One of the hallmarks of innovative organisations is that they are very good at developing ideas into successful products. The downside of that creativity is that they often have more ideas than they are able to handle. This presents a problem for senior management. How do they determine which ideas to back?
The average failure rate for new products is approximately 40%. Given the costs linked to developing a product and taking it to market, those misses can be significant. Minimising the risks associated with new product introduction can be the key to long-term survival for many organisations.
Introducing gate controls for product development is one way to address those risks. A gate system establishes criteria, across a series of stages or phases, that a new product needs to meet in order to progress development. Each step reduces the risk involved in launching the product to the wider market.
Organisations have finite resources to invest in new product ideas. They must focus those resources on the most promising ones. A gate system applies a controlled framework for testing new products as they move through the development cycle - identifying and promoting the winners and killing the losers.
Gate control is more than setting up project review points or information updates. Effective gates are tough meetings where critical prioritisation decisions are made regarding the next stage of the project. Organisations that use gates effectively have in place clear go/no-go decision points (gates) and clearly identified decision makers.
Let’s take a closer look at how one can approach internal gate criteria to maximise the entire product development cycle.
How many phases?
Traditionally, the phase-gate process has five phases with four gates, which may be further subdivided depending on organisational requirements. These phases are:
- Building a business case
- Testing and validation
Major, newer, or high-risk products tend to go through the full five-phase review. Moderate risk projects such as extensions and enhancements might often use a reduced three-phase version, which combines the scoping phases and is developed during the testing phase. Very simple changes (such as a marketing request) can be executed using a light two-phase process, seeing the launch activity incorporated into development and testing.
Determining your gate criteria
How do you make the decision to progress through a gate to the next phase of the programme? Selecting clear and enforceable criteria for each gate is one of the keys to the success of a system like this. These are fact-based decisions points where management and project teams come together to review a project and its merits for future funding.
Gate criteria will be different for each business. But it should reflect the strategy of the company and be internally consistent from one stage to the next. That is, the criteria applied at each gate should be the same for each project. This will make sure pet projects don’t receive any special treatment, for example.
Gate systems are typically built to monitor efforts from idea stage through to commercialisation. Criteria should be relatively stable year on year to promote consistent, structured product development programmes.
Innovation projects, especially in high-tech, are complex. They impact and require input from many different parts of an organisation. Therefore, the criteria need to be cross-functional to truly reflect the different pressures that affect a product through development to launch.
For example, during early development, a technical hurdle may be uncovered - or component or material costs may rise - which increases the cost of production. Or market conditions might change, shrinking the addressable customer pool. Both scenarios could call into question the feasibility of continuing with development. But if organisations don’t have cross-functional criteria at each gate, scrutinised by cross-functional teams, they risk building a product that ultimately they can’t deliver profitably or successfully.
Gate criteria should represent all of the areas of the business that impact or are impacted by the development and launch of a new product - executive, product management, marketing, engineering, procurement, manufacturing, operations, etc.
Historically, organisations have followed a functional silo resource allocation approach to development programmes. So, for example, marketing might play a central role in ideation, scoping, and building the business case but then aren’t involved again until it’s time to launch. At which point they are presented with a product whose price point has to be set to an uncompetitive level to cover the cost of production, which crept up throughout development.
Consistent, disciplined cross-functional gate criteria will help eliminate this risk.
Clear enforceable criteria
To ensure your criteria is clear and enforceable, organisations would be wise to develop programme management structures that allow transparency and controlled access to project documentation. A good document management system (DMS) can help you put these structures in place.
Some document management systems provide support for gate control by allowing program managers to group gate documents into a controlled container. These ‘document holders’ link documents together to form gate requirements for approval and for the go/no go gate meeting at the end of each phase.
Authorised users are able to review all the documents that make up the gate criteria. The container itself can be approved only once all documents in the container are approved. Organisations can use this in the phase-gate process as the final approval trigger if the gate meeting says “go”.
Features of effective gate control with a DMS
- Quick setup of structure for new development projects by product/program managers
- Auto setup of project category structures
- Import standard template document with tools for ensuring naming conventions are followed
- Auto set up of who needs to review and approve required documents at project inception
- Documents can reside in multiple locations so no document duplication
- Use of document holders to group phase gate document into a controlled repository which cannot progress to the next phase until approved by all required parties.
By establishing an interactive web-based view of the entire programme in conjunction with gate controls, a program manager can oversee the entire product development process. There are many tools that drive more stringent and accurate gate control processes, but a smart, lean document management system can underpin every action.
Product development cycles come with risks at every juncture, but greater rigour and governance is key in mitigating those challenges before they occur.
Does your existing gate strategy satisfy your requirements, or could it be improved?