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Beyond Stage Gate - A New Approach for Innovation Management

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Product innovation has been described as the way out of today’s difficult business environment. However, the rate of success of development projects, in particular white space or disruptive innovation projects remains too low.
We believe that a reason for the low success rate is the erroneous application of methods designed for incremental innovation like Stage Gate to projects with high levels of uncertainty. In this presentation we will discuss the different types of development projects based on degree of uncertainty, and the creation of different project tracks. Projects are managed using different tool sets based on the best fit between information available and decision making needs.

Published in: Business

Beyond Stage Gate - A New Approach for Innovation Management

  1. 1. Beyond Stage Gate<br />A New Approach For The Management Of Innovation Processes<br />Jose A. Briones, Ph.D.<br />@Brioneja<br />
  2. 2. 2<br />Agenda<br /><ul><li>Introduction to the problem
  3. 3. Review of conventional Stage-Gate
  4. 4. Classification of Innovation Projects
  5. 5. The Spiro-Level approach
  6. 6. Summary</li></li></ul><li>3<br />Legalese<br /><ul><li>Stage-Gate® is a registered trademark from Stage-Gate International’s Product Development Institute Inc.
  7. 7. “The fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright” - Copyright Act of 1976, 17 U.S.C. § 107</li></li></ul><li>4<br /><ul><li>Ratio of R&D needed per unit of GDP output has gone from 1:1 in the early 90’s to ~3:1 in 2009 (Source: Dr. William Strauss, FutureMetrics)
  8. 8. Success rates of innovation projects can be as low as 2.5% but rarely exceed 20% depending on when we define a project launch
  9. 9. Effectiveness of product development process is broken
  10. 10. We can no longer throw Ph.D.’s at a problem</li></ul>Problem<br />
  11. 11. 5<br />Proliferation of Solutions<br /><ul><li>Where do they all fit?
  12. 12. When do I use each tool?
  13. 13. What is a reasonable expectation?</li></li></ul><li>6<br />Challenge<br />Create a unified framework for innovation projects/product development that <br />Provides the flexibility needed for innovation to work <br />Still has the metrics needed for proper measurement of progress and resource allocation. <br />
  14. 14. Innovation <br />Twitter: @Brioneja www.Brioneja.com<br />
  15. 15. Classical Innovation Process<br />Idea Generation<br />Idea Selection<br />Project Management<br />Twitter: @Brioneja www.Brioneja.com<br />
  16. 16. Two Types of Innovation<br />Incremental or sustaining<br />Occurs in linear fashion<br />Radical or disruptive<br />Occurs in non-linear, discontinuous or <br /> iterative fashion<br />Twitter: @Brioneja www.Brioneja.com<br />
  17. 17. 10<br />Innovation Projects Classification and Segmentation<br />Google’s Wave<br /><ul><li>Was it the appropriate decision?
  18. 18. Short term versus long term?
  19. 19. Product versus platform</li></ul>Orkut vs. Facebook - 2004<br />
  20. 20. Classical Innovation Management<br />Standard processes for innovation management reflect the linearity of incremental innovation<br />Stage Gate<br />Waterfall<br />Do not work well in disruptive or radical innovation<br />Twitter: @Brioneja www.Brioneja.com<br />
  21. 21. 12<br />Identify the source of the following quote:<br />‘I am become death, destroyer of worlds’<br />
  22. 22. 13<br />Mediocrity<br />"I am going to come to you with a contrarian view of innovation, deeply researched, with more than $7-million worth of data behind the assertion that the Stage-Gate model as we know it today is…going to guarantee total performance mediocrity for your businesses. <br /> Larry Keeley, president of Doblin, Inc<br />April 2006 <br />
  23. 23. 14<br />Suitability<br />“The Stage-Gate system is not suited to the task of assessing innovations whose purpose is to build new growth businesses, but most companies continue to follow it simply because they see no alternative” <br /> Clayton M. Christensen<br />
