Stage-Gate Model

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Stage-Gate model

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A stage-gate model is a technique in which a (product, process, system) development process is divided into stages separated by gates. At each gate, the continuation of the development process is decided by (typically) a manager or a steering committee. The decision is based on the information available at the time, including e.g. business case, risk analysis, availability of necessary resources (money, people with correct competencies) etc.
The stage-gate model may also be known as stage-limited commitment or creeping commitment.

* 1 History
* 2 Stages
* 3 Gates
* 4 The stages in more detail
o 4.1 Discovery (stage 0)
o 4.2 Scoping (stage 1)
o 4.3 Building the Business Case and Plan (stage 2)
+ 4.3.1 Product Definition and Analysis
+ 4.3.2 Building the Business Case
+ 4.3.3 Building the Project Plan
+ 4.3.4 Feasibility Review
o 4.4 Development (stage 3)
o 4.5 Testing and Validation (stage 4)
+ 4.5.1 Near Testing
+ 4.5.2 Field Testing
+ 4.5.3 Market Testing
o 4.6 Product Launch (stage 5)
* 5 Advantages and disadvantages
* 6 References
* 7 External links

[edit] History

The stage-gate model was developed and first suggested by Robert G. Cooper (McMaster University) in his book Winning at New Products, published in 1986.[1] The stage-gate model is based on empirical findings of numerous "NewProd" Studies conducted by R.G.Cooper (e.g. 1985, 1992, 1994).[2], [3], [4]

The stage gate model refers to the use of funnel tools in decision making when dealing with new product development. “Gates” or decision points are placed at places in the product development process that are most beneficial to making decisions regarding continuance of product development. These production areas between the gates are idea generation, establishment of feasibility, development of capability, testing and validation and product launch. At the conclusion of each of these areas of development of a new product, it is the responsibility of senior management to make a decision as to whether or not the product should continue to be developed. The passing of gate to gate can be accomplished either formally, with some sort of documentation, or informally, decided upon based on the preferences and culture of the organization.

Stage-Gate® is a registered trademark. In Europe, the owners are Jens Arleth, Stage-Gate.EU and Robert G. Cooper, Product Development Institute Inc. In Canada and USA, the owner is Product Development Institute Inc.
[edit] Stages

A common model is composed of the following stages: ideation, preliminary analysis, business case, development, testing, launch. A stage-gate model is a conceptual and operational road map for moving a new project from idea to launch - a blueprint for managing the new-product process to improve effectiveness and efficiency. The traditional Stage-Gate process has five stages and five gates. The stages are:[5]

1. Scoping
2. Build Business Case
3. Development
4. Testing and Validation
5. Launch

Conventionally, the gates between stages have the same number as the stage following them.

In the front of process, there is a preliminary or ideation phase, called Discovery, and after the 5th stage the process ends with the Post-Launch review. Major new product projects go through the full five-stage process. Moderate risk projects, including extensions, modification & improvements, use the short XPress version. Very minor changes (e.g. Sales force & Marketing requests) may be executed using a lighter process (Stage-Gate Lite). Each stage consists of a set of prescribed, cross-functional, and parallel activities undertaken by a team of people from different functional areas. Stages have a common structure and consist of three main elements: a)Activities, b)Integrated Analysis, c)Deliverables. Activities consist mainly in information gathering by the project team to reduce key project uncertainties and risks. An integrated analysis of the results of the activities is undertaken by the project team. Deliverables of stages are the results of integrated analysis that are used as input for the next Gate.
[edit] Gates

Gates provide various points during the process where an assessment of the quality of an idea is undertaken. It includes three main issues:

* Quality of execution: Checks whether the previous step is executed in a quality fashion.
* Business rationale: Does the project continue to look like an attractive idea from an economic and business perspective.
* Action plan: The proposed action plan and the requested resources reasonable and sound.

A gate meeting can lead to four results: go, kill, hold, recycle.

