Accelerating product developments via phase-gate processes

Hans J.Thamhain, Ph.D., PMP, Bentley College

As we enter the new millennium, pressures increase on organizations toward rapidly and accurately responding to complex market and customer needs. Product developments must often be planned and managed in an environment of fast changing technology, markets, regulations, and socioeconomic factors, as well as within team-based organizations that rely on resource and power sharing (Deschamps & Nyak, 1995; Thamhain, 1996). Traditional, more linear, product development processes work well under reasonably stable market conditions, which were present, by-and-large, until the 1970s and ’80s. However, with the increasing complexities of today's projects and their business environments, companies have moved toward more sophisticated tools and techniques for effectively managing their multidisciplinary activities (Rigby, 1995; Thamhain, 1997, 1998, 1999). Also project professionals had to become more managerially skilled and organizationally innovative to cope with the increasing dynamics of our business environment. As a result, many new management tools and delivery systems evolved in recent years. The phase-gate process, a derivative of R. Cooper's Stage-Gate concept (Cooper, 1994; O‘Connor, 1994), is one of these contemporary systems that builds on the strength of well established and robust conventional product development processes, such as phased-developments and phase-review methods. Especially driven by the promise for increased time-to-market performance, managers across all industries have considered this contemporary management tool for new product developments. Success stories cover a wide spectrum of new product projects, ranging from hardware to software, to processes and services (Cordero, 1991; Editorial, 1995; LaPlante). Yet, for many managers who tried the technique, the results were mixed regarding overall project performance. Disappointments often came in form of higher administrative overheads, stifled decision making, transfer of accountability away from the project team, confusion, role-conflict, and organizational compartmentalization. All of these problems often translate into more costly, longer and less innovative product developments—precisely the opposite of what the phase-gate process promised to accomplish. Even managers who successfully implemented phase-gate processes acknowledge great challenges and management skills necessary for fine-tuning the system toward effective organizational performance within a given business environment.

The Phase-Gate Process:The Basic Design

As an evolution of the phased approach to project management, the Phase-Gate Process has gained wide acceptance for managing complex projects, especially those requiring intricate multifunctional integration (LaPlate & Alter, 1994; Neves, Summe, & Uttal, 1990; O‘Connor, 1994; Cooper & Kleinschmidt, 1993). As graphically shown for a typical product development in Exhibit 1, the process provides a template or road map for guiding projects, such as new product developments, from idea to launch and beyond. One of the prime objectives is to use phase-gate processes for making the project cycle and its performance more predictable, that is, to minimize downstream uncertainty, risk and complications (LaPlate & Alter, 1994; O‘Connor, 1994; Noori, Munro, & Deszca, 1997; Iansiti & MacCormack, 1997; Sobek, Liker, & Ward 1998). Initially, the process must be defined as a procedure that identifies specific activity phases or stages, common to a class of projects. In the example of Exhibit 1, new product developments go through five phases: (1) concept development, (2) detailed design, (3) pilot production, (4) product launch and marketing, and (5) field support. Each phase or stage is defined in terms of principle scope, objectives, activities and deliverables, as well as functional responsibilities. Further, each stage leads into a gate, which defines the specific criteria and results that must be met for the project to succeed in the next stage and beyond. If designed properly, these gates validate through multifunctional reviews, all necessary “conditions for future success.” As an example, the gate succeeding the Concept Phase could be designed to validate such criteria as producability, testability, reparability, quality parameters, available licenses, and profit targets.

For procedural simplicity, the phase-gate process is usually presented as a serial, step-by-step method. However, its application is to both serial as well as parallel work processes, including concurrent engineering, design-builds, fast tracking and multi-organizational joint developments. To conceptionalize such concurrent application, one can envision each stage as a bar or time line on a Gantt chart, as shown in Exhibit 1. Time lines can be overlapping or running completely parallel to each other. Furthermore, gates are not necessarily positioned at the end of a time line, but can occur anywhere during the activity cycle of the stage. One of the critical elements of the phase-gate concept is the review process associated with each gate. Not only must the gate metrics be designed to validate the correctness of the current project approach, but also equally important, the review process, its people, environment, and leadership must be conducive to a dynamic and candid assessment of the project and its performance against the final objectives and success parameters. Moreover, an important criteria for the phase-gate process to work, is the ability of task leaders in “downstream” phases to define the gate criteria for those phases on which they depend as “customers.” In addition, these task leaders not only define the gate criteria, but also guide the upstream activities toward desired results. This is often accomplished by participating in project— and design reviews, by soliciting and providing feedback on work-in-progress, and by cross-functional involvement in interface definitions and technology transfer processes. Interface charts, such as shown in Exhibit 1, can help to support these interface definitions by graphically showing the specific inputs and outputs required during the various phases of a product development process.

