Stage Gate - Lecture 3 1

Stage Gate –

Lecture 3

Cultural Issues

© 2009 ~ Mark Polczynski

Stage Gate - Lecture 3 2

Strategic Technology Planning

•Scenario Planning

•Voice of the Customer

•Intellectual Property Generation

•Ideation

•Technology Roadmapping

Strategic Technology Development

•Stage Gate Development

•Stage Gate Review

This Course:

Strategic

Technology

Management

Stage Gate - Lecture 3 3

Stage Gate Process:

1. What problem are we trying to solve?

2. Stage gate development process.

3. Stage gate review process.

4. Review process cultural issues.

Stage Gate - Lecture 3 4

Technology Development Stage Gate Process

Stage gate reviews

Where projectsget killed!

Stage Gate - Lecture 3 5

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!

Stage Gate - Lecture 3 6

Hey! Wait a minute!

I didn’t 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 projectsbefore they get out of control…

Than to have someone else kill off your good projectsbecause they ran out of money.

It’s your choice!

Stage Gate - Lecture 3 7

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.

Stage Gate - Lecture 3 8

Example: Three-Stage Technology Development ProjectN

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Early Project Life Late

Stage Number Cost Per Project ($K)

Total Cost ($K)

A 60 50 3,000

B 15 200 3,000

C 4 1000 4,000

$10,000

< 4:1 Attrition

< 4:1 Attrition

How to spend a $10M budget

A

BC

Stage Gate - Lecture 3 9

• 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.

Stage Projects Killed Cost Per Total Cost Cost of Killed

A 60 45 $50K $3M $2.25M

B 15 11 $200K $3M $2.20M

C 4 1 $1M $4M $1M

$10M ~$5M

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Nu

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of

Pro

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Kill projects at ~ 4:1 attrition rate.

From the preceding example…

Early Project Life Late

60

15

4

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• You never kill as many as you intend, so…

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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

Stage Gate - Lecture 3 12

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.

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• 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.

• Here’s a possible example of stage gate targets…

Disposition Target

Continue 25%

Kill 65%

Redirect 5%

Hold 5%

< 4:1 attrition target

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• 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”.

Disposition Target Reality

Continue 25% 10%

Kill 65% 65%

Redirect 5% 5%

Hold 5% 20%

At some point,you must kill these!

Stage Gate - Lecture 3 15

Lottery Ticket Management:

Hey! You never know!

This this lottery ticket (or project) might be worth $100,000,000!

But it probably isn’t,

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!

Stage Gate - Lecture 3 16

G1A1 A2 A3G2I1

I2

O2

O1

Stage Gate Development Process

Stage Gate Review Process

Always use the Stage Gate processfor every project..

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Stage Gate Reviewswill 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 project’s 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 don’t believe this, read The Goal, by Eli. Goldratt.

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Reality 4 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.

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• In Stage Gate, you provide exactly the information that you needexactly 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.

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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 needexactly when you need it.

This takes courage on the part of the project team!

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Goal: Most projects are killed – best are preservedN

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Early Project Life Late

Stage Number Cost Per Project ($K)

Total Cost ($K)

A 60 50 3,000

B 15 200 3,000

C 4 1000 4,000

< 4:1 Attrition

< 4:1 Attrition

A

BC

Stage Gate - Lecture 3 22

• 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!

Stage Gate - Lecture 3 23

The Six Realities of Stage Gate Reviews:1. You allow resources migrate to last-stage projects,

So you can’t start new projects.

2. You don’t kill as many projects as you need to, So you can’t 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 can’t tolerate “failure-driven system”, So project teams refuse to participate.

Final note: There are no magic solutions to these problems!