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Beyond “Stage-Gate:” Faster and More Profitable New Business Development

Beyond “Stage-Gate:” Faster and More Profitable New Business Development. ECMRA New Contenders, New Approaches Greg Stevens, President, WinOvations SM , Inc . October 9-11, 2000 London. Outline. State of the Art: “Stage-Gate” Processes

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Beyond “Stage-Gate:” Faster and More Profitable New Business Development

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  1. Beyond “Stage-Gate:”Faster and More Profitable New Business Development ECMRA New Contenders, New Approaches Greg Stevens, President, WinOvationsSM, Inc. October 9-11, 2000 London

  2. Outline • State of the Art: “Stage-Gate” Processes • Killer Myths Inhibiting the Fuzzy Front End (F.F.E.) of New Business Development (NBD) • Debunking Myths & Achieving Six Sigma Improvements in New Business Development • In Speed & Profitability • Specific Applications

  3. A. Stage-Gate® Systems Are “State of the Art” for New Business Development • Today’s NBD Processes First Published Broadly in 1957-58* • SC Johnson, Booz-Allen • Little New Today • Widely Adopted in Last 20 Years • By 60% of Firms • Per PDMA “Best Practices” Study • “Stage Gate ®”: Trademark of Robert G. Cooper

  4. B. Several Myths Inhibiting New Business Development (NBD) Today • Many Grains of Truth • In Current NBD Paradigm • And Much Confusion • “Get the Assumptions Wrong, and Everything that Flows from Them Is Wrong.” • Peter F. Drucker, “Management’s New Paradigms” Forbes, Oct. 5, 1998, pp. 152-177

  5. Problem: “NBD” (& Other) Experts Are Often Wrong • WSJ Survey of Expert Economists Forecasting 30-Year Treasury Interest Rates (WSJ: 1/4/99): • Got the Direction of the Changes Right Only 28% of the time • 9 of 32 Forecasts: 1982-1999 • When Experts Said Rates Would Rise, 72% of the Time They Fell • 30 Technology Companies Highly Recommended in 1968Lost an Average of 98.3% Valuein 3 Years* • Same Happening Today for “Dot Com’s:” • Bankrupt: • Boo.com; SurfBuzz.com; Red Rocket; Epidemic Marketing.com *Devoe, Raymond F., The Devoe Report, “More Bugs on the Windshield of Financial Life (Past Visits To the Elephant’s Graveyard), Vol. 21, #2, Jan 15, 1999.

  6. Myth #1: Stage-Gate Processes Work (Better than Nothing)! • Reality: No Correlation Between Companies with Stage-Gate or other NPD Processes and Commercial Success* • Per Latest IRI/CIMS R&D Database Study: • *Research•Technology Management, Roger L. Whiteley, Alden S. Bean and M. Jean Russo. July-August, 1998, 15-16. • & Even Per R.G. Cooper’s Own Research** • Stage-Gate®: Trademark of Robert G. Cooper • **J. Prod. Innov. Manag. 1999; 16: 115-133

  7. Doing ActivitiesWell in the F.F.E. of NBD Correlates with Success, But Having a Stage-Gate Process Does Not • Stage-Gate Process “Success Factor Studies” Are Like Saying: If You Score a Lot of Points, This Correlates with Winning. • But Installing a Stage-Gate System Does Not Ensure that the F.F.E.-NBD Activities Are Done Any Better than Before: • Most of the Stage-Gate Activities Were Already Being Done Before, Just Less Formally • Even After Installation, Most Firms Do Not Rigorously Use the Process (So In Reality there Is Little Change) • & The People Doing & Managing the Activities Are All the Same • Yet the Players Make an Enormous Difference, both in Sports and NBD • Little Change Brings Little Benefit

  8. Reality: Stage-Gate Processes Little Changed Since 1950’s in Either Processes or Results • Reality: No Measurable Improvements in 40 Years! • In Spite of All the “Changes” & “Best Thinking” • Indicating Few Substantive Changes • & Same Globally: Americas, Europe, Asia • 60% Success from Launch* • Same Globally: Americas, Europe, Asia • Per Robert Cooper (3/99 JPIM), & Many Other Studies • 11% Success from Early Development Stage • One in Nine Success Rates *Cooper et al, J. Prod. Innov. Manag. 1999; 16: 115-133

  9. Like the Fable ofThe Emperor’s Clothes • No Better Off With, or Without Them • Also Like Medicine in the 1800’s: • When Patients Staying Home Got Well Just as Often as Those Visiting a Doctor • And Witch Doctors • “If a Factory Produced Such Low Quality, it Would be Shut Down.” • Cooper et al, J. Prod. Innov. Manag. 1999; 16: 115-133