Exhibit 1. Example of Phase-Gate Template

Example of Phase-Gate Template

Does It Work? With a large number of success stories reported, phase-gate processes have enjoyed a favorable image for enhancing the manageability of new product developments, and have been used by many. Further, companies have invested heavily in new management tools and techniques in support of these phase-gate processes. Yet, there has been no universal evidence on the effectiveness of those tools (Cooper & Kleinschmidt, 1993). Further, few guidelines have been published in the literature on how and where to use the phase-gate concept most appropriately. Few companies go into the restructuring of their business processes lightly. For starters, one of the great challenges for management is to seek out management tools and techniques that meet the triple constraint: (1) compatible with the business environment, processes, cultures and values, (2) conducive to specific problem solving which usually involves a whole spectrum of factors from innovation to decision-making, cross-functional communications, and dealing with risks and uncertainty, and (3) useful for tacking and controlling the project according to established plans. The second major challenge is for management to implement the selected tools and/or techniques into a business process. This involves careful integration of the new concept with the various physical, informational, managerial and psychological subsystems of the enterprise to minimize the risk of rejection. The third major challenge is for management to create and facilitate a learning process for these tools and techniques to become institutionalized and used by the people in the organization because they help in getting their projects done more effectively, and create visibility and recognition for their work. Moreover, management tools are rarely used in an isolated fashion, but work in concert with other tools, techniques and concepts, either fully integrated or in support of each other as an integrated part of the established business process. Examples are concurrent engineering (Cooper, 1994; Cooper Kleinschmidt, 1993; Haddad, 1996), design reviews, out-of-bound reviews and quality function deployment.

Scope and Objective

Based on extensive field studies into project management practices between 1993–98, this paper shows how the phase-gate process can be managed to reduce project uncertainty and cycle time in new product developments. Specifically, the paper discusses techniques for setting up phase-gate processes for effectively integrating gate-reviews within the project plan and within the overall framework of modern project management. It also discusses the important role of cross-functional linkages, involvement, commitment, communications and decision-making, and how these conditions can be enhanced via properly managed gate-reviews. The paper concludes with specific suggestions, gleaned from best-in-class practices, for effectively managing the transfer of technology from R&D to the market.

Method of Investigation

The study began with an integrative literature review of project control concepts, tools, techniques, with focus on phase-gate processes and gate reviews. This initial study formed the basis for a detailed survey design, involving a combination of action research and questionnaires. Sixty-two project teams and their managers participated in this study, including: USA (22), Australia/New Zealand (16), Mexico (11), Brazil (9), and Europe (3). All of these teams worked on technology-oriented projects with team members located in various countries. The four geographic regions listed represent the location of the project office or its primary integration site. Combined, team members associated with these multinational projects worked from various locations, representing 23 countries. Specifically, the study includes data from 294 professionals: 186 engineers, scientists, and technicians, 23 supervisors, 38 project team leaders, 18 project managers, 10 directors of R&D, 9 directors of marketing, and 10 general management executives. Together, the data covered over 180 projects, mostly product/service developments with budgets averaging $1,200,000 each. The host companies are large technology-based multinational companies of the “FORTUNE-1000” category. Data were collected between 1993 and 1998 by questionnaires and two qualitative methods: participant observation and in-depth retrospective interviewing. The purpose of this combined data collection method was to cast the broadest possible information-gathering net to identify the tools, techniques and practices used for managing technical projects today, and to gain insight into applications, methods and effectiveness.

Key Success Factors for Managing the Phase-Gate Process

There are obviously cultural and philosophical differences that influence the way companies manage their projects and set up control systems. This certainly holds especially for complex management tools such as the phase-gate process. Even within one department, methods may differ from project to project. However, using content analysis of the survey data, this study shows that a general agreement seems to exist among project leaders on the type of factors that are critical to effectively organizing and managing phase-gate processes and their gate reviews in today's business environments.

What we find specifically, for phase-gate processes to work effectively, they must be congruent with the business process and the human factors of project management. That is, team members must work in an environment conducive to mutual trust, respect, candor, and risk sharing. Equally important, the work environment must foster effective communications, cross-functional linkages, and a business process conducive to interconnecting people, activities and support functions.

