Killing Innovation Projects with The Stage Gate Innovation Selection Process

An excellent approach for managing the effectiveness of your investment in innovation is the Stage Gate process.  Innovation project selection and investment becomes particularity important as you move beyond the smaller low risk opportunities to large and more radical projects involving higher degrees of uncertainty.  You must balance the need to invest in early-stage risky projects without over investing.

The Stage Gate innovation process involves breaking innovation projects into a series of stages with gates between them, where each:

• Stage involves doing some work (research, experimentation, testing and so forth) to learn, build knowledge and reduce uncertainty
• Gate involves assessing what you’ve learned and deciding whether to continue investing in a particular idea or to abandon it (temporarily or permanently) and invest in others.

At each stage of learning, the idea must pass objective criteria before it receives further investment to fund the next stage of learning (or it’s filtered out of contention).  That way, you eliminate ideas that will not deliver what you want before you’re too committed and waste excessive time and resources on them.

Ultimately, the Stage Gate process allows you to control costs. When uncertainty (risk) is high, it ensures that innovation investments only become larger as the success of projects becomes more certain.  It can be a very effective means of innovation selection (and implementation) across a range of innovation projects.

The number of stages in a Stage Gate process can vary depending on your circumstances and needs. However, a typical Stage Gate arrangement comprises five stages fed by your innovation search efforts.

Stage 1 – Scoping

Here your objective is to complete a high-level, low-cost scope of your ideas/innovation project to decide if it warrants further investigation.  Where applicable, this may include a preliminary high-level market, technical and business case assessment, and should set out the key activities for Stage 2.

Stage 2 – Building the Business Case

Stage 2 is a more detailed investigation involving primary and secondary research. This should focus on both market desirability and technical feasibility, which leads to preparing a business case.  This typically includes:

• Clarity around what the idea/innovation is and the project’s scope
• The project justification
• A proposed project development plan
• An outline of your value proposition, competitive advantage assessment, financial analysis and risk assessment.

The key deliverable from Stage 2 is typically a sound business case and project plan.

Stage 3 – Development

Now you’ll create the project’s actual detailed design and development, which typically includes:

• Technical development
• Prototyping, concept testing, trials, and so on
• Detailed project plans, including project launch requirements.

Stage 3 may involve several iterations.  Its key deliverable is an internally tested and validated idea/innovation and updated project plan, including intellectual property protection, where applicable.

Stage 4 – Testing & Validation

This stage seeks to validate the project’s entire viability, including the:

• Idea/innovation
• Implementation requirements
• Expected level of market acceptance
• Project economics, and so on.

The key objective here is to check in on progress and the project’s continued appeal before it’s launched.  You may need to send the project back to an earlier stage for further work before moving on.

Stage 5 – Launch

This stage involves the implementation and commercialisation of the project.  Where applicable, it includes:

• Operational implementation
• Marketing
• Selling
• Driving adoption
• Post-launch review.

You can tailor the number of stages and what work gets done during each to your particular needs and circumstances.

A Gate follows each Stage.  Gates represent decision points that projects proceed through if they successfully meet predetermined objective criteria.  A typical Stage Gate structure would comprise five Gates including:

1. Initial idea screen
2. Second idea screen
3. Development screen
4. Test screen
5. Launch screen.

In essence, each Gate represents a point at which the project team comes together and tests the project against a ‘hurdle’.  Your key decision at each gate is whether you’ll continue to invest in the project.

The Gates also serve as quality control checkpoints where project performance to date is reviewed and corrective action taken, if required.  That is, each checkpoint’s goals are to:

• Confirm the business rationale – does the project remain attractive from an economic point of view and continue to align with your business and innovation strategies?
• Ensure project execution quality – have you executed the previous stage soundly and is corrective action necessary for the next stage?
• Approve the project plan and resources (where applicable) – Are the project resources reasonable and sound?

Ultimately, the:

• Stages represent work that must be completed before you decide whether to keep a project as part of your innovation investment portfolio
• Gates represent the objective criteria on which work done at each Stage is assessed, and a decision is made whether to proceed further.

The objective criteria used to assess projects at each gate will normally include:

• Strategic fit
• Market desirability
• Viability and contribution to the development of core competencies
• Contribution to competitive advantage
• Technical feasibility
• Financial rewards
• Risk and risk mitigation.

Implementing an effective Stage Gate process involves:

• Deciding on what ideas or projects don’t need to go through the Stage Gate process
• Establishing effective learning processes and techniques you can adopt between each Gate
• Establishing the objective criteria, analysis, deliverables and decision processes you adopt for the decision-making process and apply at each gate
• Deciding on who your ‘gatekeepers’ will be
• Deciding whether to adopt a sequential or concurrent approach.

Not all innovation projects will need to go through your primary Stage Gate process.

Some will clearly align with your innovation strategy and won’t involve sufficient uncertainty or resources to need such a robust process. If this is the case, you may be able to adopt a more intuitive approach to project selection without undue risk.

The danger, of course, is that exceptions to the rule aren’t well designed or are otherwise circumvented, and projects that should go through the Stage Gate process, don’t.  Accordingly, it’s wise to:

• Develop simple and clear rules that provide concrete guidance on which projects don’t need to go through the Stage Gate process
• Ensure that you keep the Stage Gate process as simple and practical as possible while being sufficiently robust to achieve its intended purpose.

Finally, it’s important to note that projects involving more radical innovation will require a different selection process to the standard Stage Gate process.

If you’d like to learn more about searching for and selecting the right innovation opportunities for your business, call Fortitude Business Consulting on 1300 551 040.