  10. “Insanity Is Doing the Same Thing Over and Over and Expecting Different Results.” • Benjamin Franklin • (40 Years with No Improvement Would Probably Qualify for the “Over and Over” Part)

  11. Myth #2: “Most NBD Efforts Do Succeed!”Title of Article, by Robert G. Cooper* • Reality: Most NBD Efforts Fail • 89% Fail from Early Development Stage • Many Examples • Iridium Satellite Phones • Poor F.F.E. NBD Activity • Now Bankrupt • F.F.E. of NBD Is the Most Difficult of All Business Activities** *R.G. Cooper et al, Research Management, Vol. 26: 20-25, Nov.-Dec. 1983 **G. Stevens et al, “Creativity + Business Discipline = Higher Profits Faster from NPD,” J. Prod. Innov. Management, Vol 16: 455-468, 9/99

  12. Universal Industrial Success Curve Shows Most NBD Efforts Unsuccessful* 10,000 3000 Raw Ideas (Unwritten) 60% Success Rate from Launch Unchanged in 40 Yrs. In Spite of All the “Improvements”* ** 1000 300 Ideas Submitted 100 Number of Ideas 125 Small Projects 9 Early Stage Devel. 10 4 Major Devel. 1.7 Launches 1 Success 1 *Reference: G. Stevens and J. Burley, “3000 Raw Ideas = 1 Commercial Success!” Research•Technology Management, 40(3): 16-27, May-June, 1997. Runner-Up, IRI “Best Paper of the Year.” 1 2 3 4 5 6 7 Stage of NBD Process ** Hultink, Erik Jan; Susan Hart, Henry S.J. Robben and Abbie Griffin. Launching new products in consumer and industrial markets: a multi-country empirical international comparison. Product Development and Management Association Research Conference Proceedings, October, 1997, 93-126

  13. Myth #3: Failures Are Good! • Myth: “If You Are Not Failing Enough, You Aren’t Trying Hard Enough” • Like Saying “Bad Quality is Good!” • Reality: • “There Is a Quality Crisis in Product Innovation” • R.G. Cooper: *J. Prod. Innov. Manag. 1999; 16: 115-133 • Because Most New Business Efforts Do Fail Today, We Desperately Search for Excuses! • What We Really Need: • More Successful Systems; Higher Quality Results, & Profits

  14. Profiting From Failures Can Happen (the Grain of Truth), But Mostly Failures Are Routine & Devastatingly Wasteful • Average Life of Fortune 500 Co’s is 40 Years • One Major Chemical Co.: • ‘82-’92: Spent $13 Billion “With No Contribution to Bottom Line” per CEO • ‘60’s-’70’s: Spent $16 Billion on R&D, “Technological Black Hole” per Wall St. Journal • While Doing “Everything Right” per Today’s Standard Practices • Frightening • Massive Layoffs: Over 30%

  15. 1 2 3 4 5 6 7 Myth #4: NBD Processes Work Linearly • Mythic Linear View of Traditional “Stage-Gate®” NBD Processes: Idea >> Stages >> Launch • Myth #5: “Our Stage-Gate Is Unique” • Reality: 5-7 Stages in Most Stage-Gate Processes • Reality: Most Companies Just Reinventing Cooper’s (or 1958 S.C. Johnson) Linear “Stage Gate” Models, & Spending Millions Doing It. *Trade Name of R.G. Cooper & Associates

  16. Reality: NBD Is Non-Linear in Early Stages.Requires Leaps of Creativity, “Morphing,” To Identify Winners 2 3 4 1 2 3 4 5 6 7 2 3 4 Non-Linear F.F.E. Linear Stages & Gates Still Exist but Real View of NBD Process Is Non-Linear, Especially in Fuzzy Front End (F.F.E.)