An important part of the phase-gate process is the gate review, which relies critically on a QFD-based framework of understanding the internal customers, sponsors, and transfer points, as well as the ability to set up gate criteria, which can project the feasibility of the venture and minimizes potential problems later in the project cycle. Finally, the effective management of gate reviews involve a whole spectrum of critical factors: clear direction and guidance; ability to plan and elicit commitments; communication skills; dealing effectively with managers and support personnel across functional lines often with little or no formal authority; information-processing skills, the ability to collect and filter relevant data valid for decision making in a dynamic environment; and ability to integrate individual demands, requirements, and limitations into decisions that benefit the overall project. It further involves the project leader's ability to resolve intergroup conflicts and to build multifunctional teams.

Specifically, a number of suggestions for effective implementing phase-gate processes and gate reviews have been derived from the broader context of this field study. The recommendations presented here should help both project leaders and their managers to understand the complex interaction of organizational and behavioral variables involved in the control today's complex projects and the implementation of appropriate managerial tools, such as the phase-gate review and techniques. The findings should increase the awareness of what works and what doesn't, and help to fine-tune project management systems toward high performance. Finally, the findings should also help scholars who study these concepts to better understand the complexities involved in the project management process and to use some of the conclusions reached from this study as building blocks for further research.

Make the Phase-Gate Processes Consistent with Work Process. Management controls, such as voice-of-the-customer, interface definitions, and gate reviews should be an integrated part of the business process. Particular attention should be paid to the workability of the tools and techniques for task integration and technology transfer across organizational lines. When implementing a new phase-gate process or gate review procedure, build on existing tools and systems whenever possible. The highest levels of acceptance and successful usage of management tools are found in areas where tools are incrementally added to already existing management control systems. If at all possible, the new process should be consistent with established project review procedures and management practices within an organization.

Involve the Team. Make your people part of the phase-gate process and its managerial controls. The project team together with the project manager should be involved in the assessment of the project status against the established success criteria. Critical factor analysis, focus groups and process action teams are good vehicles for such team involvement and collective decision-making, which leads to ownership and a more readily acceptance of the tool, and a willingness toward continuous improvement and most effective use.

Pre-Test a New Gate Review Procedure. When introducing a new gate review, try the new concept first with a small project and with an experienced, high-performing team. Asking such a team to test, evaluate and fine-tune the gate review process for the company is often seen an honor and professional challenge. Further it usually starts the implementation with a positive attitude and creates an environment of open communications and candor.

Clearly Understand Organizational Interfaces. Overall project success depends on cross-functional integration via teamwork. Each task team should clearly understand the transfer mechanism for their work, be encouraged to seek out cooperation, and to check out early feasibility and integration. QFD concepts, n-square charting and well-defined phase-gate criteria can be useful tools for developing cross-functional linkages and promoting interdisciplinary cooperation and alliances. It is, furthermore, critically important to include into these interfaces support organizations such as purchasing, product assurance and legal services, as well as outside contractors and suppliers, especially if there are work interdependencies or issues affecting the project integration.

Define Proper Gate Criteria. By definition, each gate consists of a set of criteria, derived from the activities of the last stage. Meeting these criteria should essentially ensure successful completion of the project. Several conditions must be met for gates to be effective: (1) The criteria must be defined conjointly among the stakeholders of the business process at the beginning of the project cycle. For example, management must define specific success criteria for a project and articulate specific metrics useful for assessing these criteria at the end of each stage. (2) The people executing particular project stages must agree to the criteria and its metrics as an obtainable objective within the established project scope and its time and resource constraints.

Assign Gate Reviewers Early. The people who judge the fulfillment of the gate criteria should also have specific ownership in the project. Ideally, these people are eventually the receivers of the work packages produced in the stage that is reviewed via the gate. These reviewers are not only judges, but also members of the broader multifunctional project team who should participate in design reviews and project reviews during the stage execution and provide feedback on an ongoing basis, not just during the gate review. For this reason, it is critically important that gate reviewers are assigned early in the project life cycle and fully committed to multifunctional project development.

Assure Proper Representation. Assure proper representation from functional support department. This facilities the participation of resource managers in the problem identification and resolution. It also provides a link between the project team and upper management, necessary for proper management of the resource personnel, priority setting, and resolving interfunctional problems.

Anticipate Anxieties and Conflict. Especially for the introduction of a new gate review procedure, project leaders should anticipate anxieties and conflict among their team members. These negative biases come from uncertainties associated with the new working conditions and requirements. They range from personal discomfort with skill requirements to anxieties over the impact of the new tool on the work process and personal performance evaluation. These problems should be anticipated and dealt with in a straightforward manner as early as possible.