Gates have a common structure and consist of three main elements: Deliverables, Criteria and Outputs.

* Deliverables: What the project manager and team deliver to the decision point.These deliverables are decided at the output of the previous gate,and are based on a standard menu of deliverables for each gate.
* Criteria: Questions or metrics on which the project is judged in order to make the Go/Kill/Hold/Recycle and prioritization decision.
* Outputs: Results of the gate review -a decision (Go/Kill/Hold/Recycle),along with an approved action plan for the next gate, and a list of deliverables and date for the next gate.

[edit] The stages in more detail
[edit] Discovery (stage 0)

The discovery stage is the first part of any product development, whether or not the stage gate model is being utilized. During this basic stage the development team is simply deciding what projects the company wants and is capable to pursue. During this stage it is common for companies to take part in idea generation activities such as brainstorming or other group thinking exercises. Once the idea generation team has selected a project that they would like to go forward with, it must be passed on to the first gate and therefore screened by the organization’s decision makers. When searching for new product ideas it is beneficial for an organization to look to the outside world to suggest business opportunities. Using methods such as those found in empathic design can be quite helpful. Communicating with customers to understand how and why they use products can produce great strides in idea generation. Specifically, communicating with lead users can provide great feedback to the developers, as these customers are most likely to feel most passionately about the product. In addition to communication with lead users, it may be helpful for developers to communicate with suppliers. By understanding all of the types of business that their materials are being used for, developers may be able to act upon previously untapped possibilities.
[edit] Scoping (stage 1)

The second stage of the product development process is scoping. During this step the main goal is to evaluate the product and its corresponding market. The researchers must recognize the strengths and weaknesses of the product and what it is going to offer to the potential consumer. The competition must also be evaluated during this stage. It is important for the researchers to understand who and what is already in the market as well as what can potentially be developed. By determining the relative level of threat from competitors, the management team will be able to recognize whether or not they should go forward with the production of the product, whether or not they should pass the product onto the next stage.
[edit] Building the Business Case and Plan (stage 2)

Once the new product passes through gate one after the scoping phase, the next phase in the stage-gate model is building the business case and plan. This stage is the last stage of concept development where it is crucial for companies to perform a solid analysis before they begin developing the product. In comparison to the other stages in the stage-gate model this phase is generally difficult, complex, and resource-intensive. However, companies must put forth a strong effort in this stage for it is directly related to the success and development of a new product. There are four main steps that comprise this stage: Product Definition and Analysis, Building the Business Case, Building the Project Plan, and Feasibility Review.
[edit] Product Definition and Analysis

The first step, Product Definition and Analysis, is composed of a series of activities that will give you the information to define and justify the development of a new product. One of the first of these activities is the user needs and wants study where you will try to determine what creates value for the consumer. This addresses questions about the product such as what benefits does the product provide and what features should the product have. During this time the company should conduct surveys and interviews with existing and potential customers, along with staff members. Next, the company must conduct a market analysis. They must determine the market size and segmentation, rate of growth, buyer trend and behavior, and what channels to reach these buyers. Once the market analysis is complete the company must then conduct a competitive analysis. It is important to know how your competitors operate in addition to their strengths and weaknesses. This will not only help you build a great product, but will also help in determining how and where to launch your new product. Together these activities will help define the product and provide a foundation for the marketing strategy. Next, the company must build a technically feasible product concept, which includes the substance and methods needed to produce the new product. Once this is completed the company can then produce a production and operations cost analysis along with a market and launch costs analysis. Next, the company can begin to test the concept they have developed. This is when early prototypes are developed then presented to staff and consumers to gain feedback and gauge customer reaction. From this the company can make the necessary changes and see the sales potential of the product. This feedback will also help the company build a solid product definition. Lastly, the company will then conduct the business analysis, risk analysis, and financial analysis of the new product. These activities collectively make up the Product Definition and Analysis, the first of four steps.
[edit] Building the Business Case

