Rajesh Sethi & Zafar Iqbal
Executive Summary
A large number of firms have embraced the Stage-Gate process to bring discipline to “chaotic” new product development activity. The Stage-Gate process prescribes the use of several sequential gate review meetings to control and improve new product development. The current study, which is based on a sample of 120 new product development projects that used gate controls for new product development, shows that such controls have the potential of harming the performance of novel or unique new products. Managers eagerly desire novel products because such products improve the likelihood of market success and profitability. At the same time, managers want to control new product development effectively and thus can make gate evaluation criteria rigorous. Rigorous criteria are strict, objective (i.e., not open to interpretation or allowed to vary when the project requires), and frequently applied during product development. However, such rigorous gate reviews make projects inflexible, and in turn, this inflexibility adversely affects learning in the new product development project, which is crucial for novel new products. Thus, although rigorous gate criteria may work for incremental products, they harm the market performance of novel new products. Firms are likely to be better off designing separate gate criteria for novel products.
Furthermore, the study warns that rigorous gate reviews are not appropriate when there is turbulence in the technology sector of the environment. A turbulent environment worsens the adverse effect of inflexibility on learning in the project, which further harms the performance of novel new products. Thus, projects that operate in technologically volatile environments need to have different gate review criteria than projects that operate in relatively stable environments. Basically, the evaluation process needs to account for the special requirements of a turbulent environment and grant necessary latitude to new product development projects.
In addition, our study demonstrates that merely tinkering with the Stage-Gate process does not solve these problems. For example, the recent suggestion of making the Stage-Gate process more conditional for mitigating the unintended consequences of rigorous gate evaluation is not effective. Gate conditionality refers to allowing the project to proceed to the next stage even if it meets just part of the gate criteria, subject to its meeting the remaining criteria at the next or a later gate. In reality, it can become difficult to postpone finalizing project details and meeting the criteria at a later stage, even though gate conditionality permits such postponement. It is a better idea to create separate gate controls when the product is novel or the environment is turbulent.
Managers need to remember that the development of products that make a real difference in the marketplace requires the generation and effective implementation of novel ideas. Such implementation is hindered when gate controls are constraining. To meet their long-term interest, firms need to check the tendency to make gate controls overly stringent.
Biography
Rajesh Sethi is an associate professor in the School of Business at Clarkson University in Potsdam, New York. Dr. Sethi received his PhD from the University of Pittsburgh, Pennsylvania. His research interests are in the areas of new product development and supply chain management. Dr. Sethi has published his research in leading academic and professional journals, such as Journal of Marketing, Journal of Marketing Research, Harvard Business Review, Journal of the Academy of Marketing Science, and Journal of Product Innovation Management. He has been the recipient of several research and teaching awards. Before his academic career, Dr. Sethi had more than ten years of professional experience in industry. He has held various managerial positions with a subsidiary of Toyota Motor Corporation in the areas of new product development, marketing, supply chain management, and project management.
Zafar Iqbal is Associate Professor of Marketing at the Kellstadt Graduate School of Business at DePaul University. Dr. Iqbal received his PhD from the University of Pittsburgh. His research focuses on the areas of new product and service development, developing sustainable business models, marketing, and business strategy. His research has been published in various leading academic and practitioner journals, such as California Management Review, Journal of Service Research, International Journal of Service Industry Management, Journal of Internet Commerce, Journal of Personal Selling and Sales Management, and Journal of Risk and Insurance. He has been the recipient of several research and teaching awards. In addition to his academic experience, Dr. Iqbal has significant experience in serving as a management consultant to various large- and medium sized corporations and in developing and delivering customized executive-education programs.
Journal of Marketing, Vol. 72, No. 1, January 2008
View Table of Contents