To develop new products companies can integrate Project Portfolio Management into the Stage-Gate process. This approach works very well for big firms that operate in mature businesses where the portfolio of projects is pretty static.
Thanks to this approach, companies can review individual projects and make go/kill decisions on each one of them. To add PPM to the Stage-Gate process gates have to be modified. In addition, resource allocation methods are added into the gates without reprioritizing the entire set of projects every month.
The Stage-Gate process
The Stage-Gate method developed by Dr. Robert G. Cooper is an approach that can be used to make the product development process more effective. It is an effective way to create new products starting from new ideas.
By using this approach, a project is executed through several stages. These stages are separated by “gates”. The gates represent the decision points where executives decide whether or not to proceed to the next stage. This model can be used when developing new products, but also when companies need to change processes or make improvements.
At each gate, a decision is made whether to continue the process or not. This decision is based on the information available at that moment and, in most cases, is made by senior managers or steering committees.
PPM and Stage-Gate
Adding PPM into the Stage-Gate process helps to sharpen gate decision-making on individual projects. Senior managers make go/kill decisions at gates by using all information available for each project. At gates, projects are reviewed, one project at a time. During these meetings projects are prioritized and resources are allocated. It is important to consider that this is a real-time decision process that is activated many times throughout the year.
This approach is usually used by companies that already have a Stage-Gate process in place. Then, these companies add PPM to their gating process in order to support the decision making. This method works particularly well in big companies and where projects are complex and have a long duration.
How the Stage-Gate process changes
When Project Portfolio Management is added to the Stage-Gate process, at gates, senior managers have to make two decisions.
- The first decision to make is a go/kill decision, where individual projects are evaluated using different methods such as financial evaluations (NPV, ECV, etc.), checklist and scoring model tools.
- The second decision to make is a go/hold decision, where a go means allocating resources to the project. This is also the moment to create a rank-ordered list of projects that helps compare the relative attractiveness of the project under evaluation to the other “active” and “on hold” projects.
So, go/kill, active/on hold, prioritization, and resource allocation decisions are made in real-time, during the gate meeting. It is useful to underline that during these meetings, only the project under analysis is given a relative priority level against the others.
To make the decisions we have discussed above, senior managers need to evaluate the impact of the project under analysis on the balance of projects, and if the project is aligned to the project portfolio strategy.
keep in mind
Companies can use the Stage-Gate process and PPM to develop new products. Gates are decision points. During gate meetings, go/kill and on/hold decisions are made on projects – one at a time. During these meetings, senior management evaluates and scores each project before moving on to the next stage. As a result of each evaluation, bad projects are identified and taken out, whereas good projects are recognized and prioritized properly. It is important to underline that resource decisions (people, equipment, and money) are also made during these gate meetings.