www.Hexagon-Innovating.com
Killing/ cancelling projects in the face of more promising opportunities is very difficult. Projects can seem to take on a life of their own. All of the stakeholders involved in the project, from the project team, senior management serving as the project champion, possibly investors, and even interested potential customers can become invested in the project - a combination of passion and desire to push on, belonging, familiarity and comfort, buy-in, and not wanting to acknowledge failure or realize a financial loss. Nevertheless some projects, that despite good initial intentions, are unlikely to achieve their goals for any number of strategic, technical, commercial, financial or operational issues. Cancelling a project frees up human and capital resources that can then be redeployed on more promising new or existing projects. In doing so, a firm can retain a robust portfolio of projects and improve the overall innovation probability of success. A effective way to oversee a single project or number of projects in a portfolio, to ensure that efforts and resources are driving innovation, is to implement a stage-gate (or phase-gate) process. A stage is a task or series of tasks that are focused on achieving an important and measurable sub-goal of the entire project (also known as a milestone). Examples include building a working prototype, receiving regulatory approvals, raising financing, or product or service launch. Each stage is generally associated with a budget and a timeline for completion. A gate, as the word implies, is a moveable barrier. This is where a project stops to be re-evaluated based on completion of or failure to complete the current stage and reach the milestone. As part of this re-evaluation, the continuing relevance of the overall project’s goals are also examined. Each gate thus serves as a Go/No-Go (or Kill) decision point based on a pre-defined set of criteria. Projects receiving a Go pass through the gate and move on to their next stage. Having pre-established gates and detailed Go/No-Go minimal criteria for each stage are critical. Without these, the process loses its objectivity. The minimal acceptable criteria should incorporate the four components of a project namely scope, quality, time and cost. The scope being the detailed set of deliverables or features, derived from a project's requirements. It is also defined by the Project Management Institute as "the work that needs to be accomplished to deliver a product, service, or result with the specified features and functions.” The gate for developing a functional prototype of a new bicycle might include the following criteria: The bicycle is to incorporate the new frame design, to weight no more than 12 kg, to support a 100 kg rider, to contain all the standard components, and to withstand forces of 3 kN at each joint. Colour and frame graphics are not required at this stage. (Scope and Quality). This functional prototype should be delivered by January so that full production can commence on schedule at a cost of $1.0 million including a 10% contingency (Time and Cost). A gate for a market research project might include: Survey at least 100 personal trainers and confidentially collect information on their hours worked, their hourly pay and their top three issues. It is expected that client injuries will be mentioned as a top issue by more than half the respondents to justify our proposed solution (Scope and Quality). This stage is scheduled for one month at a cost of $10,000 (Time and Cost). These four project components (often referred to as constraints) are interrelated. A formula that captures the tradeoffs is Quality x Scope = Time x Cost. This illustrates that to deliver a certain product or service with acceptable quality requires a certain combination of time and money. Of course, it also implies that with enough time and money almost anything is possible, and the more practical corollary that time and/or budget constraints will negatively effect either the scope or quality of the outputs or both. In evaluating projects against minimally acceptable criteria, scope and quality should not be compromised whereas there may be some flexibility in time depending on market conditions. The constraint best able to absorb difficulties is cost: Putting more resources on a project to ensure it comes in with the desired scope and quality, and within an acceptable timeframe is usually worthwhile as long as those additional costs are “reasonable.” As outlined above, gates can be established at any major milestone. However, some practitioners prefer to use the traditional process for every project involving five fixed stages and gates as follows:
As these traditional gates are indeed major milestones, adding some additional gates to this list especially within Stages 3 and 4 for larger projects is highly recommended. If project management tools are being used, as they should be, the work breakdown structure and resulting Gantt chart can be of great value in establishing and identifying key milestones where gates should be incorporated, based on the difficulties and the risks ahead. The value of the Stage-Gate process is six-fold:
Not having a formal stage-gate process can result in work being carried out on too many projects including marginal projects. As a result, many of these projects will not deliver significant value in a timely and cost-effective manner while commanding resources that could be more effectively employed elsewhere. However, a formal process can swing the pendulum the other way, cancelling too many projects that don’t meet the precise, current gate criteria. Therefore, it is important in cases where the criteria has not quite been met for the review team to explore the root cause(s) and explore means to achieve these sub-goals in the near term. This could involve extending the timeframe, providing additional resources, doing some additional experiments to clarify the path forward, or exploring an alternate path. In effect, taking a positive approach and be open to providing a second chance. That is not to say that in many cases the outstanding hurdles will be too difficult, take too long or be too expensive such that project cancellation is indeed the correct decision. In fact, projects are unique and risky undertakings and so some failures resulting from a lack of feasibility or changing market conditions can and should be expected. A decision to cancel a project can take place on two levels: the project level and the portfolio level. At the project level, the decision should focus solely on the project and its pre-established criteria. These meetings should be scheduled based on the established gates or in rare cases: extraordinary and material events. As each project develops at its own pace, these meetings will unlikely involve other projects simultaneously. In fact, the best project cancellation decisions arise as a recommendation from the project team who has come across an issue, explored all the options and have concluded that the potential business case or value no longer justifies ongoing efforts. Portfolio decisions to cancel or at least significantly scale back projects are necessary to strategically reallocate scare resources and hence involve all of the projects currently in progress or being planned. Such portfolio decisions should not be taken lightly. As a result, they require a separate meeting, set of procedures, and usually a different and broader group of decision-makers. These meetings are usually held on a scheduled quarterly, semi-annual or annual basis in conjunction with budget reviews. Nevertheless, portfolio decisions also rely on the business case, project plan and the progress against the stage-gates of each project. Cancelling projects, although critical to long-term success, can be taxing on an organization. In order to minimize the adverse effects, it is recommended that four procedures be put in place:
The stage-gate process can be a valuable tool to manage just one or a portfolio of projects. Its primary value is improving awareness and communication which are critical for better decision-making. “Stage-Gate Process” by Duncan Jones, Hexagon Innovating (2016) is licensed under CC BY-NC 4.0
2 Comments
Shauna Narine
11/27/2018 02:36:47 pm
Can you please let me know how I can reference the picture shown on this page related to stage and gate reviews?
Reply
Duncan Jones
12/1/2018 04:34:20 pm
In APA:
Reply
Leave a Reply. |
AuthorDuncan Jones Archives
May 2022
Categories |