Now one can move on to the second step, Building the Business Case. The business case is a document that defines the product and provides the rationale for developing it. This document will vary in format amongst companies, but the primary components are the following: results of the activities of Product Definition and Analysis; legal and regulatory requirements; safety, health, and environmental considerations; assumptions made to draw the conclusions you have, and why you believe they are valid and reasonable; and out-of-bounds criteria that indicate certain changes/events which will mandate an emergency business case review. This document will be referred to throughout the development process and edited when necessary.
[edit] Building the Project Plan

The third of the four steps is Building the Project Plan. This includes a scheduled list of tasks and events along with timelines for milestones throughout the development process. Also included in the project plan are the personnel, time, and financial resources needed to complete the project. The project plan includes an expected launch date for the release of the new product.
[edit] Feasibility Review

The last step of building the business case and plan is the Feasibility Review. This is when management, along with other departments of the company, reviews the rationale for pursuing the product. They analyze the information provided by the previous steps in this process to decide whether or not the product should move forward. If it is decided to be pursued then it passes through gate two and moves on to the Product Development stage.
[edit] Development (stage 3)

During the development phase of the stage-gate process, plans from previous steps are actually executed. The product’s design and development is carried out, including some early, simple tests of the product and perhaps some early customer testing. The product's marketing and production plans are also developed during this stage. It is important that the company adheres to their overall goal of the project, which is reflected in these production and marketing plans. Doing this will allow them to definitively decide who they will market their product to and how they will get the product to that target audience. The development team maps out a realistic timeline with specific milestones that are described as SMART: Specific, Measurable, Actionable, Realistic, and Time bound. The timeline is frequently reviewed and updated, helping the team stay on task and giving management information about the product's progress. The development stage is when the product truly builds momentum as the company commits more resources to the project and makes full use of cross-functional teamwork as the marketing, technical, manufacturing, and sales departments all come together to offer their expert opinions. Having a diverse development ensures that the product continues to meet the company's technical and financial goals. A diverse team also allows specific roles and leadership positions to develop as team members make contributions using their strongest attributes. With members having clearly defined roles, tasks can be performed concurrently ensuring a much more efficient development process. The ultimate deliverable of the development stage is the prototype, which will undergo extensive testing and evaluation in the next stage of the stage-gate process.
[edit] Testing and Validation (stage 4)

The fourth step in Stage-Gate processing is the testing and validation period. The purpose of this stage is to provide validation for the entire project. The areas that will be evaluated include: the product itself, the production/manufacturing process, customer acceptance, and the financial merit of the project. Testing and Validation is broken up into 3 phases of testing: Near Testing, Field Testing, and Market Testing. Again, the main point of these tests is to validate your product.
[edit] Near Testing

The main objective in the first phase, near testing, is to find any bugs or issues with a product. The key point to remember here is that the product is no longer a prototype anymore and that it has almost all the features of the commercial model. Testing will be done initially by in-house staff, customers, and partners who are close to the firm. It is important to remember those testing have an understanding of how the product should perform, so they know what it should or shouldn’t be doing. Members of the research development team are usually present to observe the participants using the product and take any notes or data that may be useful.
[edit] Field Testing

Field Testing, or beta testing, is done by those who can provide valuable feedback on the product. This usually lasts a long period of time and the participants can include customers, partners, or anyone who is not familiar with the producing company. At this juncture the product fully resembles its planned launch model in all aspects; therefore the participant’s interaction rate will be higher because they know all the features and benefits. During this segment there are three primary objectives to be achieved. The first objective is to see how much the participant is interested. It is also worthwhile to note which individual attribute they prefer and, obviously, if they would buy the product. Next, figure out how the customer uses the product and look at its durability. Take a look at what environment the customers will be using the item in. Recording and analyzing the feedback received will be the final step in the field testing stage. The feedback can be used as a tool to help adjust any minor design improvements that need to be made. The Sales and Marketing team will also be a beneficiary of this feedback. They can use the information to help with their sales presentation and make it easier when they are trying to market the product.
[edit] Market Testing