  17. Myth #6:Everyone Is Creative! Or Can Be Taught to Be Creative Fa La! • Therefore Everyone Can Create New Products in the “Fuzzy Front End” of NBD • Just Read the Manual, Follow the Steps

  18. Myth #6 Restated: “The Environment (Nurture) Largely Determines Personality” • 67% of Americans Believe Can Readily Change Personalities* • Popular belief, & “Politically Correct” • Standard Psychology Texts of 1970’s & ’80’s: Taught Individual Personality Was Determined Largely by Environment, or Nurture: • Said: “If Identical Twins Raised Apart Could Be Studied, Their Personalities Would Be “Enormously Different**’’ *Roper Reports, 1993, 93-8 (November), Roper Starch Worldwide Inc., NY, NY **Introduction to Personality, Walter Mischel, Holt Reinhart and Winston, 1976, 2rd Ed., p. 290-291

  19. Reality: ~80% of Core Unchanging Adult Personality & Creativity Determined by Genetics • Stable Core Adult PersoNality • Overall Personality

  20. Data for New Genetic Paradigm of Creativity:2 Key Experiments Addressing Effectsof Nature and Nurture on Personality: 1. Study of Personality of Identical Twins Raised Apart • Same Genetics, Different Environments • Separated at 3 Months • Key Review Article: 1990 Science:* 2. Study of Adoptees • Different Genetics, Similar Environments • The “Reverse Experiment” of Twins Raised Apart *Thomas J. Bouchard, Jr., David T. Lykken, Matthew McGue, Nancy L. Segal, Auke Tellegen.. Sources of Human Psychological Differences: The Minnesota Study of Twins Reared Apart. Science. 1990. 12 October. 250. 223-228.

  21. Reality: Identical Twins, Raised Apart Have Very Similar Personalities

  22. Reality: Identical Twins Raised Apart Are As Alike As Those Raised Together • Both Fire Chiefs • Both Bachelors • Both Flirts • Both Raucous • “We kept making the same remarks at the same time, and using the same gestures. It was spooky.” • Suggests Zero Contribution from Childhood Environment

  23. EEG Brainwaves of Identical Twins Raised Apart Show 95% Correlations *Similarity Due toGenetics, AsShare No Common Nurture After Separation Identical Twins Raised Apart Non-Identical Twins Raised Together 95% Correlation *“How Individual Are Human Brainwave Patterns?” by H.H. Stassen, Psychiatric University Hospital Research Department, Zurich, Switzerland, 1992 p. 75 & 83.

  24. Correlations Between Any Environmental Factors During Upbringing, and Adult Personalities Are Totally Lacking: Zero • True For Adopted Identical Twins Raised Apart • & For Adoptees in Same Household Environment • “Reverse Experiment” of Identical Twins Raised Apart: No Genetic Similarity, But Same Environment During Childhood. *Thomas J. Bouchard, Jr., David T. Lykken, Matthew McGue, Nancy L. Segal, Auke Tellegen.. Sources of Human Psychological Differences: The Minnesota Study of Twins Reared Apart. Science. 1990. 12 October. 250. 223-228.

  25. New Data Is Remarkably Consistent Supporting Strong Genetic Basis for Personality & Creativity

  26. Re-emerging “New” Paradigm: “Genetics Is the Most Powerful Determinant of Most Psychological Traits*” • “New” Since Plato, Christ, Buddha, Schumpeter, Maslow... • “This Sudden Switch...From a Belief in Nurture, in the Form of Social Conditioning, to Nature, in the Form of Genetics and Brain Physiology Is the Great Intellectual Event ... of the Late 20th Century.”“The Fix Is in! We’re All Hard Wired.” • Tom Wolfe, Author, Forbes ASAP, December 2, 1996, p. 218 *Bouchard, Jr. Thomas J., “Twins and Type,”Presentation at the Association for Psychological Type, 10th Biennial International Conference, July 6-11, 1993, Long Beach, CA

  27. Myth #7: That Personality & Creativity Can Be Lastingly Taught • Reality: It Is More Productive to Teach Business Discipline to Creative Types Than to “Teach” Creativity (Largely Genetic)

  28. So: Is Everyone Creative?Reality: Only In the Sense that Everyone Is Tall • We Are All “Tall...” • And Can All Be Taught to Jump a Little Higher... • But... Only a Few Can Play in the World-Class NBA Willy & Wilt: Differently Gifted

  29. C. Achieving Six Sigma Improvementsin Speed & ProfitabilityBy Incorporating Latest Thinking into the F.F.E. of NBD

  30. Could Personality Traits ofIndividual Analysts Involved in the Early Stages 1-4, or “Fuzzy Front End (F.F.E.) of NBD Affect Profits When Later Commercialized?