Ensure No-Threat. Management must foster a project team environment of mutual trust and cooperation, an environment that is low on personal conflict, power struggles, surprises, unrealistic demands, and threats to personal and professional integrity. Cooperation with a management control tool or technique can only be expected if it is relatively risk-free to the user. Unnecessary inferences to performance appraisals, tight supervision, restriction of personal freedom and autonomy, and overhead requirements should be eliminated from the technique and any concerns dealt with promptly on a personal level.

Keep Meetings Interactive. Keep meetings interactive and on a mutual trust basis. Good review meetings are often noisy with plenty of candor and broad involvement. It is this dynamics that helps to discover small problems at an early stage.

Detect Problems Early and Resolve. The project leader should foster an environment that is high on mutual trust, focused objectives and professionally stimulating. These are the factors that positively influence the action mentality of the project team and keep it focused on desired results.

Be Prepared. Effective review meetings require housework and proper preparation by the leader and the participants. A well organized status summary, change announcement, or problem statement requires often detailed background work and considerable effort organizing the presentation or discussion.

Follow Good Meeting and Review Practices. Send agenda with meeting invitation and follow it. Start on time, finish on time. Time overruns can be costly and disruptive to others. They also set bad examples for on-time performance. Send reading material and homework ahead of meeting. Don't take precious meetings time. Assign action items and follow up. Publish major milestones and project objectives. This provides cross-functional visibility for the overall project road map; it helps to unify the project team toward critical results and end-dates.

Foster Challenging Work Environment. Professionally interesting and stimulating work appears to be one of the strongest drivers toward acceptance and effective use of managerial controls, such as gate reviews. Work challenge seems to be a catalyst for integrating personal goals and the needs of the team members with the project objectives and organizational goals. Project leaders should try to accommodate the professional interests and desires of their personnel whenever possible. Effective support of managerial controls seems to increase with the individual's perception of professionally interesting and stimulating work. It leads to increased involvement, better communications, lower conflict and higher commitment. One of the best ways to assure interesting work is for the manager to match carefully the personal interests with the scope and needs of the tasks during the “signing on” of personnel to the task or project team. In addition, the manager should build a project image of importance and high visibility, which can elevate the desirability of participation and contribution. Such an environment helps to motivate people toward established goals, innovatively and creatively, and cooperation with managerial controls.

Continuous Improvement. The phase-gate process is part of the organization's project management system and overall business process, which in turn is continuously changing with its external environment. Provisions must be made for updating and fine-tuning the phase-gate process on an ongoing basis to assure relevancy to today's project management challenges.

Ensure Senior Management Support. Like any other management tool, the phase-gate process and its reviews require top-down support to succeed. Through their involvement and communications, management can stress the importance of these tools to the organization, which will span organizational and cultural boundaries, and unify objectives.

Provide Proper Direction and Leadership. Managers can influence the attitude and commitment of their people toward the gate-review as a project control tool by their own actions. Concern for the project team members, assistance with the use of the tool, and enthusiasm for the project and its administrative support systems, can foster a climate of high motivation, involvement with the project and its management, open communications, and willingness to cooperate with the new requirements and use them effectively.

A Final Note

The effective implementation and use of phase-gate process can be critical for expedient and effective project execution, and help accelerating the technology transfer to the market. Proper application of this management control technique involves a complex set of organizational and behavioral variables. It further requires congruency and integration with the work process and the established control and reward system. Most importantly, managers must pay attention to human factors. To enhance cooperation with the gate review process, and to use it effectively as a management control tool, project leaders must foster a work environment where people find the work challenging, leading to recognition and professional growth. Such a professionally stimulating environment seems to lower anxieties over managerial controls, communications barriers and conflict, and enhances the desire of personnel to cooperate and to succeed. It also seems to enhance organizational awareness of the surrounding business environment and the ability to prepare and respond to these challenges effectively by using modern project management techniques. Further, effective use of phase-gate reviews is critical. It requires administrative skills for planning and defining project efforts properly and realistically, and then tracking the project through its life cycle. Effective project leaders are social architect who understands the interaction of organizational and behavioral variables and can foster a climate of active participation and minimal dysfunctional conflict. They also build alliances with support organizations and upper management to assure organizational visibility, priority, resource availability, and overall support for the multifunctional activities of the project throughout its life cycle. These are some of the important criteria for the phase-gate process to work effectively in today's demanding, multifunctional project environment.

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Proceedings of the Project Management Institute Annual Seminars & Symposium
September 7–16, 2000 • Houston, Texas, USA