Overview of the Stage-Gate® Innovation Performance Framework
An effective Stage-Gate process will produce a steady stream of high value innovations. In particular, “Gates with Teeth” will surface and prioritize your best bests. Take this performance one step further by viewing the high quality set of projects as a portfolio and you can optimize results event more.
- The best set of projects is advanced.
- Resources are optimally allocated to operationalize the Product and Technology Strategy.
- There is visibility into project prioritization.
- Cross-functional leaders and managers align on the right priorities.
The 5 Goals of Portfolio Optimization
- Maximize the Value of Your New Product Portfolio
The end goal is a portfolio that yields long term profitability and maximizes return on your new product development investment. Resources (capital and people) should be allocated to increase portfolio value. Common methods used include: scoring models, checklists, and financial models.
- Balance Your Portfolio of New Product Projects
Your portfolio of new product projects should include a balance of different project types: long term versus short term projects, high risk versus low risk projects, and projects across various markets and technologies. Common methods used to balance portfolios include visual charts (i.e. bubble diagrams and pie charts).
- Align Your Portfolio with Your Product + Technology Strategy
Strategy becomes real when you spend money. Ensure your Product + Technology Strategy aligns resource allocation with your strategic priorities. There are 2 ways to approach decision making: a bottom-up approach (project-level decision making at the gates), and a top-down approach (dominated by a portfolio review of all projects). Some companies combine both to achieve success.
Create clarity and direction for the visionary role of product innovation and technology to the business and enable it through the strategic allocation of resources.
- Global and regional strategies
- Corporate and business unit strategies
- Goals and objectives
- Conduct innovation capability analysis
- Determine strategic arenas and buckets
- Establish strategic alignment
- Conduct strategic value analysis
- Create Attack and Entry Plans
- Create market, product and technology roadmaps
- Pick the Right Number of Projects
Resources (people, assets, and capital) are finite. Project delays result when there are too many projects in the pipeline and not enough resources to complete them on time. Selecting the right number of projects to maximize your resources is critical. A common method is to maintain a prioritized list of rank-ordered projects. Another method is to monitor resource supply and demand to determine availability for new product projects.
- Ensure the Portfolio of Projects is Sufficient
The portfolio of innovation projects approved must be impactful enough to enable your company to achieve the goals in its product and technology strategy. For example, if the goal is 5% growth in profits from new products, the portfolio of new product development projects must be capable of achieving 5% growth.
Portfolio Optimization: Challenging to do Well if Gates are Weak or Missing
Stage-Gate International Co-founders’, Innovation Management experts Scott Edgett and Robert Cooper, pioneering work in this area (we literally wrote the best-selling book on this topic) identifies problems that can be attributed to ineffective Gates (or a complete lack) of effective Gatekeeping:
- A Strong Reluctance to Kill Projects
There are no consistent Go/Kill decisions criteria at Gates. Projects are simply added to the ‘active list’ of projects with no clear directional focus. Resources are spread too thinly across projects. This results in: longer time-to-market; poor quality of execution, and higher than acceptable failure rates.
- Poor Go/Kill Decisions
There are too many mediocre projects in the pipeline (i.e. extensions, enhancements) and a lack of high value projects. The few good projects are starved of resources, take too long to get to market and fail to achieve results.
- The Wrong Projects are Selected
Decisions are made based on politics, opinion and emotion. Many of these ‘ill-selected’ projects fail to achieve results.
- Strategic Criteria Are Missing
Many projects lack strategic alignment because they are not evaluated or scored on business merit and innovation strategy criteria. Overall spending does not reflect the business’s strategic priorities because the new product projects selected are a poor fit with the Innovation Strategy.