More insights by Dr Robert Cooper on Innovation and the Future of Stage-Gate
Why is it so important for companies to engage in bold innovation?
Well first of all Michel, I guess the word “renovation” is a play on words: the word “innovation”, which we're all familiar with, and renovation being not innovation, in other words the opposite.
First of all let's be clear: we're talking about product and service innovation. Things a company or organization takes to its marketplace to its customers or users. Some companies use the word innovation to mean anything new the company does internally or externally. I'm not talking about that. This is product and service innovation to the outside marketplace.
I guess the word innovation to me, and to most people, means something that is new to the external market place to the world, or to the marketplace that my company serves.
It could be based on new technology, but not necessarily. The iPod for example, one of the most successful products in history was an innovative system. Now mp3 players had been around for a while and so had various types of downloadable music such as Napster. But it was Steve Jobs that took all these pieces together and built an innovative, totally new system that delivered the most successful product and system in the world. That's a true innovation.
At the other extreme we have renovations. This is where companies take their existing products and make small little changes. A little fix here, a little modification. Change the color, change the label. Add a little bit, subtract a little bit. Not very exciting. Many of these projects are sales force driven. The sales guys come and say: “Hey, I can get the sale. I can get the order if we can just change it a little bit.
And unfortunately Michel the majority of product developments tend to be renovation-types: improvements: modifications, fixes, tweaks: not very exciting, not gonna make you a lot of money.
And so, the other question I guess was: why is it important to do the bolder innovations? Simply because the evidence strongly argues that as companies have shifted away from innovation, to more and more renovation-type, smaller projects the productivity on R&D money spent has gone down steadily.
And our studies of highly successful firms show that their portfolio of projects is much more towards the innovation end of the scale, and much less towards the renovation. Whereas the least successful companies when it comes to product development (making money, and measured on many different metrics); the least successful companies tend to emphasize renovation-type projects so the evidence is very clear on this: innovators win.
What is the #1 hurdle to promoting a fertile innovation culture?
I think this is one area where management from the top, leadership from the top, is really critical. I hear lots of people saying “we are bottom-up type organization, we try to push things up the organization.” Very very tough to do when it comes to innovation.
If the senior management and the next level down are not on board: it’s dead. You’re simply not going to get the support, the resources, and the encouragement you need. So you may as well look for another job, at a company we will get that support.
So I'd say the lack of leadership, vision, support, empowerment; putting the resources in place, walking the talk as well as talking the talk… Like a lot of guys talk the talk. They don't walk the talk.
The lack of this is probably the number one impediment: the leadership team and their lack of vision and courage. That would be my guess.
Stage-Gate in a nutshell
Stage-Gate is pretty simple in concept: it's basically breaking a large project into a series of stages with gates between them. You do some work; you gather some information; you assess the information; you make a decision: “Do I continue? Continue to invest? Do I put more money in the game?” And then you move to the next phase.
So it's really a way of taking any project – not just that a new product project but any project that is done over time – and breaking it into a series of manageable bite-sized chunks, with decision points along the way: “Am I still in the game? Do I still invest?”
So it's a very sensible way of running any project, as we talked about one of mitigating risk. But if you think about it, it's the way just about any significant project, whether you're constructing a building, or doing process research or what have you, should be run. And that's the Stage-Gate process.
[Michel Delifer] What was the origin? How did it start?
[Robert Cooper] I’d like to say that one day I woke up and had a big “Aha! Eureka! This is the way the world ought to operate!” [laughs] But that didn’t happen…
A number of years ago, as a junior professor, I receive the government grant. And I was gonna do a very complex study, like any young PhD professor would want to do, very complex, and the government guy giving me the money was looking at this and said “This is very interesting. I don't have a clue what you wanna do here. But what this country needs are some damn good stories of innovators, entrepreneurs that launch new products. I think that you should write some of those stories.” And I looked at the guy and I said: “What do you think I am? A newspaper reporter? I'm an academic researcher! I don't write stories.” And he said “Do you want the money?”. I said “Yeah.” So he said: “Write the damn stories.”
So I went out and I hustled around, and got my dean and a few other professors to help me find some people in town and in North-Eastern United States and in that part of Canada where I was a professor, people who had done projects in big companies.
And typically I would walk into a company like DuPont was one of them, [and say] “I wanna talk to the guys that developed the product that you would use as a case study in a training program how to do product development in your company.” That was always the premise: “Give me the team and let me talk to them.”
