Applying the Stage Gate Process to Sterling Brands’ Clients

Applying the Stage Gate Process to Sterling Brands’ Clients

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Contents

the value of Stage Gate for Sterling Brands

the Stage Gate process

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What is Stage Gate and why is it valuable to Sterling Brands?

Stage Gate is a process designed to help companies successfully develop new products and services

it’s about doing “the right projects right”

it’s about mitigating risk

it’s about making tough decisions

it’s about becoming more rigorous in our approach to new product development

ultimately, it’s about helping our clients product great products that sell

on average,

33%of a company’s sales come from

new products

source: Winning at New Products; Robert Cooper

Understanding Stage Gate is relevant for a number of reasons

Everyone in the organization produces products or services

Increasing client requests for innovation projects

Would help Sterling brand strategists better understand the client side

Has the potential to extend duration of project… and secure additional fees

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What are the main pitfalls to creating successful new products and services?

PREPARATION

Lack of a strong market orientation

Not enough upfront homework

PROCESS

Moving too quickly

No focus, too many projects

The lack of a systematic new product process with discipline

PRODUCT

Poor quality of execution

A lack of product value for the customer

in product failures,

74%reported the

detailed market study was

“poorly done” or not done at all! 16%

of companies cite product problems or defects as the

main cause of failure

lack of external understanding is one of the major needs for improvement >>> this bodes well for Sterling Brands

source: Winning at New Products; Robert Cooper

source: Winning at New Products; Robert Cooper

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What does success look like?

There are 15 critical success factors in new product development

1. Unique superior product

2. Strong market orientation

3. International opportunities

4. Predevelopment homework

5. Sharp and early product definition

6. Properly executed launch

7. Right organizational structure

8. Support from top management

9. Leveraging core competencies

10.Market attractiveness

11.Tough go/kill decisions are made

12.Quality execution

13.Resources are available

14.Speed - but not at the expense of execution

15.Multistage, disciplined process like Stage Gate

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50

60

70

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Poor SuperbUp-Front

Market Share

Success Rate

0102030405060708090

100

Me-too TrulySuperior

Market Share

Success Rate

> make it superior > do your homework

moderate moderate

source: Winning at New Products; Robert Coopersource: Winning at New Products; Robert Cooper

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it’s critical to understand the relationship between stages and gates

The Stage Gate process is simply a series of STAGES and GATES

to assure the proper work is done, deliverables created

includes parallel activities performed by cross-functional team

each stage costs more than the proceeding stage

STAGE GATE

to evaluate the work done in each stage and make go/kill decisions

information is brought together - senior management always involved

consists of 1) deliverable 2) criteria 3) outputs

“People fall in love with their own ideas.”“Someone will always hate your decisions.”

David Goldsmith, MetaMatrix Consulting Group

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The Stage Gate process

>>> We are going to use the current Liquor Innovation project to illustrate the value of Stage Gate:

To “age-down” its brand, a leading liquor brand is looking to create a new product aimed at men/women ages 25-34

stage 1

Scoping

gate 2 stage 2

Build Business Case

gate 3 stage 3

Development

gate 4 stage 4

Testing & Validation

gate 5 stage 5

gate 1

LAUNCH

post launch review

historical Sterling Brands stop point

the opportunity

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project charter specifics

Scope USA is the lead market Initial on-premise distribution (bars, restaurants, clubs) No immediate plans to roll out Globally until proven in North America

AssumptionsPackaging -

Aspirational to the target consumer with cues based on Brand DNA Explore premium bottle/decorations – acid etch, silk screen, metallic inks

Liquid development – Based from Coffee, but distinctive from Base Brand Evaluate higher proof – up to 40% abv

Cost/ Retail Pricing Target retail 750mL pricing at $19.99 Margin will be slimmer than Base Brand

>>> Ship March 2008

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It all starts with DISCOVERY

The goal is to “increase the mouth”

From top-down, bottom-up, or ideally, both

1. First, determine potential platforms

ex: energy, all natural, experiential

2. Techniques for discovery

Look for changes in the alcohol industry

Create best/worst case alternate scenarios

Use voice-of-the-customer research interviews at bars, in liquor stores, focus groups with drinkers (client brand vs. competitors) speak with bartenders to gain different perspective on what customers want

Work with lead or innovative consumers develop a diverse and ongoing panel of outsiders to act as a sounding board

Attend trade shows, read trade publications, consumer magazines

3. Create an idea bank

Accessible to the entire organization

stage 1

Scoping

gate 2 stage 2

Build Business Case

gate 3 stage 3

Development

gate 4 stage 4

Testing & Validation

gate 5 stage 5

Launch

gate 1

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GATE 1: IDEA SCREEN - decision to commit to the project

Deliverables

a series of fresh product ideas inspired by real consumers and industry trends

Criteria

Does the product “fit with the brand”?

Does the product fit with our strategic direction?

Does it meet our environmental standards?

Is the idea unique? Differentiated? “Ownable”?

Is it relevant to the consumer?

Does it appear to have a sizeable market opportunity?

Is it technically feasible? Does it leverage our production resources?