  24. 24. 15<br />Classical Stage-Gate Process<br />Source: Product Development Institute, Inc.<br />Project is managed in a linear fashion<br />“The Stage-Gate system assumes that the proposed strategy is the right strategy, the problem is that except in the case of incremental innovations, the right strategy cannot be completely known in advance” – Clayton M. Christensen<br />
  25. 25. 16<br />Xpress and Lite Variations of Stage-Gate<br />Source: R.G. Cooper, Stage-Gate International<br />These modifications still use a linear approach to innovation project management. <br />
  26. 26. 17<br />Modifications to Stage-Gate: “Spiral Development”<br />Source: R.G. Cooper, Stage-Gate International<br />Iterations occur within a stage, with no mechanism to start over<br />
  27. 27. 18<br />Modifications to Stage-Gate<br />“Simultaneous Execution” and “Stage Overlapping” can also be used to address some of the Stage-Gate deficiencies, but are not enough to overcome the restrictions of the linear approach.<br />
  28. 28. Disruptive Innovation<br />Classical <br />Business Management<br />Iterative<br />Estimates<br />Flexibility<br />Virtual teams<br />Efficiency<br />Forecast<br />Progress Measurement<br />Resource allocation<br />How Do We Reconcile Conflicting Requirements For Disruptive Innovation?<br />Twitter: @Brioneja www.Brioneja.com<br />
  29. 29. 20<br />The need for iterations<br /> For Disruptive innovations, 1 round of VOC’s is not enough to be the cornerstone of a project<br /><ul><li>Customers cannot say that they want what they do not know
  30. 30. Customers can only provide feedback on incremental modifications on what they do know
  31. 31. Iterations are needed where customers evaluate a prototype and a new cycle starts, complete with a new VOC, market and business analysis</li></li></ul><li>21<br />What are the Solutions?<br /><ul><li>Modify Stage-Gate into a real spiral approach: Spiro-Level
  32. 32. Incorporate classification via level of uncertainty in your project portfolio management
  33. 33. Manage different types of projects using levels on the Spiro-Gate</li></li></ul><li>Solution<br />Twitter: @Brioneja www.Brioneja.com<br />
  34. 34. 23<br />Classical Product Development Classification<br />Adjacent Markets<br /> vs.<br /> Blue Ocean<br />New<br />Market<br />Existing<br />New<br />Existing<br />Product<br />Conventional product development categorization fails to<br /> acknowledge the differences in available information within<br /> each space<br />
  35. 35. Stepping<br />Stones <br />High<br />Medium<br />Low<br />Positioning Options<br />Platform Launches<br />Project Classification<br />Scouting<br />Options <br />Technical Uncertainty<br />Enhancement<br />Launches <br />Low Medium High <br />Source: The Entrepreneurial Mindset<br />Market Uncertainty<br />Projects are classified by how much we do NOT know<br />Degree of uncertainty defines the track they take<br />Twitter: @Brioneja www.Brioneja.com<br />
  36. 36. Spiral Approach<br />Time<br />Spiral has 3 levels<br />Axis = Resources and Time<br />High uncertainty projects start at level 1<br />Move from learning/discovery to definition/forecast<br />3<br />2<br />1<br />Resources<br />Twitter: @Brioneja www.Brioneja.com<br />
  37. 37. Tools Management<br />T<br />O<br />O<br />L<br />S<br /><ul><li>Project analysis repeated
  38. 38. Different Tools Selected
  39. 39. Level 1 tools feed subsequent levels
  40. 40. WHEN Vs. WHICH</li></ul>Twitter: @Brioneja www.Brioneja.com<br />
  41. 41. The Spiro-Level™ 3-D Approach to Innovation<br />Resources<br />Launch<br />Quadrant IV<br />Quadrant I<br />Roadmap/Timeline<br />Idea <br />Generation<br />Level<br />3<br />Risk Analysis<br />VOC<br />2<br />Customer <br />Testing<br />1<br />Time<br />Time<br />Technology <br />Assessment<br />Supply Chain<br />Analysis<br />Business<br />Case<br />Value in Use<br />Analysis<br />Regulatory<br />IP Strategy<br />Prototype<br />Development<br />Quadrant II<br />Quadrant III<br />Resources<br />Twitter: @Brioneja www.Brioneja.com<br />
  42. 42. 28<br />Managing Projects<br /><ul><li>Projects at different levels of uncertainty must be managed differently
  43. 43. Expectations must be different
