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Pros and cons of a phase gate process in new product development

Pros and cons of a phase gate process in new product developmentWill a phase gate process hold back or enhance your new product development? What are the pros and cons of stage gating your NPD?

Waterfall development methodologies have fallen out of fashion since Agile went mainstream. Fearless entrepreneurial developers with their ‘fail fast, fail often’ mantras wanted less red tape, less friction and less interference from business hierarchies. And they got it.

The folly of 'fail fast'

In some sectors these are still heady days of cheap money and constant disruption. Businesses and investors, fearful of missing out on the next big opportunity are giving developers their head and their cash. Teams are moving fast and breaking things. They’re pushing boundaries and not worrying too much about monetisation (after all - Twitter only managed to turn a profit in 2019). Failing and iteration is still the order of the day. 

But that approach is also wasting quite a lot of VC money and inflating some spectacular bubbles along the way. And as the American V/C, Mark Suster argues, the 'fail fast' mantra is often "wrong, irresponsible, unethical and heartless.” To the entrepreneurs who claim they are boldly trying out new ideas with no worries about crashing and burning, he says:

“Tell that to the person who wrote you $50,000 of their hard-earned money and entrusted you to try your best. Fail fast? How does your brother-in-law feel about that?”

Is phase gating the enemy of an agile approach?

Phase gating splits new product development (NPD) into key stages with the opportunity to review progress at the end of each one. This approach looks to control what could be freewheeling and unaccountable NPD processes into a more governable and disciplined series of steps. These stages of the NPD process are typically broken down as follows: 

  1. Concept/ideation
  2. Feasibility study and design planning
  3. Design and development
  4. Testing & verification
  5. Validation & collateral production
  6. Manufacture/launch
  7. Improvement

With stop/go meetings at the end of each critical stage, involving key stakeholders from every department (marketing, dev, product management etc) - teams can use specific criteria to decide which projects should be allowed to continue and which should be canned. This is designed to halt wasteful projects and keep companies focused on transparency of process, customer needs and profitability.

To some, this might actually sound like an agile approach - to others, it’s an idea that introduces more unnecessary friction points and stifles creativity.

Do phase gates kill innovation?

So are stop/go meetings places where innovative ideas go to die? Where they are strangled through a lack of vision and administrative over-reach? This Accenture report found that:

“Driven by risk aversion and poor risk management capabilities, [Stage Gates] often weed out big ideas in favour of small ones. Decision-making bodies often send back proposals for additional research and work, creating time-consuming, creativity-numbing rework loops. Anything but agile and iterative, the process can be a slow, linear march that rarely moves the growth needle.” 

What are the pros and cons of a phase gated approach in NPD?

Pros

1. It stops you wasting time and money on ideas that don’t have a future

No one wants to kill innovation but there is such as thing as flogging a dead horse. Phase gates and stop/go meetings carried out at critical points in a development cycle can halt projects that are wasting money. An opportunity for a formal, clear-eyed look at the real potential of a project as it develops can save you from making serious mistakes.  It can stop you from being railroaded by developers pursuing an impossible dream.

A phase gate process takes into account:

  • money spent already
  • changing market conditions,
  • future resource required
  • the potential for obsolescence.

It’s about stop/go, certainly, but as these meetings are cross-departmental, it’s also an opportunity to recalibrate a project, to approve changing course/adding functionality to keep answering customer needs.  

2. It stops the siloing

Phase gating involves multiple team members in key project decision making. Everybody remains accountable for the fortunes of an idea, the way it is developed and makes its way through (or not) to launch. These formal review meetings supported by data and documentation will make sure you are making the right decisions, for the right reasons and at the right time. It means that scope creep is prevented; that unsanctioned development work cannot go unchecked and unscrutinised.  

3. It’s a requirement in many industries

In many industries, phase gating is actually a requirement. Think about the planning and design controls required in life science development by the FDA and other regulators. To produce safe and effective medical devices, you need these circuit breakers in place to review output against specifications - and check for efficacy. What’s more the outcome of each stage-gate needs to be documented and auditable, so that regulators can see these controls have been implemented.

4. It brings you structure

The ‘difficult second album’ syndrome haunts developers, too. Companies who have had success with a brilliant and innovative first product often struggle to recapture the magic again.

Phase gates can give you a repeatable system for successful development and commercialisation. Having a standard set of documents that need to be completed and presented at each stage will make sure you can compare the completion status, progress and potential of each project at key points. It will keep you focused on reaching milestones and sticking to a process of ongoing review and iteration.

Cons

1. It’s often not done right

In some businesses, phase gates are often not enforced properly. Evidence can be ignored or overridden to justify pushing on with a pet project of a senior manager or a star developer. The phase gates need objective, measurable and agreed goals for the activation of each new stage - otherwise they may become about who can shout the loudest.

2. Too many gates ruin your flow

One of the big dangers of phase gating is that they become bureaucratic hurdles rather than helpful review opportunities. Imposing more review stages is a natural reaction to past failures and problems, but as Rick Mitchell editor of the R&D journal puts it:

“over time phase gates can become more elaborate and onerous, and start to be seen as a waste of time” 

3. They can stifle creativity

As Clayton Christensen pointed out sometimes the true commercial potential of an innovation might only be realised after it is launched and in the marketplace. And even then it might need tweaking and optimising to make its mark. Check out the curious history of M3s Post-It note for a story of a world-beating innovation that nearly didn’t make it off the blocks. It failed over and over again to make it through the ‘phase gates’ of the company’s NPD criteria. It even failed to make money when it saw a limited market launch. Post-Its went unexploited as a product for 10 years when finally the right marketing meant it found its application and full sales potential. 

4. It’s not just about the money

Christensen also points out that it’s a complex business figuring out potential profitability against spend, particularly at an early stage of a development process. In a straight fight for resource using P&L calculations like this, the choice to either update a successful product or back a risky new innovation, innovation may never win out. If merely crude financial measures of possible success are put in place you might end up never taking innovative risks at all.

Getting phase gates right

Done wrong, phase gating can be a drag on innovation. But done right it enhances agile processes - bringing formal accountability structures to bear on development methods that can tend towards the free-form.

As Christian Ashby Industry Architect at Google argues:

“Agile is not a synonym for ‘throw away the rules’. Actually, I’d say the opposite is true. In an agile development life cycle you’ve got more sprints, you’ve got a backlog building up. You need to develop governance, you need to develop ground rules that enable your project delivery to continue. KPIs, documentation… all of those things don’t go away, in fact they become more important because they’re assets you have to build out and understand across a broader group of your project team”

And we agree. But to get this right you need the digital tools that can impose the right levels of control while helping you ideate and collaborate freely and effectively.

Using a digital DMS that automates development workflows, documentation gathering and approval mechanisms will help you bring consistency and quality based thinking to your approach. But you don’t want a system that you can’t change and update easily - or one that tells you how to do your job. Flexibility is the key - particularly, as Rick Mitchell says, you’ll need different mechanisms for NPD, existing product upgrades and more speculative projects covering new sectors.

“Small or straightforward projects may need a lightweight process, just enough to prevent them going awry without burdening them with heavy reporting. A heavyweight process can stifle creativity in exploratory projects. And novel projects that take the company in a new direction will need their own special oversight.”

Each business has different needs but nearly everyone could benefit from more structure and automation in their NPD and management processes. Finding the digital tools that can do this, without tying you up in bureaucratic knots is the real challenge.

The guide to successful new product development