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Stage Gate Review Process1 © 2010 ~ Mark Polczynski All rights reserved.

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Presentation on theme: "Stage Gate Review Process1 © 2010 ~ Mark Polczynski All rights reserved."— Presentation transcript:

1 Stage Gate Review Process1 © 2010 ~ Mark Polczynski All rights reserved

2 Stage Gate Review Process2 Integrating project execution and review process Often, project execution and project review are two separate processes. It is desirable to integrate these two processes, because you get: - Better project results, - Better project review decisions, - Faster decisions – projects move faster, - Happier people: - Everyone knows the rules of the game beforehand, - Everyone follows the rules all the time, - Everyones expectations are kept realistic.

3 Stage Gate Review Process3 What Problem We Are Trying To Solve? Example: Eaton Corporation - ~ 10,000,000,000 ~ $10 billion annual sales, Goal: 10% increase in sales per year, Driven by stock market expectations, And stock market is main customer in capitalistic system. That equates to $1B in new products per year – every year! (compounded!)

4 Stage Gate Review Process4 Whats The Problem We Are Trying To Solve? Need new products that can move the needle. Hard to get to $1B by adding $1M at a time. You need 1,000 new products! Significant growth in many small increments is difficult to manage. Many low-impact products are difficult to support. Solution: Fewer high-impact projects.

5 Stage Gate Review Process5 Possibly the biggest cause for failure of good projects: Under-funding Lack of adequate resources. Inability to ruthlessly focus on only the best opportunities. Inability to identify best opportunities early in life. Stage Gate Development Process Stage Gate Review Process

6 6 Whats the MAIN Problem We Are Trying To Solve? Many Small Projects In Many Low-Impact Products Out New Product Pipeline Before: Difficult to manage many small projects. After: Difficult to support many small products.

7 Stage Gate Review Process7 Whats do we want to have? New Product Pipeline Many Small Projects In Few High-Impact Products Out

8 Stage Gate Review Process8 Total NUMBER of Projects Overall Goal: Maximize Bang-For-The-Buck. Averagee COST Per Project Early Project Life Late Kill losers before you spend lots of money on them Feed the winners well

9 Stage Gate Review Process9 We must kill many of these projects… …but how do we discover which are the best? Many Small Projects In Few High-Impact Products Out

10 Stage Gate Review Process10 Total NUMBER of Projects Overall Goal: Weed out projects that have low impact. Average IMPACT Per Project Early Project Life Late Problem: We dont know the winners at the start of their life. Goal: Survival of the best.

11 Stage Gate Review Process11 What about small businesses? It doesnt matter if you are one of 10,000 engineers trying to add $1B in sales for Eaton Corporation. Or Joe of Joes Garage Shop trying to add $1,000 in sales. Trying to grow by $1,000 in $10 increments is hard to manage and hard to support when you are done.

12 Stage Gate Review Process12 Product Development Stage Gate Process Stage gate reviews

13 Stage Gate Review Process13 Technology Development Stage Gate Process Stage gate reviews Where projects get killed! Stage gate reviews Where projects get killed!

14 Stage Gate Review Process14 G1G1 S1S1 S2S2 S3S3 G2G2 Stage Gate Development Process Stage Gate Review Process Stage Gate Concept is Quite Simple… Put Stage Gate Review decision blocks in the process flow… So, how does a Gate work? Our topic

15 Stage Gate Review Process15 Continue S S Redirect Kill Hold G All the Gates work the same way… At the end of each development stage, you hold a stage gate review to determine if you should: - Continue: Go to the next stage, - Redirect: Go back to the previous stage, - Hold: Put the project on hold, - Kill: Kill the project.

16 Stage Gate Review Process16 Purpose of ALL Gates is to create BOTH of these curves: G G G Number Size This is very simple! So whats the Big Deal?!

17 Stage Gate Review Process17 Stage Gate Review Execution: Review is usually a meeting. So - How do you make decisions? Who should attend the meeting? How do you organize the meeting?

18 Stage Gate Review Process18 Continue A A Redirect Kill Hold G How do we decide what the decision will be? - Continue? - Redirect? - Hold? - Kill? Lets look inside of a gate

19 Stage Gate Review Process19 Is this a good project? All information needed? Yes No Kill Hold Continue Re-Direct What is its priority? YesHigh NoLow Three-Step Decision Process: Ask questions in this order. Does this project make business sense: ~ Strategically? ~ Financially? ~ Technically? Has the team completed all outputs in a quality fashion? What is the impact relative to other projects? Are people and money available?

