Innovation is not for the faint of heart. At times, managing innovation can feel like the myth of Sisyphus, repeatedly pushing a boulder up hill. Particularly when navigating the stage gate process.
Most organizations use some form of stage gate process to manage innovation. New product ideas must pass through a series of stage gates, where they are poked, prodded, and vetted before moving on to the next stage. In theory, this leads to stronger ideas. But in practice, stage gates don’t necessarily result in survival of the fittest ideas; they can lead to survival of the safest.
Stage gates work great at identifying risks. The problem is that bold and meaningfully unique ideas inherently carry risks. The path of least resistance in a stage gate process is to launch an idea that plays it safe. But by definition, ideas that play it safe won’t really make an impact. The world is already full of safe ideas.
As Accenture put it,
“A primary goal of the NPD funnel is to ferret out the best innovations by winnowing them through a series of stage gates that reduce risk. The reality is often very different. Driven by risk aversion and poor risk management capabilities, the process often weeds out big ideas in favor of small ones. Decision-making bodies often send back proposals for additional research and work, creating time-consuming, creativity-numbing rework loops. Anything but agile and iterative, the process can be a slow, linear march that rarely moves the growth needle …
“In many companies, the union of innovation and risk management is formed around an innovation-choking funnel process: a series of stage gates designed to reduce uncertainty as exposure to risk grows. For many companies, the funnels end up producing only weak, incremental ideas.”
Championing innovation means finding a way through, addressing risks without diluting what makes the idea remarkable. We have to remember that in innovation, playing it safe is risky. I’d love to hear your thoughts on navigating the stage gate process.
(Marketoonist Monday: I’m giving away a signed cartoon print. Just share an insightful comment to this week’s post by 5:00 PST on Monday. Thanks!)
Nick says
I think that innovation is one of the hardest parts of business to navigate because it goes against all we have been trained to think through business school: minimize risk, maximize profit. But I think the best case I can make for embracing risk is that failure is an option if you learn from it and use that new knowledge to succeed. Stage gates are great at identifying risks, but how many truly revolutionary ideas make it through the stage gate process? Look at the disruptive innovations of today, nobody could tell in the initial process that they would be successful, but isn’t that the point. High risk, high reward.
Dan Greenberg says
While what you say is true, I believe it does not address the underlying causes. Specifically, consider a major account from a multi-product company. That account is worth 8- or even 9-figures in sales per year. A “new innovation” might make this a little larger or even insure it for years to come, but a failure in front of the customer can make it go to zero. Risk aversion here is not some weak-kneed reaction. Rather, there’s a real financial calculus… the option value of the innovation versus the downside. In a big company, often that calculus makes the innovative idea too risky. This is the Innovator’s Dilemma. Cheerleading that companies should be more innovative does nothing to address the underlying (and rational) cause.
Jim Butt says
The situation is more serious. I would liken it to the next cell in the sequence where “Sadistiphus” allows the boulder to roll over him on its way back down the hill, thereby increasing the professional pain and possibly creating a path for other folks to attempt the same objective at a later date.
John Brooker says
Interesting article! Three points:
1. With regard to the very valid point of the possibility of losing the customer… One way to overcome this is to share the risk and the reward with the customer. One assumes that if the account is worth 8-9 figures that there is a good relationship. Therefore, work with the customer to develop the innovation so that the risk is shared. To develop the innovative relationship you could start with a small step – a small innovation that does not bet the farm.
2. Another factor is that higher risk innovation is likely to take budget away from people sitting on the innovation panel. They might therefore have a vested interest in cutting these innovations out. Perhaps some independent panelists (like independent Board directors) might help?
3. Finally, one small way I have seen to alleviate the problems of stage gating is to have a discretionary budget to seed fund an idea with a lot of potential, to firm it up before a final decision is made. The London Crossrail project in the UK uses this and it has worked.
AK says
Playing devil’s advocate- On the other side, there is got to be a process- someone is got to ask the tough questions and someone is got to make sure the marketer has all his loops tied up. My perspective is that every marketer will always think he has the best/most innovative idea- but too bad, because a company can’t launch them all. Also, yes choosing safest is not the recommended way, but we all know how risk appetite is inversely proportional to the level of authority and therefore the designation.
Don says
Having worked at companies both big and small, I think there are different ways to look and approach this that can create insights as to innovation and stage gating.
The risk versus size of business at stake question brought up is very valid but also can become a deep cultural barrier to innovation in companies. In small companies where there is a sense of “grow or die,” innovation is a must and stage gates can be a forum for finding ways to minimize business risks to the company and the customers rather than not doing the project. The process can be project enhancing rather than simply culling if done this way. It actually gets the minds of management engaged in active problem solving as opposed to judging.
Sometimes we also protect our customers when they also need to have innovation to succeed versus their competition. Making our customers part of the development and innovation process so that they share in the risk can be a messy uncomfortable process, especially because it challenges us to turn over some of the decision making to the customer. The upside is the customer now has emotional skin the game as well and a true partner in trying to make the launch a success.
Connie says
Having read the report, I think they make some valid points. The stage gate process is often looking at innovation through the lens of the current, and sometimes that is just not possible or is deceptive in reporting its results because of assumptions and constraints from existing projects that the innovation is meant to solve.
Where I disagree, however, is that the stage gate process is the devil of all processes. It can work for some companies. I think the best example is the case they quote from Salesforce – it worked for them, but they failed to examine the process as issues became apparent. Had they had a process in place for reviewing themselves on a regular basis, they could have diagnosed the issues and scrapped the stage gate for a system that better fit their needs as the company grew.
I work at a company that does the whole lean six sigma thing. We’re constantly changing and making things better along the way. But we are also clear and upfront about this with our customers, and we’ve also got set times of the year where we review if the changes worked, need tweaking, or need scrapping all together. Those reviews might add to administrative time, but they do ensure that the company doesn’t make a costly mistake and keep making it (our form of risk management).
Jeremy says
The report interesting. For me, the insight is not the process. There are many good innovation processes, stages gages, design methodologies, whatever.
The quality of the output depends on the quality of the observer. The observer is a participant as well. What you perceive, how you perceive something, and why you perceive things the way you do is governed by your assumptions, attitudes and beliefs. Your experiences are by definition yours. They are different from those of others even if you do exactly the same thing in the same way at the same time.
Applied to innovation, the process is nothing compared to the individuals and teams who are on the job, and the decision-makers who sponsor and decide next steps and who decide to persist or not with riskier but more breakthrough innovations . This is the how, why and what of great innovations that make it through.