Academic journal article Research-Technology Management

Optimizing the State-Gate Process: What Best-Practice Companies Do-II: Leading Companies Are Creating More Rigorous Go/kill Decision Points and Implementing More Effective Portfolio Management

Academic journal article Research-Technology Management

Optimizing the State-Gate Process: What Best-Practice Companies Do-II: Leading Companies Are Creating More Rigorous Go/kill Decision Points and Implementing More Effective Portfolio Management

Article excerpt

Now that most businesses have implemented a systematic new product process, what are the leading firms doing to make the process even more effective? Part I of this two-part series focused on adding a new stage, namely Discovery, to enhance the flow of solid new-product ideas and opportunities into the process (RTM, Sept.-Oct. 2002, pp. 21-27). Harnessing fundamental research by applying a unique form of the Stage-Gate[TM] method to these projects was also outlined (1).

This second article moves to a critical and difficult topic, namely better project selection and becoming much more discriminating in terms of the projects one undertakes. This translates into building in more effective Go/Kill decision points--tough gates--and moving toward portfolio management.

Better Go/Kill Decision Points

Most companies have too many projects and not enough resources to do them well, our benchmarking study revealed (2). As a result, resources are spread too thin over too many projects, and there is simply not the time or ability to do many of the key project activities proficiently. Consistently, we hear from senior people that, in spite of the fact that they indeed have a world-class new-product process on paper, there is a lack of discipline to adhere to it--that key activities are not executed when or as well as they should be. Often the problem boils down to simply trying to do too many projects too quickly.

Why do firms consistently say yes to too many projects? And why are the gates so weak--why do so many companies have trouble killing projects or pruning the new-product portfolio? Here are five reasons we observe:

1. There are too many "must do" projects; companies seem to respond to customer and sales force requests, often a little too quickly and willingly. "We must have this product ... otherwise we'll lose this customer," is the frequent refrain from the sales force.

2. There is no mechanism to kill projects; after projects are born, they get a life of their own. Other than project status meetings and review points, there are no serious Go/Kill decision points built into the project or process.

3. No criteria have been established for making Go/Kill and prioritization decisions. This is an extremely weak area, with almost 50 percent of the firms in our study confessing to deficiencies here (3). Missing is a scorecard with criteria or metrics for rating the "goodness" of projects and helping managers to make objective prioritizing decisions.

4. Senior people are not engaged in the decision process properly. They are very busy; thus, scheduling these critical Go/Kill decision point meetings is difficult. Moreover, many senior managers do not understand their pivotal role in product innovation; they confess to not being close enough to the action, they do not understand the key projects fully, and they are unprepared or unable to make vital Go/Kill and prioritization decisions.

5. Finally, it is simply very difficult to "drown puppies." All the approved projects look good and it is hard to say no to any of them. Besides, given the way senior people are measured, there is often a huge pressure on senior management to get any project at all to market.

A Customer Request Process

The projects customers request are often small ones, and can be initiated with little formality, sometimes with little more than a chat between the salesperson and a technical manager. The problem is that, while individually these projects consume few resources, collectively they can account for the majority of your resources. At AlliedSignal-Honeywell, for example, the "Other" category of projects--tweaks, modifications and customer requests--was taking an ever-increasing piece of the resource pie.

There are several solutions. The first is to use a Strategic Buckets approach to portfolio management; that is, make conscious decisions on what proportion of your resources will be devoted to different types of projects: platform developments, new-product projects, and smaller projects, such as customer requests (Figure 1). …

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