Stage & Gate Project Management Systems

If you’ve been involved in launching new technologies, new products, or you’ve been involved in the implementation of profit improvement initiatives involving capital and technology, you are probably familiar with the concept of stage and gate project management.   Many companies have various types of formal stage and gate project management systems.   They are very typically employed in big industrial R&D organizations seeking to develop and commercialize new technologies.   Some companies have very little in the way of formal stage and gate systems.   Others have very detailed systems and procedures, but managers fail to understand key concepts and underlying principles related to stage and gate project management, and so commercial initiatives languish or fail to move forward.  Without a stage and gate management approach, sometimes projects leap ahead with great momentum, only to crater after the unnecessary expenditure of huge amounts of capital and/or development funds, because an appropriate stage and gate plan was not developed or adhered to.

Whether a company employs a formal system or an informal system, virtually all successful profit improvement related project initiatives proceed through a stage and gate process.   In my over 30 years of experience in implement and launching dozens of successful new products, new technologies, process de-bottlenecking and new capacity initiatives, I have never been associated with a single successful initiative that did not go through a stage and gate process, whether informal or formal.   It’s therefore important to understand fundamentally what a stage and gate management system is, key aspects that should be included, and some of the pitfalls to avoid.

What is a stage and gate project management system?

A stage gate system in its essence is a management approach that divides projects into success discrete work stages and approval gates.   Work stages begin with initial ideas where resource expenditure is minimal. By focusing efforts within the individual work stages to achieve immediate success criteria, it increase the odds of success of a project, while minimizing risks by putting off the expenditure of funds before success parameters are identified and met.   The stage and gate management system encompasses the entire organization.   Commercial functions are typically involved in the ideation process by defining needs – they establish parameters within which ideas are created. This is the “what should we work on ” opportunity input into the process – what types of products or what economic situation needs to be created.  Technical organizations then begin to develop approaches or ideas to address the economic opportunity.   Work progresses in stages, with the scope of work increasing as the project moves toward implementation.   Each work stage must pass through “gates” requiring increasingly detailed business and technology risk assessment before approval is given to proceed to the next work stage.

Below are two diagrams describing a typical stage and gate system for the identification and commercialization of new products.    The first two diagrams describe a system for evaluating multiple opportunities using an “opportunity funnel” diagram.   The second diagram presents the stage and gate approach using a traditional chart.

Stage and Gate Figure 1

Stage and Gate Figure 2

Stage and Gate Figure 3

Putting together a stage and gate plan might seem like a cumbersome exercise that slows down a project.   Often researchers and engineers launch into a project without addressing without planning existing work or establishing key success criteria, in the interest of expediency.   However, rather than slowing down a project or threatening its chances of success, a proper stage and gate plan actually does the opposite.   A stage and gate approach identifies what areas of a project or initiative should be worked on now, and which should be saved for later stages. It prioritizes activities, helping focus the team on what is needed to address key gate approval criteria. Key issues actually get addressed sooner, and additional resources are utilized only if the project is attaining the technical and commercial guidelines established.   Another benefit of a stage and gate system is the requirement to plan ahead for future work stages.   Gate approvals not only require a projects to be hitting targets for the current work stage, they also require an explanation of the work and resources needed for the next stage, plus the requirement that commercial and technical assumptions are understood with greater certainty.   The stage and gate approach forces planning – planning that anticipates needed resources and potential obstacles.   The team gets focused on devising solutions to these obstacles in a timely and stage appropriate manner, all of which increases the odds of success for the project.

For very large projects or any project which takes over a year to execute, market conditions may change.   It’s important that commercial assumptions are verified at each stage of the work.   Sometimes, after a project is fully engineering and ready to go, market conditions have changed so much    Commercial criteria for passing the project into a more detailed and expensive work stage are not developed.   The result is a lot of wasted activity, cost and time.   Creating a stage and gate plan helps focus the teams efforts on the highest priority items – those that are needed to address gate approval criteria.