And it's amazing the number companies that were quite willing to cooperate ‘cause they wanted the stories written up too, you know for posterity, for their heritage. And I started writing these stories and it took typically about two or three months per company, and after about 20 or 30 of them I began to see: “There's a pattern!” Whether it was DuPont or United Technologies developing a new jet engine or somebody developing into new telecommunications system, there was a pattern. It's like these guys all went to the same school. And I began to realize that maybe we could integrate all of these things these different teams were doing, and come up with a playbook.
It's a bit like watching football team, a winning football team say like Manchester United in the UK. And if you watch enough games, you begin to get an idea: “There's a pattern here; they're doing something different.” And then you go to Spain and watch their winning team, and you see they have a pattern. And slowly but surely you put together all the pieces.
So at first we started identifying the patterns: “What are the best practices? What is it that these teams are doing in common?” Some other things for example: every one of these guys broke the process in the pieces. None of them went to the boss and asked for all the money. They took it in chunks. They knew how to manage their bosses.
Another thing they did: they all built in Voice-of-Customer right at the beginning. They're very clever guys, these project leaders. Very entrepreneurial, very clever guys…
And after pulling together the pieces slowly but surely, somebody suggest to me: “Why don’t you write it up as a complete recipe, as cookbook based on the best chefs in Europe, okay? Only this is a new product guide, based on the best project teams.”
And that’s how Stage-Gate was born.
Stage-Gate: the winning model or work in progress?
I don't think I'm never satisfied that it is THE solution because that is an evolving process, and just when we think we have it right, some other company comes up with an improvement. And I think that's great it's an evergreen system that keeps growing, and keeps self-improving. So I don't think there's ever been a point when we sat back and said: “Aha! It’s there. It’s perfect.”
It keeps improving, and I'm amazed even in the last five years how many companies I go into, or that contact me and say: “We’d like to show you what we've done. And boy this is pretty clever, and this is really the next step for us.”
And that's happening all over the world today, and I'm very thankful that they do contact me and show me.
When is a company ready to adopt Stage-Gate?
I think that, as long as you keep the process simple, and fairly high-level, and not a lot of paperwork, it can suit even the smallest entrepreneurial firm. I've seen companies – the smallest 2 people – use a Stage-Gate process.
Now their Stage-Gate process is very very different than the one that Exxon might use, or the one that DuPont might use obviously. It tends to be more conceptual, more of a flow diagram: “These are the stages. These are the gates. Here are the questions we ask. Here are the activities we do.” Very very simple. Not a lot of paperwork. But it's just a guide, a roadmap so that the handful of people in the small company can go from point A to point B.
Very interestingly right now Michel, I'm working in Canada (both French Canada and English Canada) with two groups of small businesses, and these are handpicked from a government program – they all received research grants – and there’s 12 companies in Ontario and 12 in the Montreal area. And they wanted me to give these guys a seminar on best practices and how to win the game. And I said: “By the way, I know they're all small companies, I won't talk about process ‘cause small companies hate process, so I promise I won't talk about that.”
Well, joining one of the coffee breaks, somebody was saying: “I hear you know my former employer. We use Stage-Gate.” So I talked a little bit about it. They all put up their hands up! They wanted to hear more. And so we actually developed, with the user group, an incredibly simple – it's just based on PowerPoint – version of Stage-Gate for the SMEs (Small Medium Enterprises), and they love it.
But it's very very simple, very high level, and not a lot of paperwork. So it can be used.
[Michel Delifer] And there is value for SMEs, even with this simplified process?
[Robert Cooper] Absolutely. And they found it very very helpful to just structure the process a little bit, put some labels on where they were. It's like a roll-back you know where are we today. It helps them think through where they're going.
Another thing – because we've had feedback from them as they’ve used it – it makes sure that you don't miss obvious things. It’s a more inclusive process, and includes things we might not have otherwise done, and this is good because we're missing things.
So they've been saying pretty positive things, even small businesses, but it's got to be kept simple.
A word on criticisms levelled at the Stage-Gate model.
I've read a number of articles over the years that have been critical of Stage-Gate, and of course anytime you have a dominant system, there's bound to be people finding criticisms with it and that's just normal. Even Six Sigma, a wonderful process, was criticized in its heyday.
The rebuttal arguments are equally interesting to read because there's been a lot of people that have written articles attacking the articles that were attacking Stage-Gate. So the battle goes back and forth. I don't tend to get involved in that battle. I tend to stay away from that battlefield.