  31. Population Studied by WinOvationsSM: • From a Fortune 500 Chemical Co. • Dow Chemical • 69 F.F.E.-NBD Analysts & Projects Profiled • >95% of Analysts & Projects Measured • 267 Staged Projects Spanning 10 Years • 1984-1994: Gave Time to Measure Profits • In Europe and North America • In Effect a 10 Year, $20 Million Experiment

  32. Consistent Process Used by All F.F.E.-NBD Analysts Evaluated • Evolved from Planned Innovation Opportunity Analysis • Bacon & Butler, 1982 • Testing Critical NBD Hypotheses, or “Draft Propositions:” • Need • Value • Opening • Advantage • Fit • Rigorous Training & Coaching Through 1-2 Projects • Staged Analyses, Periodic Management Review “Gates”

  33. HOW IS THE FUNCTION DONE? End of Individual’s F.F.E. Analysis “Fuzzy Front End” (F.F.E.) of NBD Process: `` Profits WHAT IS THE VALUE OF MEETING UNMET NEEDS? Winning Actions Unspoken Needs New Ideas Winning Tactics WHAT ARE THE SYSTEM COSTS?` Gap-Analysis WHAT ARE THE SPOKEN UNMET NEEDS? Ideas Prioritized Draft Propositions Idea Management 2. Success-Wheel Gut-Level-Screen Gut-Level-Screen Stages: Ideation Shaping Analysis Validation Develop & Implement Individual Analyst Predominates Teams Predominate

  34. Personality of Analysts in the F.F.E. of NBD Was Measured Using MBTI® Instrument & Correlated with Profits • Two MBTI Personality Measurements Correlated With NBD Profits Earned After Project Was Later Developed & Commercialized by the Business: • “N” for Intuition(Vs. “S” for Sensory) • “T” for Thinking(Vs. “F” for Feeling) • No Benefit from Including Other Two Personality Measurements: • E/I (Extroversion – Introversion), or • J/P (Judging – Perceiving)

  35. Top 1/3 (23 Analysts)= 70.4 102 Max -78 Min. Top 1/3 (23 Analysts)= 70.4 Middle 1/3 (23 Analysts)= 27.8 Bottom 1/3 (23 Analysts)= -14.7 Result:Rainmaker-IndexSM* (Based on MBTI®) Mean Rainmaker-Index Scores of F.F.E.-NBD Analyst Groups • An 85 Point Increase in the Rainmaker-Index Correlates with $8.7 Million Additional Profits Earned Per Analyst* • Corresponds to the Difference Between the Mean Scores of the Top Third and Bottom Third of the Rainmaker-Index • Rainmaker-Index Also Correlates with MBTI Creativity Index: Rainmakers are Highly Creative* *See References: #2 & #6 by WinOvations, At End of Presentation. Selected as “Outstanding Research Paper” from October, 1997 PDMA Research Conference Rainmaker-Index: Service Mark, WinOvations, Inc.

  36. RainmakerSMIndex:Correlates Strongly With Later NBD Profits (Even Better Than MBTI®-CI) Profit per Analyst, $ Millions Times More Effective, Top Vs. Bottom Third Personality Index Bottom Third Middle Third Top Third N = 23 Analysts N = 23 Analysts N = 23 Analysts Rainmaker Index $8.23 95 X $0.09 $0.93 Rainmakers! MBTI-CI Index 11 X $0.65 $1.37 $7.37

  37. All Personality Types Needed in Business Development • “Rainmakers” (With Business Discipline) Needed • Having Business Discipline Training & Coaching • Starters: For the “Fuzzy Front End” of New Business Development • Many Other Types Also Needed • Finishers: For Later Stages of New Business Development and Implementation • In Fact: Need More of Other Types than Rainmakers • Because Later Development Stages Take Far More Effort

  38. Analysts’ Recommendations After Detailed Analyses StageConsistently Profitable When Later Developed & Commercialized • 97% of Positive Recommendations from F.F.E. of NBD Process Later Commercialized Were Profitable • Vs. 11% Typically from Stage 4 of 7 Stages on Success Curve • More Than a Six Standard Deviation Improvement Vs. Benchmark “Universal Success Curve” for NBD

  39. Getting the Right Answer Consistently Provides Profits/Unit Effort Nine Times Faster Vs. Benchmark $$ Profits 97% of Time, >SixSigma Improvement 1 Effort withBest Practices Profits 11% of Time 1 2 3 4 5 6 7 8 9 9 Efforts Needed with Typical NBD Systems Negative, Discouraging Outcomes: Helps Explain Why Typical Staged-Gate Systems Are Underutilized

  40. Pick the One in 10 that Wins? Done That • More Exciting: Achieve Success With Almost All Early-Stage NBD Projects By “Morphing” Them • Done That Too

