Product innovation can often be a case of the confused leading the irrational. No wonder three out of four projects fails. But Robert Cooper, a leader in new product development, consultant to the Global 1000, author and seminar speaker, has a simple fix
According to your research, around three-quarters of innovation projects don’t make it.
The number-one reason for the high failure rates—and it comes up in our studies and other people’s studies in just about every country from Israel to Korea—is a lack of understanding of the marketplace. People get brilliant ideas and think they’ve got the best thing since sliced bread. They believe in it so strongly they can’t understand why other people don’t have the same desire, need or hots for the product. In other words, they don’t go out and do the necessary market research, they don’t listen to what people say they want and they don’t check out and validate the product concept with customers. They charge into development, spend a ton of money, launch the darn thing, and are disappointed and almost insulted when people avoid it like the plague.
Toyota in Japan has a series of principles of effective product development, and one of them is ‘front-load your project’. Which means, do more work in the early stages and you will save all kinds of grief in the later stages. Do your upfront homework!
Yet even best-practice companies still fail when developing a new product three out of four times.
A development project has money on the table, you’re spending time, effort and cash on the thing—and three out of four fail commercially or get cancelled, and it’s tough to cancel a project you’ve spent that much money on. It’s like playing poker when you’ve already pushed a lot of poker chips into the middle of the table, then you look at your hand and fold it. Nobody wants to do that and the temptation is to keep on betting, and of course a lot of companies do and they get into a lot of trouble. They should have folded the hand.
And you’ve come up with a systematic process to make that call with more confidence?
Stage-Gate really does two things: it helps people pick the right projects, and helps people do projects right. It’s based on academic research that was focused on observing what successful project leaders and entrepreneurs did when they developed successful new products. I picked a group of very well-known companies, asked them for a textbook example of their best-done project ever, and sat down with these guys and just wrote down everything they did. It’s like watching great football teams, or world-famous chefs. When you watch excellent people doing things, you pick up some tips.
Tell us a bit more about the gates and the process of Stage-Gate.
Stage-Gate is built around stages and gates. At each gate, the project team sits down with senior management who are supporting the project with resources and finance. The project team presents to the gatekeepers, or the senior managers, the results of the project to this point. And the senior guys have to make a decision: do we continue to invest? It’s a tough decision and most companies are very deficient here: the project reviews, or ‘gate meetings’, are cumbersome; a lot of incoherent and irrelevant information is presented. You get a bunch of decision-makers in the room who have no rules, they have no criteria, they shoot from the hip, they bet from their heart—and, as you know, in poker if you bet from the heart you get into trouble fast.
So what we have put together is a gate procedure that is highly disciplined. It requires that the right decision-makers be in the room, and requires the correct information that the main gatekeepers need in order to make a good decision within 60 to 90 minutes. That information is presented in a relevant, coherent and simple-to-read fashion. The project team presents its case—and it’s a rehearsed, templated presentation. Only what the gatekeepers need to know is presented. The gatekeepers have criteria, they have a score card and they score the project on these criteria. The scores are displayed on a projector screen. People debate and discuss the differences between each gatekeeper’s score. Consensus is reached, a decision is made, the resources are committed—the meeting is over! It’s on to the next stage, and see you guys in two months with the results of the next phase of the project. It’s a very deliberate, disciplined method. And boy, does it ever work.
What about the stages?
The stages are where the action is. Successful project teams build a number of best practices into their projects, and our stages capture these best practices. They include building in the voice of the customer, doing front-end homework, getting sharp, early product definition, practising spiral or agile development, and seeking a unique superior product. Stage-Gate builds in these and many other best practices so that the result is a steady stream of winning new products.
Can you give us a few examples of Stage-Gate success stories?
I helped install the original new product process at Procter & Gamble in the 1980s, and it did not work very well back then. It was too cumbersome, too elaborate, far too complex. People avoided it like the plague. It had too many stages, too many gates; they called them ‘seven gates to hell’! We’ve learned a lot since the mid-80s. Now P&G has a really slick Stage-Gate process that was implemented around 1990, called SIMPL. Today that’s in its third generation and has been partially responsible for taking that company from a position of very poor innovation back in the 1980s. In 1990, Procter hadn’t had a successful major new product in 20 years. That was a real shock to the company that invented detergent and commercialised disposable nappies. Today, they’re an innovation machine. So it’s not just one product—I’m proud of the fact that I helped turn the company around.
Another that I’m proud of is Lego. The owner of the company, the son of the founder, welcomed the process with open arms. He said, “We’re very creative people but we need a more systematic approach.” Unfortunately for Lego the world turned on them in the 90s. Little boys became less interested in playing with mechanical toys and started playing more with electronic toys, and that was a major problem for Lego. Fortunately they had systems and the senior management in place to turn the situation from a disaster, and they were able to come out with products like Mindstorms and new robotics products in which electronics and computers are integrated with Lego-style blocks. That has been a real bonanza for them.
Some Australasian companies have done well with Stage-Gate. For example, I know Hardy’s uses Stage-Gate, and major firms such as Fonterra, Lion Nathan, Mars and Simplot Foods.
That must be keeping you pretty busy—I see you travel a lot, too.
Yes, including places like Australia and New Zealand—wonderful! I love New Zealand. I’ve been there many times. One of the first major global assignments I had was to install Stage-Gate with the consumer-products firm Reckitt & Colman [now Reckitt-Benkizer]. Our job was to implement Stage-Gate everywhere R&C did R&D, and they had a pretty big R&D centre in Auckland. So I spent quite a bit of time working with those folks, as well as with other firms in New Zealand. I’ve enjoyed Auckland very much.