The general comments from the critics are: the process is bureaucratic; the process is rigid; the process is linear; the process is not adaptive; and there's a few other adjectives they use.
And the rebuttal arguments are, generally: n°1 you've made it bureaucratic – the process wasn’t bureaucratic, you made a bureaucratic; in other words: it’s how you implemented it: you put in all the paperwork, you put in all the forms, you put in… The original model didn't have all that stuff and shouldn't. Okay, you chose to have business cases that were 60 pages long, when they should have been two pages long; that's your choice.
So, a lot of the criticisms are the way companies implement it. Just like Lean Six Sigma a lot of companies did it brilliantly but some people never got good results; the devil's in the details – it was the implementation.
The other rebuttal arguments are: the rigid aspect, the non-adaptive, you know one-size-does-not-fit-all – that’s another criticism – that's true, and that was certainly true of the Stage-Gate system in 1995. And if you're using a 1995 Stage-Gate system, you have those problems. But shame on you: it's now 2014 and maybe you should be updating your system. If it's more than 4 or 5 years old, it's out of date.
Most companies have moved beyond the old model. They've made it adaptive; they've gotten rid of the linearity; they’ve gotten rid of the rigidity; they've gotten rid of the one-size-fits-all; they've made it context-based; and so on. They just modernized their process.
So though those are the two general rebuttal arguments: you've implemented it wrong, and you're using a very old version of the model circa 1995.
Convincing the doubters: a case study of conversion to the Stage-Gate philosophy
I’d better be careful about what I say here, ‘cause I could get into some trouble. I don't want to mention the company by name for obvious reasons, but this is a major bank in my country – it was the largest bank and this is business banking, which is the largest part – the bank was split into two sections: retail and business. And the guy in charge, the senior executive vice-president in charge of business banking was an ex-account manager and he liked doing deals, and he hated bureaucracy. He liked making loans and he liked doing big deals and big financing, things like that, and he had not much use for process.
Now the Stage-Gate process was underway in his organization, and then he took over the senior position. I remember him telling me: “Bob, I don't think this process and I are gonna get along. I don't think we’re gonna be friends.” [laughs]
Now because I was living in the same city, I had been invited to help them implement this process – in fact work with this organization for 4 or 5 years while they did it.
And then he became a believer. And it was rather interesting, it was almost overnight.
They developed the new product, and the new product was designed for small businesses. It was a tiered interest account. Now a tiered interest account means that you've put cash in the bank, and depending on how much money you have in the bank, they'll give you higher and higher interest rates, and this was designed for small business.
You see, all the big banks have a bad reputation with small business. They hate big banks. So the idea here is: “We're gonna help small businesses, get a good reputation, and give them this tiered interest account.” And it was his idea, ‘cause he’d come in from the field – he had been a senior account manager – and he though: “This is a great idea to help the small business guy.” Because obviously, these cash accounts from big business, they get no interest, no interest at all.
And they rolled it out, and the first sale was made to Exxon, and the second sale was made to a huge insurance company, and the third sale… [Michel Delifer] They were not SMEs!
[Robert Cooper] No! They hadn't done any homework at all! They hadn't done a launch plan. They hadn't done a business case. They had given the Salesforce no training. They went out and sold it to all of their friends. They lost 17 million dollars in about 3 months on interest they would not have had to pay.
The big boss came to me at this point and said: “I've learned the lesson. You do your homework. You do your voice-of-customer research. You put together a launch plan. You build the sales force in. You do all these things, and we did none of those things, did we? It was just me! I think we need a process. I never want to see this happen again.”
And it was a very expensive lesson for this gentleman. Interestingly enough, in a book that I turned out subsequent to that, he was one of the guys who signed the back of the book and said: “This is a great book to read.” in one of these attestations, and he put his name down on it and said: “This is the system to use.”
So, a complete 180 degrees from where he first started. That was an interesting one, and it was a major major company.
What role do PPM tools play in a successful new product development process?
And what a world of difference it's made. It's enabled management today to see where the projects are, where the resources are going, which projects are in trouble, which projects are behind schedule.
It’s facilitated portfolio review so much with all the different displays and dashboards.
It's also made life so much easier for project teams who can now work on the same documents together in different locations without having a lot of duplication.
And it just did all the things that we would sit around thinking: “Gee I wish we could do…!”
And now that wish is here thanks to automation.
