Understanding Stage-Gates in Project Portfolio Management

In the intricate world of Project Portfolio Management, where multiple projects sail through various stages simultaneously, the concept of stage gates stands out as a crucial navigational tool. For Project Management Office (PMO) members steering the ship, comprehending stage gates is vital to ensuring projects align with organizational objectives and progress efficiently. This blog article aims to demystify the concept of stage gates in PPM, offering insights into their significance.

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What are Stage Gates?

In the realm of PPM, a stage gate is a strategic milestone or decision point that separates different phases of a project. At each gate, project progress is evaluated, and key decisions are made regarding whether to proceed, modify, or halt the project. Think of stage gates as checkpoints in the project journey, allowing organizations to maintain control, allocate resources wisely, and align projects with overall business strategy. The goal is to always know in which phase a project resides in - respectively what needs to be done to move over to the next phase. With this approach, you can create a system that easily allows for comparing projects.

Key Components of Stage-Gates

Before we dive into common stage-gate setups, take a moment to get a sense for the more general key components of stage-gates.

Gate Criteria

  • Clear criteria are established for each gate, outlining what needs to be achieved for the project to proceed.
  • Criteria often include deliverables, budget adherence, risk assessments, and alignment with strategic goals.

Decision-Making

  • Each gate involves a decision-making process, where stakeholders evaluate project performance and make informed decisions on the project's fate.
  • Decisions can range from giving the green light to the next phase, requesting modifications, or even terminating the project if it no longer aligns with organizational objectives.

Project Evaluation

  • Projects are rigorously evaluated at each gate, considering factors such as timelines, resource utilization, and overall project health.
  • This evaluation ensures that the organization is investing resources wisely and that projects are aligned with strategic goals.

Certainty

  • Another often overlooked quality of stage gates is that they can shed light on how certain planned/forecasted timelines and budgets are. Data provided in early planning phases is often far less reliable than data provided in later stages.
  • This evaluation, especially on the portfolio level, brings significant value in judging the overall portfolio health.

Selecting A Stage Gate System For All Projects In The Portfolio

The varieties of stage gates vary widely. As much as projects do. For example, a stage gate process designed for a single product development project may differ greatly from a process designed for a working capital reduction, or a software project. But if you want to compare projects of differing type and nature against each other in an attempt to get a sense of your project portfolio health, a bunch of different stage gate systems can make things extremely complicated.

So what can you do and who is responsible for making ends meet? Let's break the bad news first: The task of selecting a one-size-fits-all state gate system resides with the PMO. The good news? As per usual when putting on one's PMO pants, the key to success resides in taking a step away and in taking a look at all projects from the portfolio level to begin with. How that may work for you, is maybe best demonstrated with one of the most common types of PPM stage gate systems: the Degree of Implementation philosophy.

Degrees of Implementation (DoI) - A Widely Used Stage Gate Concept For PPM

Even the DoI stage gate is not standardized. But commonly, it consists of roughly six stages. DoI 0 to DoI 5. The beauty of these stages: they can be applied to more or less any project type or initiative brought forward. They hence often work wonders for PPM and PMO members!

Let's take a closer look at the stages.

DoI 0 - Idea: This phase is meant for all projects and initiatives in the early idea phase. Any project idea - no matter the size or scope - starts in this very phase. At DoI 0, information is often vague, not reliable, and nothing to write home about - or to report to outside stakeholders that is - just yet.

  • Approval to enter stage: Rough idea with a brief description, initial idea owner identified
  • PMO tasks: Check if the project idea resides well with strategic goals

DoI 1 - Analysis: During DoI 1, and once the initiative has been identified as worth pursuing, the initiative owners set out to validate and refine their early assumptions with data from other stakeholders and additional analysis. The goal is to provide the PMO with a short and rough concept.

