10 lessons learned implementing a Stage-Gate in oil & gas

By Mark Barnett

Sometimes you need to use tape with a sticky… Sometimes you need to use tape with a sticky…

One of the most iconic innovations of the 20th century is also one of the simplest—the Post-it® note. Ironically enough, when executives, managers, front-line workers—and even customers—come up with a new idea, they often quickly scribble it down on a sticky and post it on or around their desks.

But we all know what happens next. Days pass. Maybe even a week or two go by, and the Post-it that captured the “next big thing” falls unceremoniously to the floor. Now, perhaps the sticky wasn’t designed to stay stuck forever. Regardless, the innovator “improves” the Post-it fail by attaching a piece of tape to the note.

Although it’s a sure bet that executives in the Oil & Gas industry use sticky notes, they also put to use proven tools and resources to manage new product investments. These tools—like the sticky note—are recognized to be effective and efficient and have become the standard across the industry.

One such resource is Stage-Gate® and similar methodologies. With so much at stake, a new product development (NPD) process must be one that is predictable and controllable, and it must produce successful products with enough consistency to justify the scale of investment involved. The value of Stage-Gate and similar methods has been proven by the success of the many companies that have used them. So why then, do some new product ventures fail? Why did the “proven” product not work? Why did the sticky note eventually fall to the floor?

New Products in Oil & Gas

Projects in the Oil & Gas industry can range from small scale, on the order of six figures, up to the billions of $US over a development period that can be as long as five or more years. With such large investments at stake, it’s important to use a well-integrated set of best-in-class tools and methodologies to reduce the risk of either a less-than-projected return on investment, or worse, a total failure. If the chosen approach can also reduce the NPD cycle time, its value is even greater.

Many large organizations have adopted a gated approach to reduce NPD risk. One of the key features of such an approach is a set of “go/no-go” decision gates which, in principle, ensures that each project remains aligned with its original strategic intent and its value remains high enough to justify its continuation to the next stage of development.

As well as processes and methodologies, there are a few fundamentals that companies must remain true to when developing new products: call them best practice or just plain common sense. Sometimes small deviations from these fundamentals cause problems. On the other hand, small modifications may be identified that make the process work even better in situations that are a little different from the usual.

The message here is flexibility: while adhering to the process and fundamentals of NPD, keep an eye out for situations that demand something a little different—some nuanced modification that improves the process—like tape on a sticky.

The following are 10 lessons learned when the business units of one of the world’s leading Oil & Gas upstream services companies, with over $20B in annual revenue, decided to revisit their processes to optimize the return on investment of individual NPD projects. The process used, Stage-Gate, is time tested and well understood, but a focus on the business case, risk management, cross-functional collaboration, and integrated launch planning, versus just “following the process,” provided the fundamentals necessary for success. And a handful of other practices that were added made a critical difference in ensuring NPD went off with fewer problems and surprises.

One important conclusion resulting from using the gated NPD process implementation is that there are five distinct components, all of which must be embedded in any NPD methodology to maximize its effectiveness. They are:

1. A robust business case
2. A strong risk management approach
3. A comprehensive integrated launch plan
4. A governance discipline where leaders are genuinely engaged and accountable
5. Clear ownership of and accountability for the NPD process

The Second Half of Best Practices for NPD Success

But what are some best practices beyond these five well-known known components? Here are five more:

1. Don’t ignore (proven) advice
Few organizations want to deliberately ignore lessons learned from others who have executed similar initiatives. For example, there are 10 tips for successful implementation of Stage-Gate that 2 of its leading experts have shared[1]. But what happens when a company only heeds eight out of the 10 and, further, does not fully follow those they do “adhere” to?

Often, the lessons not followed lead to gaps and weak points in execution. In this Oil & Gas company’s Stage-Gate implementation, the leadership’s conscious choice not to emphasize change management and internal communication delayed the adoption timeframe by up to six months And the final outcome? The organization had to double back to address the large implementation gaps created.

2. Avoid overkill
When this initiative started, the gated approach was defined in full-blown form, describing the process that the largest, most complex, and highest-risk NPD projects would follow. After an initial set of large-scale projects (roughly one per business unit) went through a pilot phase of the Stage-Gate process, demand for the use of the gated approach for a wider range of projects grew. However, it quickly became apparent to many of those who wanted to apply Stage-Gate that it would be overly burdensome for smaller, less risky projects to adopt the same level of detailed documentation and governance oversight.

Fortunately, others external to this organization had already developed a set of best practices for scaling the Stage-Gate process for projects of different sizes and degrees of risk. Drawing from that work, three versions of the Stage-Gate process are now used, differentiated not by their relative degree of rigor, since that is the same for all three processes, but by the management level of the members of the governance committee, the degree of formality of some specific gate reviews, and the level of detail of the documentation required. Along with the scaled processes, a set of criteria for determining which process a particular project should follow is also in place. The organization based those criteria on the level of risk and complexity and the magnitude of the financial investment required for each project.

The introduction of a scalable set of gated NPD processes was a significant step forward in enabling broad adoption of the Stage-Gate process across the organization. It will need to be addressed in any implementation of a gated NPD process, regardless of industry, if moving to a standardized NPD approach is a goal.

To read the rest of Mark Barnett’s best practices for NPD success, click here.

 

Mark Barnett, PhD, MBA is Senior Executive Consultant, at Robbins-Gioia, LLC. He has 15 years of experience leading business transformations within multiple industries, including oil & gas, high-tech R&D and manufacturing, telecommunications, and insurance and financial services. Mark served as Robbins-Gioia’s engagement lead at one of the premier international oil & gas products and services companies, implementing a common new product development framework across 10 business units. He is also an thought leader in the area of Customer Experience Management, transforming organizations to place customers at the center of everything they do, leading to increased revenue, improved service quality, and reduced operating cost.

 

[1] Edgett, Scott J., and Jones, L. Michelle, “Ten Tips for Successfully Implementing a Stage-Gate® Product Innovation Process,” Reference Paper #33, Stage-Gate International and Product Development Institute Inc., 2012.

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