  44. 44. Tools to manage them must be different</li></li></ul><li>29<br />The Business Development Management Role<br /><ul><li>Must reduce the projects’ level of uncertainty
  45. 45. Transform options and stepping stones into platforms
  46. 46. Generate products/opportunities from the platforms that can be managed with conventional financial and project management tools</li></li></ul><li>30<br />Relationship Between Spiro-Level and Project Type<br />Level 1<br /><ul><li>Positioning and Scouting Options
  47. 47. Stepping Stones</li></ul>Level 2<br /><ul><li>Platform Launches and Projects</li></ul>Level 3<br /><ul><li>Enhancements and individual product launches</li></li></ul><li>31<br />Keys to the Process<br /><ul><li>Time and resources start small, increase as the levels go up
  48. 48. The analysis is repeated at each level, but the tools used for each level are different.
  49. 49. Level 1 uses tools more suitable for high levels of uncertainty, i.e. Discovery Driven Planning, Probabilistic Decision Analysis
  50. 50. Level 3 uses more conventional management tools, i.e. Linear Stage-Gate, NPV</li></li></ul><li>32<br />Reviews <br />Management and Project teams define number and type of reviews<br /><ul><li>Agreed upon timeline and level of resources defines the number of reviews</li></ul>By Quadrant<br />By Level<br /><ul><li>Level 1 does not need as many reviews as Level 3</li></li></ul><li>33<br />Tools for Overall Project Management<br />Level 1<br /><ul><li>Discovery Driven Planning
  51. 51. Knowledge to Assumption Management</li></ul>Level 2<br /><ul><li>Product/Technology Roadmaps
  52. 52. Multigenerational Product Planning</li></ul>Level 3<br /><ul><li>Linear Stage-Gate
  53. 53. Agile Development</li></li></ul><li>34<br />Tools for Product Attribute Value Analysis<br />Level 1<br /><ul><li>Market Perceived Quality Profile</li></ul>Level 2<br /><ul><li>Kano Analysis</li></ul>Level 3<br /><ul><li>Conjoint Analysis</li></li></ul><li>35<br />Tools for Voice of the Customer<br />Level 1<br /><ul><li>Unmet Needs – KJ Analysis</li></ul>Level 2<br /><ul><li>Job to be Done</li></ul>Level 3<br /><ul><li>Product Features</li></ul>VOC Level 1: Broad and shallow<br />VOC Level 3: Deep and detailed<br />
  54. 54. 36<br />Tools for Financial Analysis<br />Level 1<br /><ul><li>Reverse Income Statement
  55. 55. Real Options</li></ul>Level 2<br /><ul><li>Probabilistic Decision Analysis</li></ul>Level 3<br /><ul><li>NPV
  56. 56. DCF</li></li></ul><li>37<br />Summary<br />A modified Spiral approach to innovation project management can be used to:<br /><ul><li>Integrate project portfolio management by level of uncertainty
  57. 57. Manage different types of projects using the appropriate tools
  58. 58. Maintain the right framework to track progress and resources but provide the flexibility that innovation projects need for success </li></ul>This approach has already been successfully used to create a disruptive innovation product for the construction industry<br />
  59. 59. 38<br />Epilogue by Clayton Christensen<br />“We keep rediscovering that the root reason for established companies’ failure to innovate is that managers don’t have good tools to help them understand markets, build brands, find customers, select employees, organize teams, and develop strategy” <br />“Some of the tools typically used for financial analysis, and decision making about investments, distort the value, importance, and likelihood of success of investments in innovation”<br />“There’s a better way for management teams to grow their companies. But they will need the courage to challenge some of the paradigms of financial analysis and the willingness to develop alternative methodologies”<br />
  60. 60. Conclusion<br />This framework for innovation projects provides<br />The flexibility needed for successful innovation projects in any industry<br />The metrics needed for proper measurement of progress and resource allocation. <br />Twitter: @Brioneja www.Brioneja.com<br />
  61. 61. 40<br />Contact Information<br /><ul><li>Jose A. Briones, Ph.D. (Brioneja)
  62. 62. Twitter: @Brioneja
  63. 63. Brioneja@spyrotek.com
  64. 64. www.Brioneja.com</li>

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