Outputs

Go/Kill decision - tentative commitment to project

Agreed to key initial criteria that will be used to assess options throughout the process

stage 1

Scoping

gate 2 stage 2

Build Business Case

gate 3 stage 3

Development

gate 4 stage 4

Testing & Validation

gate 5 stage 5

Launch

gate 1

gatekeepers

director of innovation

brand manager

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stage 1

Scoping

gate 2 stage 2

Build Business Case

gate 3 stage 3

Development

gate 4 stage 4

Testing & Validation

gate 5 stage 5

Launch

gate 1

STAGE 1: SCOPING - understanding the merits GATE 2: SECOND SCREEN - evaluate scoping documents

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stage 1

Scoping

gate 2 stage 2

Build Business Case

gate 3 stage 3

Development

gate 4 stage 4

Testing & Validation

gate 5 stage 5

Launch

gate 1

STAGE 1: SCOPING - understanding the merits

Preliminary market assessment

internet search, focus groups, quick concept testing

identify points of differentiation and superiority

Preliminary technical assessment

feasibility

timing and cost: identify suppliers

technical, legal, and regulatory risks

Results:

An understanding of the magnitude of opportunity and a technical assessment

GATE 2: SECOND SCREEN - evaluate scoping documents

Deliverables

documents from the scoping stage: market opportunity, technical assessment

Criteria

Is the market opportunity large enough?

Can we produce this drink?

What are the margins? What is the payback period?

What are the implications for sales? Marketing? Legal?

What time is required? What existing / new capabilities would be needed?

Outputs

Go/Kill decision - if granted, begin moving into heavier spending stages

Potential for up to 3 product ideas to be prototyped

gatekeepers

sales, legal, director of marketing, finance

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stage 1

Scoping

gate 2 stage 2

Build Business Case

stage 3

Development

gate 4 stage 4

Testing & Validation

gate 5 stage 5

Launch

gate 1

STAGE 2: BUILDING THE BUSINESS CASE GATE 3: GO TO DEVELOPMENT

historical Sterling Brands

stop point

gate 3

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stage 1

Scoping

gate 2 stage 2

Build Business Case

stage 3

Development

gate 4 stage 4

Testing & Validation

gate 5 stage 5

Launch

gate 1

STAGE 2: BUILDING THE BUSINESS CASE - doing the critical homework

1. Defining the product offering

target market definition

product benefits, features and value proposition

desired product features attributes, requirements and specifications

2. Competitive analysis

3. Technical appraisal

4. More detailed business and financial analysis

5. Preliminary operations and marketing plan

Results: Clear product definition, project justification, detailed project plan

GATE 3: GO TO DEVELOPMENT - gateway to spending

Deliverables

Descriptions of 3 products, project justification, detailed project plan

Criteria

Was Stage 2 homework completed well?

Were the results positive enough to warrant funding?

Which product option has the best financial outlook for the company?

Outputs

Go/Kill decision - selection of the ONE product that will go into development

A clear product definition

historical Sterling Brands

stop point

gate 3

gatekeepers

CEO, CFO, Operations, Director of Marketing, Director of Sales

15

gate 2 stage 2

Build Business Case

gate 3 stage 3

Development

stage 4

Testing & Validation

gate 5 stage 5

Launch

STAGE 3: DEVELOPMENT

stage 1

Scoping

gate 1

gate 4

GATE 4: GO TO TESTING

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gate 2 stage 2

Build Business Case

gate 3 stage 3

Development

stage 4

Testing & Validation

gate 5 stage 5

Launch

STAGE 3: DEVELOPMENT - implementation of plan

Lab testing (continuous)

alpha, in-house, lab tests

consumer feedback leading to iterative prototypes

Parallel processing

operations plans

launch plans - selection of 5 launch markets

updated financial analysis

legal, regulatory and patent issues cleared

Results: A lab-tested prototype that consumers love

stage 1

Scoping

gate 1

gate 4

GATE 4: GO TO TESTING - checking all work thus far

Deliverables

a working prototype

Criteria

Is the quality high enough?

How does it taste? Smell? Look? Sound? Feel?

Does the product meet the definition in Gate 3?

Are the marketing and operations plans clear?

Does the revised financial analysis still meet fiscal goals?

Outputs

Go/Kill decision

Validation plans for next stage evaluated and approved

Marketing and operations plans reviewed for probable future execution

gatekeepers

Operations/QA, Marketing, CFO, Director of Research, Legal

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gate 2 stage 2

Build Business Case

gate 3 stage 3

Development

gate 4 stage 4

Testing & Validation

stage 5

Launch

STAGE 4: TESTING AND VALIDATION -

stage 1

Scoping

gate 1

GATE 5: GO TO LAUNCH

gate 5

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gate 2 stage 2

Build Business Case

gate 3 stage 3

Development

gate 4 stage 4

Testing & Validation

stage 5

Launch

STAGE 4: TESTING AND VALIDATION - evaluating every aspect

In-house product tests in test kitchens

Consumer taste testing

Pilot production - to improve production process

Test markets - 5 cities being selected, on-premise only, gauge reactions, effectiveness of launch plan, expected market share and revenues

Revised business and financial analysis

TEST RESULTS?

if not satisfactory, rewind to stage 3 and improve the product

stage 1

Scoping

gate 1

GATE 5: GO TO LAUNCH - ensuring validity

Deliverables

most refined marketing, operations and launch plans to date

Criteria: Testing the Testers

How well was the validation performed?

What is the expected financial return?

How smart are the operations and marketing plans?

Outputs

Go/Kill decision - the official green light; also the last chance to kill the idea

gate 5

gatekeepers

CFO, Operations, Marketing, director of research

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gate 2 stage 2

Build Business Case

gate 3 stage 3

Development

gate 4 stage 4

Testing & Validation

gate 5 stage 5

Launch

STAGE 5: LAUNCH - implementation of all plans

Marketing launch plan

Operations / production plan

Results: Roll out of product in 5 markets

stage 1

Scoping

gate 1

POST-LAUNCH REVIEW

evaluate 5 test markets and decide if successful

> go/kill nationwide rollout

6-19 months post-launch

cross-functional project team disbands

product performance review vs. projections (revenues, costs, expenditures, profits, and timing)

post-mortem discussion: what went well, what could be improved

post launch review

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thanks