new product.

Now in stage four there's going to be even more extensive testing.

In this specific stage gate model, stage four is referred to as the testing and

validation stage.

So, firms test whether the product functions properly, and

they also test whether the market is ready for it or not.

There might even be customer trials.

Firms generally also start purchasing production equipment.

They will do production testing and they will finish launch and operations plans.

In addition, firms may also have to start preparing the post-launch and

life cycle plan.

The latter is about what's going to happen to the product

once it is at the end of its life cycle.

And finally we have the launch

which means that you are going to scale up to full production of the products.

Firms will then start to monitor the sales, results, and

they also execute the post-launch plan and the life cycle plan.

Now, one final thing to consider

about stage gate models is the sequential nature.

You saw that the project start on the left side, and then the project moves on

to the next stage, the next list of actions is being executed.

Now, there are also other ideas on how stage gate process could be modeled.

Do you remember this?

We saw that uncertainty decreases when the project moves through this model

from the left side to the right side.

And cost and investments generally increase.

But is this sequential approach the most effective approach?

The top half of this slide,

you see the sequential approach that we just discussed.

A project moves from stage one to two, etcetera.

Only when the activities in stage one are finished then the project gets to go,

to move to the next stage.

The activities belonging to stage two are executed.

You could also think of a concurrent process,

however, which you see in the bottom half of the slide.

In such a model, some activities that are conducted in the first stage

do not need to be finished before starting activities of the second phase.

This can especially be done for

the projects that have a relatively high level of certainty.

In practice this often happens in software development, for example.

The big advantage of a concurrent process is that you have a shorter time to market.

So, all together, the time it takes from starting to develop the project or

product to really launching it into the market place can be shorter.

Apart from the time to market, there are other up sides and

down sides to the different stage gate approaches.

The downside of one approach is often the upside of the other.

So, if you think about the concurrent development that I just showed,

you do run the risk of creating very high costs on the one stage is

strongly dependent on the former.

So let's say that if you start working in the second phase and certain results in

the first phase have implications for what was already done in the second phase,

then you might need to do rework, and thereby costs increase.

Another downside to the concurrent approach is that there is often a high

pressure, because time to market In important outcome of the project.

Also you can have more conflicts between the different people working in such

a concurrent process.

Of course at certain moments they have to decide which come to follow.

With the people working in stage two have to follow the work of the people in stage

one or the other way around, this could create conflict.

Now if you look at the sequential development, one downside is that you do

not have an early alarm system which you do have in a concurrent process.

Let's say that you have started the project

without involving any people from manufacturing.

Only once you move to the manufacturing stage you might have problems, and

you might have to go back to the development phase or

concept definition phase, even and start again.

In the case of concurrent processes,

manufacturing starts much earlier in the project.

So, if there is a problem you will know about it much sooner.

And of course, the long life cycle, sorry, long cycle time

as a downside to the sequential process was already mentioned and hopefully clear.

So that was it for the stage gate models.

Stage gate processes are highly formal systems in which many people are involved.

Quite often senior people who have to sit down at the table at each gate and

decide whether the project will continue or not.

So the use of stage gate models requires a lot of resources.

Of course the upside is that you can also control costs

by preventing projects to continue that are unlikely to succeed.

You simple kill or stop them.

Another important observation is that throughout the stages costs increase and

uncertainty decreases.

And finally, of course the main purpose of stage gate models

is to increase the chance that promising projects make it to the end and

the projects that are not very promising will not.

Now, to show what happens in the different stages in practice,

the next video will describe a short case study with a casserole home cooker.

The casserole home cooker is an award winning product developed by

the industrial design agency, Spark.

In the video, you will see the six stages, which they call phases

that products go through and also what happens within each phase.

You will learn about the real world trends that the casserole home cooker taps into.

What the design is focused on when creating a concept for the product.

How to design it and why, etcetera.

I hope that it will give you a few and better insight into what happens in

the different phases of a >> [INAUDIBLE]

>> model.

Thanks for watching this video and enjoy the next one.

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