The stage and gate process may sound intimidating in terms of all of the planning and outlining for future work and approval gates. It’s important to recognize that the amount of detail and planning required for a stage and gate plan progressively grows as a project proceeds toward commercialization. A very formal and detailed stage and gate plan is not necessary in the earliest stages.   But it should be clear to everyone working on the project the work scope of the current stage and what evaluation or gate criteria must be met for the project to be approved for future work stages.

4 Elements of a Good Stage and Gate Plan

1. It’s created early in the life of a project.   Ideally a simple plan is developed before any sizable technology and/or engineering dollars have been expended.   Some call this stage of work, the ideation phase.   Ideas should be assessed for basic production cost, very rough implementation costs, and commercial benefit to ensure the project is worth working on to begin with.
2. Customers are identified early and involved in the assessment of project viability.  One of the biggest mistakes in the technology/new product development process is that no one talks to a customer, until very late in the process.   Marketing has to be involved early on in a project.   This point will be made again in the “common pitfalls” section below.
3. Appropriate talent is involved to develop and roughly assess conceptual manufacturing processes, and conceptual operating and capital costs.   For new chemical product launches, typically engineers and chemists collaborating together make the best teams.   A skill that must be learned early on by both chemists and engineers is the ability to make appropriate technical and engineering assumptions when conducting the work.   Every detail need not be tested or analyzed.   The use of rules of thumb for chemical reactions, processes and separations should be employed, and inexpensive and simple project cost estimating tools must be employed in a projects early stages.   Sometimes, this means the most experienced employees work on projects in early stages, then supervise less experienced employees in the more detailed work stages.
4. Commercial assumptions are retested during at the end of each stage.  Critical technical and business assumptions are identified, with a work plan developed to address these and bring appropriate level of confidence at each stage of the work.   Test, retest and reconfirm at the end of each stage.   Sometimes new opportunities are identified this way, and the project can take a completely different path forward as a result.   Failure to reconfirm is a common pitfall to avoid.

2 Common Pitfalls to Avoid

1. Failure to properly assess and reconfirm commercial outcomes during each project stage.   New product development initiatives often take years to commercialize. What started out as a brilliant idea with smashing market fundamentals may not be attractive at all by the time expensive initial production or piloting is to begin.     An essential element of commercial assessment is direct customer interaction. R&D and technical leaders may be reluctant to interact with customers, however, in my experience this activity is very beneficial, expansive and enjoyable aspect of the stage work effort.   Large organizations are among the most prone to fall into the trap of not confirming commercial assumptions directly with customers, because commercial, marketing and sales functions are conducted in functional “silos” where there is little or insufficient interaction between those leading stage work and those that interact regularly with customers.
2. A stage and gate system is confused for a project schedule.   Some have mistaken a stage and gate plan for a project schedule.     While there can be elements of a schedule built into individual work stages, the stage and gate plan is fundamentally not a project scheduling tool – it’s a resource management tool that helps focus team members on identifying and working on critical aspects of a project (and thereby increasing its odds of success), while limiting the application of resources until success criteria have been met (and thereby minimizing project risks). A stage of work is not time bound – it’s objective bound, and the work is not complete until objectives are met.

Summary

Virtually every significant successful project or new profit initiative passes through some sort of formal or informal stage and gate process.   Only in the case of a dire crises or emergency are the essential early stage of work skipped.   As we often know, crises or emergency approaches to accomplishing the work are often wasteful, and sometimes accomplish very little.   A prudent approach where the work is broken down into stages, with management gate keepers be approving future work stages based on the attainment of technical and commercial success criteria, gives projects the best chance of success, while protecting a company’s valuable resources.

Reader Comments

Have YOU had experience with Stage and Gate Project Management? What might you add to this narrative? Please share in the comment section. On the flip side, have you been involved in projects that did NOT go well. Please share your story in this context. Perhaps that might be the key to another reader not suffering the same fate. Thank you!