Managing Technology Development Projects - stage-gate.net/downloads/wp/wp_25.pdf · Managing Technology…
Post on 09-Sep-2018
Embed Size (px)
<ul><li><p>ManagingTechnologyDevelopmentProjects</p><p>ByRobertG.Cooper</p><p> This article was published by IEEE Engineering Management Review, Vol. 35, No. 1, First Quarter 2007, pp 67-76 </p><p>2007StageGateInternational</p><p>StageGate isaregisteredtrademarkofStageGateInc.InnovationPerformanceFrameworkisatrademarkofStageGateInc.</p><p>http://www.stage-gate.com</p></li><li><p>IEEE ENGINEERING MANAGEMENT REVIEW, VOL. 35, NO. 1, FIRST QUARTER 2007 67</p><p>Managing Technology DevelopmentProjects</p><p>Overview</p><p>Technology development projects are the foundation or platform for new products and new processesand thus are vital to the prosperity of the modern corporation. But these basic research or fundamentalknowledge-build projects are often mismanaged because companies employ the wrong process to managethem or apply inappropriate financial criteria for project selection. The result is that technology developmentshave become increasingly rare in the typical companys development portfolio. To better manage suchprojects, leading companies have adopted a unique Stage-Gate process specially tailored to the needs oftechnology development projects. This process consists of three stages and four gates, and feeds the frontend of the typical new product process. Scorecards and the use of tailored success criteria are used to rateand rank these technology projects, while the strategic buckets approach to portfolio management ensuresthat dedicated resources are deployed for these higher-risk projects.</p><p>ROBERT G. COOPER</p><p>RESEARCH TECHNOLOGYMANAGEMENT by ROBERT G. COOPER.Copyright 2006 by INDUSTRIALRESEARCH INSTITUTE INC. Reproducedwith permission of INDUSTRIALRESEARCH INSTITUTE INC. in the formatMagazine via Copyright Clearance Center.</p><p>Key Concepts: Technology development, Stage-Gate, scorecard,portfolio management.</p><p>THE term technologydevelopment refers to a specialclass of development projectswhere the deliverable is newknowledge, new technology,a technical capability, ora technological platform.These projects, which includefundamental research projects,science projects, basic research,and often technology platformprojects, often lead to multiplecommercial projectsnewproduct or new processdevelopment.</p><p>Technology development projectsare a special breed: although theyrepresent a small proportion ofeffort in the typical companysdevelopment portfolio, they arevital to the companys long-termgrowth, prosperity and sometimeseven survival. These projects alsostand out because they are oftenmismanaged or mishandled,resulting in few benefits to thecompany. The chronicles of many,if not most, large corporationsare replete with horrific storiesabout huge technology projectsthat led to nothing after spending</p><p>millions of dollars, or worse yet,were cancelled prematurely, thusforgoing millions in potentialprofits.</p><p>This article outlines provenapproaches to selecting andmanaging such venturesomeprojectsapproaches thatrecognize that traditionalmanagement techniques,such as phase-review,Stage-Gate or PACE withtheir elaborate checklists,scorecards, deliverables lists,and financially-based Go/Killcriteria, are inappropriate forsuch projects (13).</p><p>WHATS SO SPECIAL?Technology development (TD)projects are indeed a verydifferent type of developmentproject. First, they areincreasingly rarethe averagebusinesss R&D portfolio hasshifted dramatically to smaller,shorter-term projects such asproduct updates, modificationsand fixes over the last 15years (4). With the exception</p><p>satherv2007 Copyright</p><p>sathervSGI Website, linked</p><p>http://www.stage-gate.com</p></li><li><p>68 IEEE ENGINEERING MANAGEMENT REVIEW, VOL. 35, NO. 1, FIRST QUARTER 2007</p><p>of a handful of best-practicecompanies, gone are the dayswhen portfolios were repletewith advanced technology,technology breakthroughand true innovationdevelopment projects (5).</p><p>Because these growthengines provide theplatforms for thenext generation ofproducts and processes,companies have tomanage them better!</p><p>This dearth of innovative projectsis in part due to managementspreoccupation with the shortterm and immediate financialresults, which usually precludesundertaking venturesomedevelopment projects (6). Whenresources are tight, managerstake few chancesthey elect thesure bets, which are typicallythe smaller, closer-to-homeprojects. Heres a typicalcomment (7):</p><p>My business has a limitedR&D budget. I cant affordto risk a major percentage ofthat budget on a handful ofbig projects. Ive got to hedgemy bets here, and pick thesmaller and lower risk ones.If I had a larger R&D budget,then I might tackle somemore venturesome projects.</p><p>Senior R&D executive ina $300 million business unitof a major manufacturingconglomerate.</p><p>Additionally, the businesssinability to handle these projectseffectively also contributes to areluctance to undertake moreof them. In short, becausethese projects are mismanaged,the results are often negative,</p><p>which creates a real fear ofever undertaking such a projectagain! Management becomes riskaverse.