2 .2.3.1 DOING THE RIGHT PROJECT RIGHT
2.3 THE VALUE ACQUISITION PROCESS
2.3.3 THE STAGE-GATE DEVELOPMENT PROCESS
Stage 1: Preliminary investigation:
This first stage has the objective of determining the project’s technical and market place merits. The typical market assessment will determine if the proposed product has any commercial prospects such
s:
market.
. 3. izing up the competitive situation.
he preliminary technical assessment will include key concerns such as:
? ed technically?
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5. hat are the key technical risks?
to gate 2. Cooper [10] suggests that this activity should not take longer than one calendar month.
ject is again submitted to the original set of “must meet” and “should meet” criteria used at ate 1.
ew data gathered during stage 1. Again a checklist and a scoring model facilitate this gate ecision.
a
1. The attractiveness and potential of the 2. Gauging possible product acceptance
S
T
1. What will the product requirements or specifications be 2. How can these requirements be achiev
3. What are the odds that it is feasible 4. Can the product be manufactured?
W
This stage is a quick scoping of the project, and provides for the gathering of both technical and market information – at low cost and in a short time – to enable a cursory and first-pass financial analysis as input
Gate 2: Second screen:
The project is submitted to a second and somewhat more rigorous screen at gate 2. This gate is essentially a repeat of gate 1: the project is re-evaluated in the light of the new information obtained in stage 1. If the decision is Go at this point, the project moves into a heavier spending stage. At gate 2 the pro
g
Here additional “should meet” criteria may be considered, dealing with sales force and customer reaction to the proposed product, potential legal, technical and regulatory “killer variables” – all the result of n
d
Stage 2: Detailed investigation (Build the business case):
Stage 2 is where the business case is constructed: this stage is a detailed investigation stage, which clearly defines the product and verifies the attractiveness of the project prior to any heavy spending.
Stage 2 is also the critical homework stage which will include research on market needs and preferences, competitive analysis, concept testing and a detailed technical study which will focus on
e “do-ability” of the project at stage 2. A detailed financial analysis is also conducted as part of the
nvolves considerably more work than stage 1, and requires the inputs from a variety of sources. According to
team consisting of multi-functional members.
nt stage, the last point the idea can be discarded before it becomes an official project. Gate 3 subjects the proposed project once again to the set of “must need”
t to the product definition and agreement on the project plan that charts the path forward. At this point the opportunity/idea become a formal development
team is designated.
roduct. In stage 3 detailed test plans, market launch plans and production and operation lans are also developed. An updated financial analysis is prepared, while legal and patent issues are
e also revisits the economic question via a revised financial analysis based on new and more accurate data. The tests and validation plans for the next stage are approved for
This stage tests and validates the entire viability of the project: the product itself, the production process, customer acceptance and the economics of the project.
th
justification facet of the business case.
The result of stage 2 is a business case for the project: the project definition or protocol is agreed to, and a thorough project justification and detailed project plan are developed. Stage 2 i
Cooper [10] stage 2 is best handled by a
Gate 3: Decision on the business case:
This is the final gate prior to the developme
and “should meet” criteria used at gate 2.
If the decision is Go, gate 3 sees commitmen
project and a full project
Stage 3: Development:
Stage 3 is the implementation phase of the development plan and the physical development of the product. During this stage the emphasize is on technical work, but marketing and manufacturing activities also proceed in parallel. The deliverable at the end of this stage is a lab tested prototype of the final p
p
resolved.
Gate 4: Post-development review:
The post-development review is a check on the progress and the continued attractiveness of the product and project. This gat
immediate implementation.
Stage 4: Testing and validation:
Gate 5: Pre-commercialization business analysis:
This is the final point at which a project can still be discarded before full production starts. This gate focuses on the quality of the activities at the testing and validation stage and their results.
The criteria for passing this gate focus largely on the expected financial return and appropriateness of the launch of the product. The operations and marketing plans are reviewed and approved for implementation in stage 5.
Stage 5: Full production and market launch:
Stage 5 involves implementation of both the marketing launch plan and the production plan.
Post-implementation review:
Finally a post-audit – a critical assessment of the project’s strengths and weaknesses, what was learned from the project, and how the next one can be better – is carried out.
Cooper [10] claims that this proposed stage-gate system as shown in figure 6 could be very successful due to the fact that it incorporates the following factors that are vital to the success and speed of a new product to the market:
1. The process places a lot of emphasis on the investigation of the pre-development activities.
2. It is a multi-disciplinary and multifunctional process.
3. There is a lot of parallel processing – which speeds up the process.
4. There is a strong market orientation in the process.
5. The gates or decision points establish a higher level of focus in the process.
6. Throughout the process there is a strong focus on quality of execution.
7. There is post-project learning – which closes the loop on continuous improvement during the project lifecycle.
2.3.3.1 ESTIMATION AND EVALUATION OF VALUE OPPORTUNITIES
Chapman and Ward [5] propose a minimalist “pass” approach in their paper where they write about the estimation and evaluation of value opportunities and their associated uncertainties.
The process concerns itself with the estimation and evaluation of value possibilities at decision points in order to optimize the overall management process.
The approach involves the following six steps:
1. Identify the different attributes to be quantified.
2. Estimate crude but credible ranges for probability of occurrence and impact.
3. Recast the estimates of probability and impact ranges.
4. Calculate expected values and ranges for composite parameters.
5. Present the results.
6. Summarize the results.
For step 1 shown above management could use the following attributes to help with the decision- making throughout the value acquisition process. The attributes present a combination of what Babcock [2] and Cooper [9] suggest. They are:
1. The technical relevance of the opportunity (availability of needed skills and facilities, the probability of technical success).
2. Research direction and balance of the organization (the compatibility with research goals and desired research balance).
3. Timing of R&D and market development relative to the competition.
4. Stability of the potential market to economic changes and difficulty of substitution.
5. Position factor relative to other product lines and raw materials.
6. Market growth factors for the product.
7. Marketability and compatibility with current marketing goals.
8. Producibility with the current production facilities and manpower.
9. The financial factors.
During the application of the first pass approach Chapman and Ward [5] mention that there is an underlying concern to avoid optimistic bias in the assessment of uncertainty, and a concern to retain simplicity with enough complexity to provide clarity and insight to guide uncertainty management.
After the organizations’ aggregate project plan, goals and objectives have been set, and arriving opportunities have been approved for further development, the stage is set for the execution of the projects. The value delivery phase and in particular the Critical Chain Project Management principles as developed by Goldratt [18] will be discussed in the next section of this chapter.