David Theil Agile Coach and Product Leader with 10+ years experience in different roles — Head of Software, Scrum Master, Product Owner, and Dev. I help teams escape the Feature Factory and start agile product development.

Minimize project risk using the stage-gate process

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Minimize Project Risk Using The Stage-Gate Process

As an IT professional and former product owner, I hated and loved the stage-gate process (aka the phase-gate process). Done right, it can save you and your company a lot of trouble and minimizes your risks. Done wrong, it will cost you time and resources.

Let me walk you through the positive and negative sides of the stage-gate process so you can avoid major mistakes.


Table of contents


What is a stage-gate process and how does it reduce project risk?

The stage-gate process divides a project into different phases, so-called stages, with gates in between them. These gates can be seen as decision points with reviews where the results of the previous phase are presented to stakeholders. These stakeholders have the power to decide whether the project may proceed to the next phase and be granted more resources (or not).

Another way to look at the gates is as milestones that measure the progress of the project. With the phase-gate process, you can reduce project risks and improve communication and transparency.

Resources are scarce and projects are always exposed to a certain risk of failure.

To counteract these risks and avoid putting too many resources into projects that can ultimately fail, the stage-gate process defines five phases and gates in between these phases:

Whenever a project completes one phase and is ready to move on to the next phase, it must go through a gate review. A steering committee must determine if the project can proceed, has to repeat the stage, needs to stop, or is good to proceed to the next stage under special conditions.

Every stage and stage-gate review represents a possible exit to save resources. The stages act as a touchpoint to influence the project and ultimately minimize risk.

The stages in detail

Let’s break down each stage in detail.

Stage 0: Idea generation

The idea generation stage is often also referred to as the ideation stage. It’s where several people from different fields of the company find promising ideas for new products and services. They come together and brainstorm for good, initial project ideas and evaluate them based on specific criteria.

This phase serves as a basic orientation for brainstorming, researching, gathering information, and exploring ideas. Often, it involves not only internal staff but also external ones. This is because customers and suppliers provide useful information and articulate needs.

This initial team selects the best idea from the collected pool of ideas and forms a project goal.

Activities in this stage include qualitative and quantitative research methods, idea generation methods, and problem exploration methods such as design thinking.



The goal of this stage is to provide an idea that has enough potential to be worth the effort of implementing it further in the next stages.

Stage 1: Scoping

The scoping stage is when the product or service idea is further evaluated and developed, and the viability of the idea is analyzed based on various factors. The goal of the phase is to identify whether the idea is viable and represents a market opportunity for the company. Typically, this is the phase where one or more people are accountable for pushing the project idea forward. This means more resources are allocated for this evaluation.

The team conducts detailed research and analysis to understand the market and user needs. They also evaluate the technical feasibility of the project idea. Often, a detailed project plan is made to outline the requirements, risks, and objectives of the project.

Risk assessment is often done with a SWOT analysis and helps the team evaluate the project based on strengths, weaknesses, opportunities, and threats.

The goals of the scoping stage are to:

  • Conduct more research to better understand the market and the user needs
  • Identify and evaluate the strengths and risks of the project
  • Create a detailed plan of the requirements and objectives of the project
  • Align the target of the project with the company strategy

Stage 2: Building a business case

In this phase of the stage-gate process, the team creates a comprehensive business case and plans to commercialize the idea. The team may conduct a feasibility study and a detailed project plan.

Often, a business plan document or a business model canvas is used to map out all the important aspects of a viable business strategy. The goal of this phase is to minimize the commercial risk of the product or service through planning the project and business model.

Specific activities in the stage include:

  • Creating detailed market analysis and understanding the market potential
  • Developing a strategy for positioning and pricing the product or service
  • Creating a marketing plan
  • Evaluate the financial needs
  • Developing a project plan that outlines major steps, milestones, and needed resources

In the stage-gate review, the steering committee will make sure that the project is well-planned and that the business model is feasible. This will enable them to allocate more resources and invest in further stages of development and commercialization.

Stage 3: Development

In this stage, the team develops the product or service. The team is usually built up and engineers are added to it.

During this development phase, the team uses the details of the business and project plans to develop the product or service. During this development, the team will also execute tests and validations to ensure that the product or service meets the requirements and specifications outlined in the project plan.


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The goal of the development is to create a product or service that is ready for commercialization. The gate review, therefore, ensures that the outcome of the development is ready to release to the market.

Major activities in the development stage are:

  • Designing and development of the product or service
  • Conducting tests and validations with the market and the users
  • Ensuring the technical and economical feasibility and viability
  • Preparing the product or service for commercialization and release to the open market

Stage 4: Launch

In the launch stage, the composition of the team changes — fewer engineers are needed and sales and marketing specialists are included in the project. The team prepares the product or service to be released to the market. They create a distribution, sales, and marketing plan and execute the plan from the business model and project plan. Special strategies are refined, like pricing, promotions, and marketing strategies.

The goal of this stage is to successfully launch the product or service to the market and sell it to target customers. In the gate review, the product’s performance in the market is presented to the steering committee.

Major activities in this stage are:

  • Releasing the product or service
  • Refinement of the sales and marketing strategy from the business model and project plans
  • Implementing and executing the sales and marketing strategy
  • Refinement of the pricing and the promotion plan
  • Marketing and sales activities
  • Monitoring the market performance of the product

What are stage gates and stage-gate reviews?

The noun “gate” can be used literally as a passageway or entrance, but also more abstractly as a means of access such as “the gateway to wealth.” In the stage-gate process, we view gates and gate reviews as a formal method of controlling project risks and monitoring changes in project scope.