20 Stage Gate Review Process20 Purpose of Stage Gate Review Meeting: Stage gate reviews… Are business decision meetings Are not project reviews Are not design reviews Are not performance reviews A key advantage of a well-deigned and well-executed stage gate process is that it makes the engineer/technologists an integral contributor to business decisions. This is absolutely essential in technology-driven businesses. About picking the projects that will have the biggest impact on your business

21 Stage Gate Review Process21 Purpose of Gate Review Meeting: Picking winner projects and killing losers. For winners, this is about: Making an investment decision (where to put money), Allocating and committing resources (where to put people), Assessing potential of project (all info needed to make good decision), not quality of project or product, Assessing risk of project (but winner may be high or low). Pet Projects

22 Stage Gate Review Process22 Stage Gate Review Executors (R): Running the current project Experts (R): Validating project deliverables Customers (V): Receiving next project outputs Suppliers (V): Asking for next project Investors (V): Paying* for next project Who Should Attend the Review? R = Recommend V = Vote * = Paying means providing money and/or people Note: a particular individual may play more than one role.

23 Stage Gate Review Process23 Typical Stage Gate Review Agenda: 20 min.Executor presentation and recommendation – All participants – Silent listening to presentation No discussion, but clarifying questions allowed. 15 min.General discussion – All participants – Led by non-voting facilitator. 15 min.Voter deliberation – Typically voters only – Led by facilitator. 10 min.Tem briefing on decision and action items – All participants – Led by facilitator. 1 hourYes, this can, and must, be met!

24 Stage Gate Review Process24 Gatekeeper Rules of Order Gatekeepers are the voters at the stage gate review meeting. If gate review meetings degenerate to vicious attacks by gatekeepers on project teams… …then before long you wont have any new projects! To avoid having this happen, gatekeeper rules of order need to be established and enforced (by review meeting facilitator). Here are some rules…

25 Stage Gate Review Process25 Gatekeeper Rules of Order – Page 1 Gatekeepers must attend review meeting in-person or virtually, or your vote defaults to Continue. A substitute may be sent. Gatekeepers must review team presentation before* the meeting. Serious concerns must be communicated to teams before the meeting. No surprise attacks allowed in the meeting. No cross-examination allowed during team presentations. You are not trying to break down the witness in a courtroom. * Typically the project team sends the gatekeepers a stage gate project report one week before the stage gate review meeting.

26 Stage Gate Review Process26 Gatekeeper Rules of Order – Page 2 Gatekeepers cannot require information outside of the scope of the stage being reviewed (e.g., cant require Stage B information at Stage A review). Decisions must be made in accordance with the criteria for the gate, not a gatekeepers opinion of the project - no pet projects. Final vote must be unanimous. Gatekeepers must be willing to negotiate with other gatekeepers to make a decision.

27 Stage Gate Review Process27 Gatekeeper Rules of Order – Page 2 You can Hold a project, but you cant Hold a decision. The decision must be given at the stage gate review meeting. We will get back to you later is not allowed. Continue decision means that money and resources are committed! This is a promise that the team can actually execute the project!

28 Stage Gate Review Process28 Stage Gate Cultural Issues

29 Stage Gate Review Process29 Impact on Morale So, Stage Gate review is about killing off projects. You start with many small projects and end up with few big projects. This means that you kill off many projects. This can lower the morale of the engineers. You are killing off their great ideas!

30 Stage Gate Review Process30 Hey! Wait a minute! I didnt come here to have some guy tell me how to kill off my projects! Well… You are much better off helping kill off your own bad projects before they get out of control… Than to have someone else kill off your good projects because they ran out of money. Its your choice!

31 Stage Gate Review Process31 The Six Realities of Stage Gate Reviews: Even when you try to do everything correctly, some things will go wrong. Here are six different things to worry about. These tend to be related to: Organizational culture, Human behavior.

32 Stage Gate Review Process32 The Six Realities of Stage Gate Reviews: 1.You allow resources migrate to last-stage projects, So you cant start new projects. 2.You dont kill as many projects as you need to, So you cant start new projects. 3.You put too many projects on hold due to lack of resources, So your new product pipeline clogs. 4.Stage gate processes slow individual projects down, So people abandon the system. 5.Project teams overwhelm system with info to support project continuation, So excess resources are consumed needlessly. 6.Culture cant tolerate failure-driven system, So project teams refuse to participate. Final note: There are no magic solutions to these problems!