The last phase in the Testing and Validation stage is the market testing. Unlike the other two, this is completely optional. It all boils down to this: A solid marketing plan and launch plan along with a confidence in the products ability to sell: go to the launching stage. If there is a doubt in any of these plans there are two options to proceed with. One option is a simulated market test. Customers will be exposed to new products in a staged advertising and purchasing situation. The goal of this test is to obtain an early forecast of sales from the observations and making any necessary adjustments. The second option involves trial sells. This test is done through specific channels, regions, or consumer demographics.
[edit] Product Launch (stage 5)

The product launch is the fifth and final stage of the stage- gate process and is the culmination of the product having met the proper requirements of the previous stage-gates. The product launch stage is one of the most important, if not the most important stage of product development. Development teams must come up with a marketing strategy to generate customer demand for the product. The company must also have to decide how large scale they anticipate the market for a new product to be and thus determine the size of their starting volume production. In addition part of the launch stage is training sales personnel and support personnel who are very familiar with the product and that can assist in market sales of this product. Having a smooth launch process is an important part in the stage-gate process because it translates to faster time to profit, but if done thoroughly and well step by step, a smooth launch process should also result in more effective marketing, a knowledgeable and prepared sales force, and ideally early customer acceptance. Another aspect which companies often misjudge during the launch process is the topic of setting a product price. Companies must dedicate sufficient time to price setting during the launch process to avoid either undershooting or overpricing the potential market. Finally, distribution is a major decision making part of the launch process. Selecting a distributor or vender for a product must be done with careful though and potential sales in mind. Taking all of these factors of the launch process into consideration is key to a successful product launch and in general a successful product.
[edit] Advantages and disadvantages

There are many benefits to using the stage-gate model. The organization of a firm’s innovation process can provide competitive advantage for a company, in that other companies will not be able to come up with products at the same quickness and quality level. Poor projects are quickly rejected by the model, resulting in a fast paced track for those products which are going to prove to be more successful for a firm. When using the stage gate model in a larger company, the model can help to make what could potentially be a large and limiting innovation process into a simple, guideline lead approach which allows an organization to demonstrate prioritization and focus into their development process. When a stage gate model uses cost and fiscal analysis tools such as net present value, the company can potentially be provided with quantitative information regarding the feasibility of going forth with potential products. Finally, the stage-gate model is a great opportunity to validate the updated business case by project’s executive sponsors[6].

Another benefits of using Stage-Gate model are:

-accelerates speed-to-market;

-increases likelihood of product success;

-introduces discipline into on ordinarily chaotic process;

-reduces re-work;

-achieves efficient and effective allocation of scarce resources.

The main problem with the stage-gate process is the potential for structural organization to interfere with creativity. Some experts believe that overkill of structure can cause creativity and customization to be put on the back burner of importance in an organization.

The process needs to be modified to include a top-down link to the business strategy if applied to IT and other non-product development projects.
[edit] References

1. ^ Cooper, Robert G. (1986) Winning at New Products, Addison-Wesley, 273 pages
2. ^ Cooper, 1985).Cooper, Robert G. Selecting winning new product projects: Using the NewProd System, in: Journal of Product Innovation Management, 1985, Vol. 2, pp.34-44
3. ^ Cooper (1992) Cooper, Robert G. The NewProd System: The Industry Experience, in: Journal of Product Innovation Management, 1992, Vol.9, pp.113-127
4. ^ Cooper (1994) Cooper, Robert, G. New Products: The Factors that Drive Success, in: International Marketing Review, 1994, Vol.11, pp.60-76
5. ^ Cooper, Robert G. (1993). Winning at New Products: Accelerating the Process from Idea to Launch. 2nd Ed.,Cambridge, Mass: Addison-Wesley
6. ^ Conducting Successful Gate Meetings

[edit] External links


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