</p><p>A second factor that makes theseTD projects so special is thatthey are often the foundation orplatform for a new product lineor an entirely new business. Inshort, TD projects are importantto profitability in that theyhelp to de-commoditize thebusinesss product offerings.They are the breakthroughs,disruptive technologies andradical innovations that createthe huge growth opportunitiesand superlative profits (8).</p><p>Exxon Chemicals Metalloceneproject is a classic example.Here, a fundamental researchstudy into a new polymerizationcatalyst yielded some earlyinteresting research results,namely polyolefin materials withunusual technical properties.What started out as a early-stageresearch project in the 1980sultimately resulted in an entirelynew class of polymers withengineering properties and abillion-dollar business for ExxonChemical.</p><p>DONT USE TRADITIONALMETHODS FORNON-TRADITIONAL PROJECTS</p><p>A final reason that TD projectsare so special is that they arefragile. If one applies traditionalmanagement techniques tonon-traditional projects, muchdamage is done. For example,force-fitting a TD project throughyour normal new-productsystem will create considerablefrustration on the part of theproject team, will result inunnecessary or irrelevant work,</p><p>and could even kill an otherwisehigh-profit-potential initiative.</p><p>Exxon Chemical was one ofthe first companies in theUnited States to recognize thatsuch research or technologydevelopment projects requiredspecial treatment, and thatramming them through theirtraditional management processeswould do much harm. Thus, bythe 1990s, Exxon Chemical haddesigned and implemented aspecial methodology based onstage-and-gate techniques tohandle such high-risk technologyprojects (9).</p><p>Much damage is doneby applying traditionalmanagement techniquesto non-traditionalprojects.</p><p>The fact is that traditionalsystems simply do not workfor these special TD projects.Why? Traditional new-productprocesses are designedfor fairly well-defined andpredictable projects; technologydevelopments, however, are bytheir nature high-risk projectswith many unknowns and greattechnical uncertainties. Forexample, early in the life ofsuch projects, the likelihoodof technical success may bequite low, and a probabletechnical solution often cannotbe envisioned. It may takemonths or years of lab work tosee a technical solution and togain confidence in a positivetechnical outcome.</p><p>Similarly, the traditionalnew-product process requiresa full business case andfinancial analysis before heavycommitments are made. But ina TD project, the commercialprospects for the new technology</p><p>satherv2007 Copyright</p><p>sathervSGI Website, linked</p><p>http://www.stage-gate.com</p></li><li><p>MANAGING TECHNOLOGY DEVELOPMENT PROJECTS 69</p><p>are often unclear, especially nearthe beginning of the project whenthese commitment decisions arerequired.</p><p>In the Exxon Chemical Metalloceneproject, for example, whenexperimental work first began,it wasnt clear whether thiswould lead to a new plastic, orperhaps a new fuel additiveallthe researchers had in the earlydays was some gummy stuffwith interesting properties: theprecise direction of the projectwould not become clear until theresearchers had done more workat considerable expense. This isnot exactly the reassurance thata short-term, financially-drivenexecutive wants to hear!</p><p>Many of the activities requiredof most companies new-productprocesses simply dont fitthe TD project. Review anycompanys new-product processand invariably there is alist of required tasks suchas undertake a competitiveanalysis, do voice of customerwork and define the productbenefits to the user. Thatsfine when one knows whatthe market and product are.But how does one undertakesuch mandatory activities whenthe market is unknown andthe product not even defined?Moreover, most companies newproduct processes require a listof deliverables at the completionof each stage, deliverablessuch as a business case or acommercialization plan. Again,these are relatively meaninglessconcepts when the product andmarket have not yet been defined.As one frustrated project leaderput it:</p><p>How can I be expected todo a market analysis whenI havent even defined theproduct, let alone the market</p><p>yet. Im not even sure whatthis technology is capable of interms of delivering improvedtechnical performance.</p><p>Finally, the Go/Kill criteriaused to rate and prioritizedevelopment projects asfound in most companysstage-and-gate developmentprocesses again assume projectsthat are fairly well-defined. Forexample, an Industrial ResearchInstitute study revealed that78 percent of businesses relyheavily on financial criteria toselect projects: criteria such asprojected annual profits, NPV (netpresent value) and expected sales(10). When qualitative criteriaare employed, according to thesame study, the most popularare leveraging core competencies(for example, the projects fit withthe plant, and fit with the firmsbase technology), the expectedpayoff, and the perceived risklevel. These quantitative andqualitative criteria are fine for themajority of development projects,but not so good for technologydevelopments. A seasoned R&Dexecutive in a major corporationsummarized the situation thisway:</p><p>Using traditional Go/KillcriteriaNPV. KOI (return oninvestment) and the likewillalmost guarantee that newtechnology projects are killedin our company simplybecause of the unknowns,uncertainties, risks andthe step-out nature of suchprojects. Our selection rulesare very risk averse andgeared towards short-termprojects.