  41. The New NBD System Provides More Than a Six-SigmaImprovement Vs. The “Universal” NBD Success Curve 10,000 95% Success Rates From Stage 4 Are Achieved vs. the Benchmark for Traditional Stage-Gate Processes of 11% (1 in 9). This Represents More than a Six Sigma Improvement. 3000 Raw Ideas (Unwritten) 1,000 300 Ideas Submitted Number of Ideas 100 125 Small Projects Benchmark Benchmark From Here From Here 9 Early Stage Developments 10 4 Major Developments 6s 6s WinOvations WinOvations 1.7 Launches 1 Success 1 To Here To Here 1 2 3 4 5 6 7 Stage of NBD Process Ref: Stevens & Burley, May-June 1997, Research•Technology Management Ref: Stevens & Burley, May-June 1997, Research•Technology Management

  42. Dramatically Increases the Probability of Success by Selecting Inherently Creative People When Needed • As in Fuzzy Front End of New Business Development (F.F.E. of NBD) • Creativity Needed Because Starting Ideas Are Rarely Commercial, & Must Be Morphed • Key: Train & Coach Creative Types in Business Discipline – Described Next • “Leash Your CreativitySM”

  43. Process Step 1: Determine Top Management’s Gut-Level-ScreenSM • “Group” Zone of Agreement & Excitement • Their Gut-Level-Screen Manager 1 Manager 3 Manager 2

  44. Step 2: Prioritize Platforms, Groups & Projects Vs. Gut-Level-Screen Platform A Platform B Platform C Use Success-Wheel on These Projects First, & Leverage Findings Across Entire Group Group 1 Group 2 Group 3 Functional Groupings Project 1 Project 2 Project 3 Project 4 Project 5 Project 6 Project 7 to Project “n” Project 1 Project 2 Project 3 Project 4 Project 5 Project 6 Project 7 to Project “n” Project 1 Project 2 Project 3 Project 4 Project 5 Project 6 Project 7 to Project “n” Specific New Product Level Ideas

  45. Steps 3-4: Success-WheelProject Analysis Forms and Tests Draft Propositions That Must be Proved A. Internally Tested Propositions: • Fit Vs. Gut-Level-Screen & • Sustainable Competitive Advantage B. Marketplace Tested Propositions • Customer Visits: How Done, Spoken Needs, Costs, Value C. Iterative-PropositionsSM: • Unspoken Needs, New Ideas, Winning Way in World • When Know How to Win, It’s Time for Commercial Development

  46. Wins! $ Per Unit Performance Best Global Approaches Final F.F.E.-NBD Analysis Step: Cost Per Unit PerformanceIn The Customer’s Eyes Is Key ($/Part, or $/Ft. Bonded: Not $/Lb. Sold) • In This Example, the Highest Cost Per Pound Raw Material Still Wins Vs. The Best Global Competitors • Vs. Today’s Processes... And More Importantly Tomorrow’s • Then Go!! Activate Teams, Develop & Commercialize

  47. D. Applications of New System at Honeywell (AlliedSignal): • The new approach “combines creativity with a high degree of business discipline. … we ended up with winning business plans that fully identified over $100 million per year in new sales potential.… with the likelihood of developing into several hundred million dollars per year businesses.” • “As a result of their work…we know the costs of the best competitors in the world, and how to beat them, by better meeting customers’ spoken and unspoken needs.”

  48. Application of New Approach at Dow Chemical, in (Insite®) Metallocene Polymer Catalysis: • Helps Identify “Starters” and “Finishers” • Key Personnel Issue • Has Resulted In Over 3 Billion Pounds of New Polymer Capacity, Much in New Areas • Projected in 1991, and Now Come True • & It’s Just the Beginning

  49. Myth #8: “We’re AlreadyDoingSomethingPrettyMuchLikeThis” • With Due Respect, Saying the Traditional Staged-Gate Approach and the New Approach Are Alike… “Is Like Saying Veterinarians And Taxidermists Are In the Same Business, Because Either Way You Get Your Dog Back.” Sen. Joe Lieberman, Wall St. Journal, 8/22/00, p.1.

  50. Reality: Most NBD Systems Need Dramatic Improvement • You Know Your NBD System Is Really Working IF: • 95% of NBD Efforts Succeed After Early Development • Vs. 11% Per Universal Success Curve • Your Company Greatly Exceeds Your Industry In: • Corporate Growth Rates, Profitability & Consistency • Stock Appreciation & Book Value • You & Most of Your Co-Workers Are Heavily Invested In Your Company. New Employees Want to Work There, With Options • Economist, Forbes,Fortune, or BW: • Picks Your Company as a Gem in that Industry

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