  • Approval to enter stage: More detailed description, rough project duration estimate, rough budget/benefit estimate, potential risks and assumptions outlined
  • PMO tasks: Check if the new outline corresponds with the strategic goals, judge if project outline and ballpark estimates are reasonable

DoI 2 - Validated & Planned: Once a solid business case has been built in DoI 1, the initiative is approved by the PMO - and automatically passes on to the next stage. The planning phase. If the PMO does not approve, it may level down or even object to the idea altogether. But more often than not, it's go-time! The initiative owner is asked to bring forward a robust set of milestones to execute the initiative. In addition, the budget requirements - and often overlooked - the measurable benefit/effect plan needs to be as reliable as possible at this point. Often, a monthly schedule of expected value to be captured on the bottom line is the name of the game.

  • Approval to enter stage: solid and detailed business case in regards to time, money, and resources
  • PMO tasks: Make sure the plan meets the necessary requirements, support the initiative owner in planning, assign a portfolio priority level, and check all planned initiatives to avoid bottlenecks as early as possible, make sure success can be measured down the line by selecting suitable KPIs together with the initiative owner.

DoI 3 - Aproved & In Execution: Now it is time to hit the ground running. Execution is the name of the game in DoI 3. Let you plans commence!

  • Approval to enter stage: DoI 2 plan has been deemed suitable and executable
  • PMO task: regularly check on execution (implement a strong and rigid reporting cycle), identify bottlenecks and risks together with project teams, evaluate individual project and overall project portfolio health regularly, prioritize projects accordingly, support project teams in reporting progress

DoI 4 - Executed: Many initiatives sit at L3 during implementation, with the initiative only moving to L4 once all milestones to realize value are completed. At this point, the PMO - often in collaboration - assesses the project to ensure that it will deliver the value promised. By the way, in an ideal world, the PMO knows this quite a bit early - but that is for another article dealing with the issues of planning and measuring project benefit/effects.

  • Approval to enter stage: all milestones are achieved, no project work outstanding
  • PMO task: make sure all milestones are truly completed

DoI 5 - Effective: Now it is often time to wait a little. Namely, until the PMO can measure the results/effects to make sure the project is indeed effective. This is often extremely difficult and needs to be thought of already in DoI 2. Little is more annoying than going through all stages just to learn that measuring the value created is impossible.

  • Approval to enter stage: effects measured (often in profit line or cash impact)
  • PMO task: make sure you measure the right thing... not but seriously, this sounds easier than it is.

Make It Your Own

Whilst the DoI system above is common, you should still check if it meets the requirements for your project portfolio. The most common adaptions include melting together DoI 0 and DoI 1 to one single stage, adding a DoI between 4 and 5 to indicate if first (financial) values have been measured, and adding stages allowing for showing if projects have been cancelled or paused.

Significance of Stage Gates in PPM

Let us conclude: In the intricate dance of Project Portfolio Management, stage gates emerge as pivotal choreographers. By understanding and implementing stage gates effectively, PMO members can ensure that their organization's project portfolio not only aligns with strategic objectives but also sails smoothly toward success. As checkpoints in the project journey, stage gates empower PMO members to make informed decisions, mitigate risks, and optimize resource allocation, ultimately steering the ship toward a successful and strategically aligned destination.

Risk Mitigation:

  • Stage-gates provide an opportunity to identify and mitigate risks early in the project life cycle and throughout the entire process.
  • By assessing risks at each gate, PMO members can take proactive measures to address potential issues before they escalate.

Resource Allocation:

  • Efficient resource allocation is a key benefit of stage gates. PMO members can redirect resources based on project performance and strategic priorities, optimizing the overall project portfolio.

Strategic Alignment:

  • Stage gates ensure that projects remain aligned with organizational strategy. If a project deviates or loses relevance, decisions at the gates can realign it or facilitate its timely closure.

Would you like to take your project portfolio to the next level?

Find out how our PPM software Falcon can help!
Falcon applies the stage-gate model in the form of DOIs. We would be happy to explain in a personal meeting how Falcon can support you individually with your project portfolio management.
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