Impact of implementing Stage-Gate

The impact of implementing Stage-Gate

With a well-implemented world-class Stage-Gate process, a typical company can expect to

Increase the success rate of the product development program by 10-30%.
Reduce time-to-market by 30% or more.

1) The financial impact of higher success rates

10% higher succes rate gives 0.5 mill more in profit per 1. mill invested in NPD
It is obvious that the impact of higher success rates is huge. The importance of a highly successful product development programme cannot be underestimated even though the potential cannot be precisely expressed in numbers. However, a cautious calculation shows that a 10% increase in success rate of NPD investments of 1 mill. €/yr. can be worth around 0.5 Mill € in additional annual margin

The questions are then: What is your company's current success rate and how much can it be improved? If the your current success rate is 50%, it might be possible to improve it by 20% over a two-year period which in turn can improve your bottom line by 1 mill €/yr. for every 1 mill you invest in new products.

2) The financial impact of shorter time-to-market

A 30% reduction of time-to-market can roughly improve your company's bottom line by 0.3 mill €/yr. for every 1 million you invest in development of new products provided that you success rate is 50%.

Again, this statement is based on certain assumptions a typical project. These assumptions may not apply hundred per cent for your company. However, you can get an impression of the order of size of the financial potential.
The pie chart on the sheet "Cycle Time Reduction" shows a sample project that takes 18 months and has a net present value of 0.9779 mill €. If this 0.3 mill project was done in 12 months, it would be worth 0.1859 mill EURO more (0.1859 is the cost of delay). By applying this conclusion on a NPD programme of 1 mill €, the potential improvement becomes 0.62 mill €/yr. if we assume 100% success rate. 50% success rate gives a potential of 0.3 mill €/yr.

3) Additional benefits by shorter time-to-market

Most companies agree that that shorter time to market and on-schedule completion of projects have many other benefits. Some of the important are:

Advantages of being faster than the competitors.
Customer credibility: our customers can always rely on our promised time schedules.
Internal credibility: Other departments can rely on our NPD schedules.
Highly focused and motivated development teams: Its fun to be part of a good project. Its frustrating when others beat up on you because you are behind schedule.
Being able to run the right number of projects for the resources we have.
Avoid domino effect (One delayed project means that the next ones will start later and also become delayed.
Avoid additional work, trouble and further delays by rescheduling delayed projects.