I recently read this interesting article from Nielsen Wire on new product development for consumer packaged goods (CPG). This article talks about how to realize the most revenue from new product development in the CPG space. Key takeaways:
- Manage ideas loosely (have an innovation team live far, far away from headquarters with low involvement from senior staff)
- Manage the process precisely (a formal Stage-Gate process is recommended)
I found myself scratching my head over how to translate these astounding insights to high tech new product development in a software startup or small business environment. My take: they don’t translate.
I agree in principle with managing ideas loosely – no blue sky work can occur if every new idea is shot down by someone who is too concerned with the here and now. But is it prudent to have a completely separate blue sky process in a startup when the entire startup needs to all march to the same tune? This structure seems advisable only for corporations with a strong established business, which generates the revenue to fund the innovation process. For pre-revenue or early revenue-bearing businesses, there is no separation between new product development and the business itself – they are one and the same. A company like that hasn’t earned the right to send a team off to another city and go blue-sky on everybody else.
The second point made in the article, regarding tight management of process, is even less transferable. Let’s take the application of Stage-Gate for an example. Imagine managing web software development with a 2 week release cycle, where each release must go through the 5 typical gates:
- Gate 1: initial screen (to decide whether the idea is worth pursuing)
- Gate 2: approval to proceed to building a business case
- Gate 3: approval to proceed to development
- Gate 4: review outcome of development before going into QA
- Gate 5: review outcome of QA, decide whether to release
“Absurd” is the only word that comes to mind.
I believe in only as much process as it takes to maximize efficiency and guarantee a high quality of output. (That is a whole lot more process than most entrepreneurs I work with are used to. I can’t help it – if I am to execute I have to set up an efficient environment.) I also believe in tailoring processes to suit the industry and nature of programs. Different processes are established for different things. You can’t apply a consumer electronics hardware development process naively to shrinkwrap software development, and you cannot apply shrinkwrap software development processes naively to web application development.
Stage-Gate can work for CPG and hardware development programs with a long turnaround time, but is completely inappropriate for fast turnaround programs and most software programs. It behooves senior management to understand enough of the principles of Stage-Gate versus Agile or Mini-Waterfall so they can apply an appropriate level of oversight without bogging everybody down with inapplicable processes.