A stage-gate review is usually held when the project completes one phase and needs to continue with the next higher phase. These are transition points of the project where it undergoes a change and the focus of the work shifts from one area to another.

In the next phase, the project often requires more resources, which means that the steering committee and stakeholders must make investments. On the one hand, investments will incur increased risk and expenses, but on the other hand, will also increase the reward in case of success.

Gate reviews serve several purposes, they:

  • Help assess the readiness of a project to move on to the next phase
  • Provide a recap of the past phase
  • Proved a preview of the team’s plan for the next phase
  • Ensure a commitment to resources
  • Create an external view of the project
  • Help to reflect on the project’s purpose and value

Special roles: Steering committee and gatekeeper

The steering committee in the stage-gate process consists of different stakeholders and sponsors. Often, it’s senior employees and managers who can act as sponsors to the project. They can assign resources to the project and make “go” or “kill” decisions.

A special role in the stage-gate process is the gatekeeper. The gatekeeper should not be a sponsor, but an independent person. Their job is to negotiate the formal expectations and requirements for the project to proceed from one stage to the next, as well as ensure that the project meets these requirements and expectations.

A gatekeeper also ensures that the project stays aligned with the overall goals and objectives of the organization.

How do we measure success with stage gates?

Before a project starts a stage-gate process, the details, requirements, and expectations for each gate must be clear to everybody involved. For each gate, there must be a concrete definition of deliverables and objectives. Each gate must include the following:

  • Inputs: which artifacts and deliverables will be evaluated and must be brought in the stage-gate review?
  • Criteria: which metrics and KPIs will be evaluated and must be reached?
  • Output: the evaluation of the inputs and criteria must be considered and a decision must be made on how and if the project can carry on

The team must meet all these objectives and deliver all the needed artifacts before a gate review is held. In the gate review, the steering committee and the gatekeeper revisit these artifacts and decide how to proceed.

There are five decision options for the steering committee:

  • Go: the team can proceed with the next stage and typically additional resources are committed to the project
  • Kill: the project is not feasible and stops. The resources are free for new projects
  • Hold: the project will be put on hold and the bound resources will be used in other projects temporarily
  • Repeat: the project needs to make some changes in the current stage and can repeat the stage-gate review
  • Conditional go: the project can move on to the next stage but under special conditions

Advantages and disadvantages of the stage-gate process

The stage-gate process has a couple of advantages and disadvantages against regular project development approaches. This is because it is a structured and systematic approach.

Advantages

  • Splitting a project into stages with gates in between the stages helps minimize risks. After every stage, an evaluation and decision to carry on or stop are made
  • The expectations and the process is clear for everyone. This structure provides a guideline for everyone involved. The clear deliverables, objectives, and requirements also help the project team to stay on track
  • Throughout the process, the project stays aligned with the overall project goals and company objectives
  • The structure of the process and steering committee help allocate resources exactly when they are needed. Resources are therefore managed well and costs and timelines are transparent to everybody involved
  • The feedback from the steering committee helps make adjustments early in the process. These shorter feedback cycles save time and money
  • The steering committee has the insight and the power to influence the project and therefore the ability to control the project

Disadvantages

  • The process can be time-consuming and resource-intensive, especially for smaller projects. Each stage and stage review binds resources and requires time for preparing the deliverables
  • The process can also be seen as inflexible because a project must go through all gates
  • The given structure of the process makes it hard to adapt and make changes, especially when the changes concern decisions made in previous stages
  • The different stages split the project into focus areas. Projects that require different resources at the same time, such as projects with rapid prototyping or with integrated development, may not be compatible with the stage-gate process
  • The strict process makes it hard for projects that develop products in rapidly changing markets

Stage gates in agile product development

If a classic stage-gate process is used in dynamic markets with rapidly-changing requirements for a product, the market conditions may have already changed so much that the product and project fail during launch. In these cases, the stage-gate process costs more than it brings to the company.

Agile product development, on the other hand, is especially designed for rapidly-changing markets and requirements. In agile product development, very little is known about the needs of the users and the market at the beginning. The market often changes very quickly and the users often do not know what their needs are.

Therefore, in agile product development, development and discovery are often integrated. The strategy is to develop hypotheses about user needs and to confirm or falsify them with MVPs in the market. This reduces product development risk and shortens feedback cycles. Products are developed that are sure to find a market.

However, the stage-gate process in its original form prevents this approach because it is sequentially structured. The stage-gate process can be adapted to take advantage of both the benefits of agile, with integrated product development on the one hand and the control options provided by a steering committee on the other. Instead of working sequentially, the work is integrated. However, the stages represent investment and resource steps.

In the beginning, only a few employees and few resources are invested in an idea. Progress is monitored at each stage-gate and, and if successful, more resources, people, and capital are made available for the team. This process can be compared to the startup venture capital world. A startup is a small, interdisciplinary team that first proves an idea with an MVP prototype on the market and only then searches for more investment. Then there are several rounds of financing and the start-up grows.

Conclusion

The good thing about the stage-gate process is that it provides a good structure and everyone involved knows exactly what to do and how. Resources are not simply released blindly for projects but are used in a targeted manner. The process ensures that projects are aligned with business goals and that risks are minimized.

However, instead of going through the process sequentially, an agile approach with interdisciplinary teams that gradually receive more resources is recommended, especially in very dynamic markets.

Sources

Featured image source: IconScout

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David Theil Agile Coach and Product Leader with 10+ years experience in different roles — Head of Software, Scrum Master, Product Owner, and Dev. I help teams escape the Feature Factory and start agile product development.

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