33 Stage Gate Review Process33 Example: Three-Stage Technology Development Project Number of Projects Average COST Per Project Early Project LifeLate StageNumberCost Per Project ($K) Total Cost ($K) A60503,000 B152003,000 C410004,000 $10,000 < 4:1 Attrition How to spend a $10M budget A B C

34 Stage Gate Review Process34 Your boss thinks he is spending all his money on Stage C. But actually, you must balance spending across all three stages. Even though most of the projects will be killed! This takes significant managerial courage. StageProjectsKilledCost PerTotal CostCost of Killed A6045$50K$3M$2.25M B1511$200K$3M$2.20M C41$1M$4M$1M $10M~$5M

35 Stage Gate Review Process35 Number of Projects Kill projects at ~ 4:1 attrition rate. From the preceding example… Early Project Life Late 60 15 4

36 Stage Gate Review Process36 You never kill as many as you intend, so… Number of Projects Early Project Life Late Goal You always have more Stage B and C projects than you can support, so… You never have enough money or people to start as many Stage A projects as you intend. Reality

37 Stage Gate Review Process37 Reality: You never kill as many as you intend, So you never start as many as you intend. Management Perception: Poor Stage Gate Review Process, and/or Incompetent reviewers. But Also: Educational system trains us to never raise our hand unless we have the right answer. There is significant unconscious pre-process screening by project initiators. Many of the small projects at the front end are really pretty good. Bottom Line: You will have to discipline yourself to kill relatively good projects.

38 Stage Gate Review Process38 You want to have a good balance among the various Stage Gate Review decisions. You do not want the system clogged up with projects on Hold. Heres a possible example of stage gate targets… DispositionTarget Continue25% Kill65% Redirect5% Hold5% < 4:1 attrition target

39 Stage Gate Review Process39 Excessive number of projects put on hold due to lack of resources. This clogs up system with things that you will probably never get around to anyway! This is lottery ticket management. DispositionTargetReality Continue25%10% Kill65% Redirect5% Hold5%20% At some point, you must kill these!

40 Stage Gate Review Process40 Lottery Ticket Management: Hey! You never know! This this lottery ticket (or project) might be worth $100,000,000! But it probably isnt, So kill it already! If you want to play lottery ticket project management, Then use your product development funds to buy lottery tickets, The odds are better!

41 Stage Gate Review Process41 G1G1 A1A1 A2A2 A3A3 G2G2 I1I1 I2I2 O2O2 O1O1 Stage Gate Development Process Stage Gate Review Process Always use the Stage Gate process for every project..

42 Stage Gate Review Process42 Stage Gate Reviews will slow projects down! Reviews are sequential events scheduled at specific times and attended by particular individuals, usually very busy individuals. Reviews usually grouped in bunches to accommodate reviewers. There may be significant project delays while waiting for the projects next gate review. This does slow things down. But killing bad projects earlier in the project ultimately frees up resources that would have been wasted on weak projects. So, projects slow down, but overall throughput increases. If you dont believe this, read The Goal, by Eli. Goldratt.

43 Stage Gate Review Process43 Long-Term Impact… If you are going to do Stage Gate, Then everyone has to play by the rules. If people start going around the system for personal advantage, The system will collapse. Some projects will suffer, But in the long run everyone benefits.

44 Stage Gate Review Process44 In Stage Gate, you provide exactly the information that you need exactly when you need it. Whole idea is to spend as little money and time as possible to make a good (not perfect) decision. Goal: Never spend one penny more than what you need to get through the gate. Never spend one second more than you need. This is the survive and advance mentality. You only need one more goal than your opponent to win.

45 Stage Gate Review Process45 Big mental shift: This goes against human nature, Especially for engineers, who are taught to be highly risk-adverse. Tendency on part of engineers is to overwhelm decision-makers with too much information to justify continuing with the project. But here, you provide exactly the information that you need exactly when you need it. This takes courage on the part of the project team!

46 Stage Gate Review Process46 Goal: Most projects are killed – best are preserved Number of Projects Average COST Per Project Early Project LifeLate StageNumberCost Per Project ($K) Total Cost ($K) A60503,000 B152003,000 C410004,000 < 4:1 Attrition A B C

47 Stage Gate Review Process47 The vast majority of projects will be killed. People will see this as: Personal failure – My project was killed, I must be a bad engineer, Disruptive and unsatisfying - Constantly starting new projects – never finishing anything. Threat at performance review time – - What am I being judged on? - What is success? What is failure? - What is excellence? Threat to job security – Constantly killing projects implies an insecure position. This is the ultimate cultural challenge of Stage Gate!

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