Wednesday, August 20, 2014

New Product Development using Stage-Gate model

New Product Development: is an organizational process that includes set of activities required to deliver a new product to the market identified on the basis of perception of market opportunity. Each organization has its own new product development process and they make changes to it over the time learning from experience and adapting to market standards. However, all of them typically follow stage-gate model. According to several independent research studies (i.e. Product Development & Management Association, AMR Research, Booz-Allen Hamilton, etc.) between 70-85% of leading U.S. companies now use Stage-Gate to drive new products to market.

Stage-gate model:
According to the official site of stage-gate model, “Stage-Gate® is a value-creating business process and risk model designed to quickly and profitably transform an organization's best new ideas into winning new products. When embraced by organizations, it creates a culture of product innovation excellence - product leadership, accountability, high-performance teams, customer and market focus, robust solutions, alignment, discipline, speed and quality.”


Stage-gate model
Stage-gate model
How it works:
Stage-Gate System is a conceptual and operational road map for moving a new-product development from idea to launch.  It is a product management technique in which any product development process is divided into various stages separated by gates.

Each stage consists of a set of activities and has to quality corresponding gate to start with the activities of the next stage. The gates serve as quality-control checkpoints with three goals: ensure quality of execution, evaluate the business rationale, and approve the project plan and resources. At each gate, the decision to continue product development is taken by the manager or steering committee based on the analysis done till that stage or information available at the time. The process is iterative in nature and product manager can switch to any of the previous stages in case of failure to qualify through appropriate gate.  

Now, let’s discuss each stage-gate of new product development in detail.

Stage 0: Idea Discovery:
New ideas are be generated by using multiple approaches like:
  1. Conducting marketing research to find out the consumers' needs and wants.
  2. Inviting suggestions from employees, consumers, vendors and partners.
  3. Brainstorming suggestions for new-product ideas.
  4.  Tracking global trends by searching in different markets viz., national and international markets.
  5. Exploring disruptive innovations to create new products.
  6. Tracking competitors for new products.


Ideas are screened for its uniqueness, market perception, and competitive scenario to qualify Gate0.

Stage 1: Scoping:
In this stage, the gap analysis is done between customer needs and available solutions. Once a gap is identified between customer needs and existing products, a customer value proposition (CVP) is drafted. During this time, the product manager conducts surveys and interviews with existing and potential customers, along with staff members. This stage also lets product manager initiate discussion with the vendor to establish a strategic collaboration for the product development, support and launch. The Scoping stage is concluded by preparing the market requirement document to qualify Gate 1.

To qualify Gate 1, product manager ensures a rock-solid customer value proposition, suitable time to market estimation and seek vendor support to continue product development.

Stage 2: Business Case
This is the last phase of concept development where it is crucial for product manager to perform a solid analysis before they begin developing the product. This phase is generally difficult, complex, and resource-intensive.  To begin with this stage, product definition and analysis are carried out by using the gap analysis, market research to determine the market size and segmentation, growth rate followed by competitive analysis. This will not only help you build a great product, but will also help in determining how and where to launch your new product.

Next, a technically feasible product concept is prepared, often called PoC (Proof of concept). Once the technical feasibility is established, the prototypes are developed and presented to staff and customers to gain feedback and gauge customer reaction. An analysis of production and operations cost along with the market and launch cost analysis is also carried out in-parallel to PoC testing.

On completing the technical feasibility test, a business case document for the product is prepared. This document set consists of: 
  1. Market sizing and penetration, 
  2. P&L statement, 
  3. Product Requirement Note (PRD), 
  4. Legal and Regulatory Requirements, 
  5. Safety and Other Considerations, and 
  6. Project Plan highlighting tasks lists with timelines, risk analysis and mitigation plan, resources required and cost involved.


Stage 3: Development
Essentially the execution stage of the product development, the most preferred process used is an Agile methodology wherein the product manager shares user stories with the project managers who specifies the product to be developed by the development team. The development team maps out a realistic timeline with specific milestones that are described as SMART: specific, measurable, actionable, realistic, and time-bound. In the development phase, the product builds momentum as more resources are committed to the project and makes full use of cross-functional teamwork as the marketing, technical, manufacturing, and sales departments all come together to offer their expert opinions.

The criteria to pass gate 3 are quality of work, adhering to development timeline, product consistency with the original definition of the product, and accepted maintenance cost of the product.

Stage 4: Testing and Validation
This phase provides validation for the product under development. A long list of tests is carried out to validate the product including at least: 
  1. White box & Black box testing
  2. Regression and Performance testing
  3. User acceptance testing
  4. Functional & Non-functional testing
  5. Alpha Testing
  6. Beta testing

The gate 4 is the final gate and opens the door for full commercialization, i.e. market launch and full production of the product. Criteria for passing gate 4 largely focus on test results, user experience, organizational readiness for the product, and GTM execution.

Stage 5: Launch
Stage 5 involves execution of GTM (Go-to-market) strategy and the operational plan. Industrial set-up for mass production of the product is done, the distribution channel is established and the selling begins.


Post-launching the product, the product review plan is executed focusing on the product performance measured mainly in terms of market share, growth rate and profitability. A debriefing document is prepared periodically and the product is customized or modified to adapt market requirements and feedback.


Mind it:
The entire new product development process is an ever evolving platform where product managers and entire organization learns from errors, design mistakes, losses. Having the entire team working in close synchronization will ensure creating and launching successful products. Productivity during product development can be achieved if, and only if, goals are clearly defined along the way and each process has contingencies clearly outlined on paper.

1 comment:

  1. I do realize this was a discussion and not a recommendation for a complete process yet it seems that what was not included could be a disservice to your readers.

    I was intrigued with your article/blog as our company uses the Stage Gate Model and
    after review of your implementation, I noticed you used customer experience testing
    yet did not mention what many vendors fail to include in their Development/testing process
    (which should be accomplished in parallel or concurrently with the development process of
    systemically used products); which is systems evaluation of product. Usability testing is
    valuable yet when used alone fails to insure real usability in the applications required. Once
    functional testing has been accomplished and the product is determined functional, the product
    should be placed in a system that verifies the product specifications are really met. Real
    performance verification, in real use scenarios/test cases, must be accomplished to enable
    knowledge that the product performs as designed. This gaping hole in most processes when
    closed enables most customer found issues to be eliminated. This elimination takes place before
    your product gets a black-eye in the customers mind and muting of your product launch. A failed
    launch normally results in large amounts of lost revenue, expenditure of valuable capital and
    expenses to fix manufactured and installed failed product, while a released systemically
    evaluated product preserves and/or enhances your position in the market place. Many say they
    can’t afford the investment, while it has been proven, you really can’t afford not to insure your
    product works as published, in at least the most used applications, before release.
    Thanks for the discussion.

    ReplyDelete