</p><p>USE A PROCESS DESIGNED FORTD PROJECTS</p><p>For some years, leading productdevelopers have relied on</p><p>idea-to-launch processes,such as Stage-Gate, to drivenew-product projects to market(11). The conclusion at aconference of the ProductDevelopment ManagementAssociation (PDMA) that focusedon technology developmentsand fuzzy front-end projectswas that many companieshave dramatically improveddevelopment cycle time andefficiency by implementing formalStage-Gate systems but thatthe front end remained a mystery(12). The consensus is that sometype of rigorous stage-and-gateprocess is desirable for TDprojects, but the process must becustom designed for these typesof projects (13).</p><p>Some type of rigorousstage-and-gate processis desirable but it mustbe custom-designed.</p><p>Figure 1 illustrates a typicalTD process, which has beenadopted in leading companiesthat undertake fundamentalresearch projects; it consists ofthree stages and four gates (14).</p><p> The stages are shown asboxes in Figure 1. Eachstage consists of a set ofbest-practice activities to beundertaken by the projectteam. These activities aredesigned to acquire vitalinformation and therebyreduce the unknowns andhence the risk of the projectfrom stage to stage. Theoutcome of each stage is aspecified set of deliverables.</p><p> The gates, designated bydiamonds, are the Go/Killdecision points. Here,management meets withthe project team to decidewhether the project meritsadditional funding and</p><p>satherv2007 Copyright</p><p>sathervSGI Website, linked</p><p>http://www.stage-gate.comhttp://www.stage-gate.com/resources_stage-gate.php</p></li><li><p>70 IEEE ENGINEERING MANAGEMENT REVIEW, VOL. 35, NO. 1, FIRST QUARTER 2007</p><p>resources to move to the nextstage. If Go, resources arecommitted at the gate andthe project and team moveforward.</p><p>Here is a quick walk through thetypical TD process (see Figures 1and 2):Discovery.The trigger for theprocess is the first stage, involvingdiscovery or idea generation.Quality ideas are essential to asuccessful technology programand thus technology ideas frommultiple sources must be soughtfor consideration at Gate 1. Whileidea generation is often done byscientists or technical people, itcan also be the result of otheractivities, such as:</p><p> A strategic planning exercise,where strategic arenas areidentified, and possibleTD research directions aremapped.</p><p> Technology forecasting andtechnology roadmapping.</p><p> Brainstorming or groupcreativity sessions focusingon what might be.</p><p> Scenario generationabout future market andtechnological possibilities.</p><p> Customer visitation programsand voice-of-customerinitiatives.</p><p> Active idea solicitationcampaigns within theorganization.</p><p>Gate 1 Idea ScreenThis firstgate is the idea screen, the initial</p><p>decision to commit a limitedamount of time and money tothe research project. This gateshould be a gentle screen, whichposes the question: Does theidea merit expending any effortat all? Criteria for Go are largelyqualitative, are scored at the gatereview by the gatekeepers, andshould include such items as:</p><p> Strategic fit and impact. Strategic leverage. Likelihood of technical</p><p>success. Likelihood of commercial</p><p>success. Reward or the size of the</p><p>prize if successful.The Gate 1 gatekeeper ordecision-making group istypically composed of senior R&D</p><p>Figure 1. The technology development Stage-Gate process is specially designed for TD projectsthree stages andfour gates up to an Applications Path Gate.</p><p>Discovery</p><p>Decision:Go to</p><p>TechnicalAssessment</p><p>InitialScreen</p><p>Decision:Go to</p><p>DetailedInvestigation</p><p>Decision:Applications</p><p>Path</p><p>To NPD Process</p><p>To ProcessDevelopment</p><p>To JV, LicensingDetailed</p><p>InvestigationTechnical</p><p>Assessment</p><p>ProjectScoping</p><p>Gate1</p><p>Stage1</p><p>Gate2</p><p>Stage2</p><p>Gate3</p><p>Stage3</p><p>Gate4</p><p>Figure 2. The TD project moves from the Scoping Stagea relatively simple stagethrough to the DetailedInvestigation Stage, which can entail person-years of experimental work.</p><p>ProjectScoping</p><p>Gate1</p><p>Stage1</p><p>Gate2</p><p>Stage2</p><p>Gate3</p><p>Stage3</p><p>ApplicationsPath Gate</p><p>Gate4</p><p>Discovery</p><p>TechnicalAssessment</p><p>DetailedInvestigation</p><p> Lays out the foundation for the project Defines the scope of the project Maps out the forward plan Several weeks</p><p> Demonstrates the lab or technical feasibility under ideal conditions Initial or preliminary experimental work 3-4 months</p><p> Implements full experimental plan Technology feasibility is proven Scope of technology and value to company is defined Plan developed for the utilization of results Potentially years of work</p><p>To OtherProcess</p><p>(e.g. NPP)</p><p>satherv2007 Copyright</p><p>sathervSGI Website, linked</p><p>http://www.stage-gate.com</p></li><li><p>MANAGING TECHNOLOGY DEVELOPMENT PROJECTS 71</p><p>people, such as the corp...</p></li></ul>
View more >
MIS 5302 Spring 2017 – Managing Technology & ?· MIS 5302 Spring 2017 – Managing Technology & Systems.…
Providing and Managing Technology Training Providing & Managing Technology Training Susan McKibben The University of Akron.
MANAGING INFORMATION TECHNOLOGY BASE VILLAGE ... Managing information... · 2015 on managing village-owned…