How building voice-of-customer in the NPD process can make the difference between success and failure
A large conglomerate who has a pump division, and again I gotta be careful that I don't mention names here because they could sue me… But the first project was an absolute disaster: they decided they were going to develop a smart pump. Some customer had suggested: “Why don't you guys come up with an industrial comp that intelligent. ‘Cause pumps are pretty dumb you know: you turn them on, they pump water, and then that’s it.
They said: “This is a pump that would recognize its own environment, and if things are going wrong – such as vibration or something going wrong with the pump – it would take the necessary corrective action, and save a major failure of the pump – shaking itself to death or something like this.
“Come up with a smart pump!” And boy oh boy, this company decided: “This is the project for us. We're going to be the first people out there with an intelligent pump.” And they didn't do any voice-of-customer research, other than this one customer – who happened to be DuPont – saying: “Why do you guys do this?”
Everyone wanted on the project; it was THE project of the year. And I actually went to the company event – sales, marketing and technical event – where the project teams were being invited up on stage, and everybody was clapping and they were bowing, and [there was a] slide presentation. And these guys came up, and they got a round of ovation like you wouldn't believe, because their product was incredible.
They had designed the pump attached to microprocessor, a computer and the product had all kinds a sensor so it could sense vibration, could sense pressure, temperature, anything you want: downstream, upstream, in the housing… And process all this data, and took the necessary action: speed it up, slow it down etc. And people thought: “This is phenomenal!” Of course, they were all techies. And they actually sold one! And that was it. One. They spent 20 million dollars on this thing; it was brilliant technology! Brilliant. And the thing died, and they had to pull it off the market in a year.
Phase 2: a new Managing Director rolls into the US operation from Italy. He's a strong believer – he runs a pump division in Italy, same company – strong believer in VOC [Voice-of-Customer]. He was horrified to see how much money they'd spent and hadn't talked to any customers, that they already knew the solution before they even understand the problem.
So he brought in a group he’d been using in Europe to teach people how to do Voice-of-Customer - this is a group called the Ninbe group out of Stockholm, I believe – [they’d] done a lot to work on training people how to do Voice-of-Customer research etc. B2B. And the next thing you know: they’ve resurrected this project and it’s has become one of the Voice-of-Customer projects.
And they get out there, and they start talking to customers: 3-person teams: technical, marketing, sales guys. And they go around the many many pump users in petroleum refineries, chemical plants, people that are using pumps. And you know an interesting thing is nobody mentioned the pump vibrates a lot. This is not an issue. But they have some very interesting questions like: when you lie in bed at night and think about pumps what keeps you awake? I don’t know, let me think about that… Or: your pump is your friend because…? That was another good question. Or: what is a major point of pain when it comes the pumps?
And you know they kept coming up with time and again? We got a plant here, a facility that has 25 pumps, they’re 50 or 100 horsepower each, they run 24 hours a day 7 days a week, and boy does that use electricity. When electricity was cheap: not a problem; now, it's killing us. And so the naive product developer would say: “Aha! Let’s develop a more efficient pump!” But it’s been done. It's just like the internal combustion engine: it’s there. You know you can spend a billion dollars and improve it by 2%.
One other things they did as they were walking through the customer's facility, you know with their hard hats on, their goggle – because you're supposed to do that when you do voice-of-customer, you're supposed to be out there, touching real customer, seeing them use, abuse and misuse the product – one of the things they noticed is: beside every pump there was a valve, and they said: “What's that for?” “Well that's to control the flow.” “Just a minute here: you're running the pump full speed, right? 50 horsepower running flat-out; in the US at 1750 rpm, and then you're using a valve to slow the flow down? Isn't this a bit like driving an automobile with your foot on the accelerator to the floor, as fast as you can go, and then using the handbrake to control the speed? This is stupid! We have a solution: we have the technology to sense downstream supply, upstream demand; [the] microprocessor slows the pump down when you don't need it as much.”
And boy oh boy they came out with this smart, variable speed supplied/demand pump in the earlier part of this century, and it was incredible. I mean sales just skyrocketed: in an existing installation, a retrofit, the pump a paid for itself in about eight months (it saved electricity); in a new installation you didn't even need the valve so it paid for itself almost immediately.
Huge success, Tale of Two Cities: the worst of times (the 1st project), the best of times.
[Michel Delifer] I think that’s a great story Bob.
[Robert Cooper] And really, a lot on lessons learned. These guys became firm believers. I know the head engineer, I still communicate with them from time to time. He's gone on to become the CTO [Chief Technology Officer] of the corporation, and he said this was one of his big learnings too. We all remember the smart pump.