Many large organizations have adopted a gated approach to reduce new product development (NPD) risk. One of the key features of such an approach is a set of “go/no-go” decision gates which, in principle, ensures that each project remains aligned with its original strategic intent and its value remains high enough to justify its continuation to the next development stage. But along with processes and methodologies, there are fundamentals that companies must remain true to when developing new products.
The following are 10 lessons learned when the business units of one of the world’s leading Oil & Gas upstream services companies, with over $20B in annual revenue, decided to revisit their processes to optimize the return on investment of individual NPD projects. The process used, Stage-Gate®, is time tested and well understood, but a focus on five distinct components and another handful of lessons learned made a critical difference in ensuring NPD went off with fewer problems and surprises.
The first five and second half of best practice
One important conclusion resulting from using the gated NPD process implementation is that there are five distinct components, all of which must be embedded in any NPD methodology to maximize its effectiveness. They are:
1. A robust business case
2. A strong risk-management approach
3. A comprehensive integrated launch plan
4. A governance discipline where leaders are engaged and accountable
5. Clear ownership of and accountability for the NPD process
But what are some best practices beyond these five well-known known components? Here are five more:
1. Don’t ignore (proven) advice
Few organizations want to deliberately ignore lessons learned from others who have executed similar initiatives. For example, there are 10 tips for successful implementation of Stage-Gate that two of its leading experts have shared. But what happens when a company only heeds eight out of the 10 and, further, does not fully follow those they claim to adhere to? Often, the lessons not followed lead to gaps and weak points in execution. In this Oil & Gas company’s Stage-Gate implementation, the leadership’s conscious choice not to emphasize change management and internal communication delayed the adoption timeframe by up to six months.
2. Avoid overkill
When this initiative started, the gated approach was defined in full-blown form, describing the process that the largest, most complex, and highest-risk NPD projects would follow. After an initial set of large-scale projects went through a pilot phase of the Stage-Gate process, demand for the use of the gated approach grew. However, it quickly became apparent to many of those who wanted to apply Stage-Gate that it would be overly burdensome for smaller, less risky projects to adopt the same level of detailed documentation and governance oversight. Fortunately, others external to this organization had already developed a set of best practices for scaling the Stage-Gate process for projects of different sizes and degrees of risk. Drawing from that work, three versions of the Stage-Gate process are now used, differentiated by the management level of the members of the governance committee, the degree of formality of some specific gate reviews, and the level of detail of required documentation.
3. Understand the process
If the Stage-Gate process is a framework that overlays an existing NPD process, then a primary exercise in implementing that framework is to align stages and gates to the existing process. This presupposes that the existing NPD process is well understood and well documented. With this in mind, it shouldn’t be surprising that one of the most powerful exercises carried out during the subject Stage-Gate deployment was the development of detailed process maps representing all major work streams within the entire end-to-end NPD process. While the maps are valuable in and of themselves, the numerous tools being developed using the information contained in the maps, such as role and responsibility matrices (a detailed RACI matrix), deliverable matrices (who owes what to whom when, using what template), etc., will be even more valuable since they will be used in day-to-day project execution.
4. Use Flexibility
Another best practice that emerged is “Flexibility”—a disciplined process for allowing project-specific deviations from the baseline Stage-Gate approach adopted within each business unit. (The baseline in this case is the Stage-Gate process as customized by the business unit in the process mapping sessions.)
Flexibility consists of three elements: (1) justification for the proposed deviation, (2) identification and rating of the associated risks and, if needed, risk-mitigation actions and contingency planning, and (3) approval by the project’s governance committee for the proposed deviation.
5. Prepare a software infrastructure
In the implementation described here, a comprehensive yet low-cost infrastructure was created in Microsoft SharePoint. This infrastructure significantly improved the outcome of Stage-Gate-based NPD efforts by enabling collaboration and transparency in project execution and alignment of work with the Stage-Gate framework. Among the components of this infrastructure are tools to:
• Manage and share documents across all work streams and through all stages
• Manage action items and deliverables
• Identify, track, and manage risks
• Facilitate gathering data for gate reviews
• Record and communicate gate review decisions and feedback
• Capture and share lessons learned
Conclusions
Every company strives to consistently deliver new products that address customer needs cost effectively while achieving reliability, quality, safety, and other important customer goals. While challenging, there are a number of critical success factors that can greatly improve the odds of success.
If several components are embedded in the gated NPD approach, the chance of success of programs executed using it will increase considerably. Yet, it stands to reason that likelihood of successful products will be further enhanced by applying what others have learned the hard way—the second half of best practices described above.
Written By: Mark Barnett, PhD, MBA is Senior Executive Consultant, at Robbins-Gioia, LLC (http://www.robbinsgioia.com). He has 15 years of experience leading business transformations within multiple industries, including oil & gas, high-tech R&D and manufacturing, telecommunications, and insurance and financial services. Mark served as RG's engagement lead at one of the premier international oil & gas products and services companies, implementing a common new product development framework across 10 business units. He is also an thought leader in the area of Customer Experience Management, transforming organizations to place customers at the center of everything they do, leading to increased revenue, improved service quality, and reduced operating cost.
[1] Edgett, Scott J., and Jones, L. Michelle, “Ten Tips for Successfully Implementing a Stage-Gate® Product Innovation Process,” Reference Paper #33, Stage-Gate International and Product Development Institute Inc., 2012.