How product management teams can make better innovation decisions
I am interviewing speakers at my favorite annual conference for product managers, the PDMA Inspire Innovation Conference. This discussion is with two speakers who did a joint session, Dr. Wayne Fisher and Dr. David Matheson, whose session is titled “Improving decision quality during stage gate reviews.”
Recent findings from PDMA’s Outstanding Corporate Innovator award program indicate that highly innovative companies follow some form of stage-and-gate process, including agile-stage-gate, to balance risk and rigor in the development of new products and services. Also, a recent Society of Decision Professionals poll suggests that innovation decisions are a rich area for improvement. We will discuss gate decision best practices with Wayne and David.
After nearly 3 decades with Procter & Gamble and training thousands of their managers on innovation, Wayne founded Rockdale Innovation to guide other organizations in innovation best practices.
David has more than two decades of portfolio and innovation management experience. He cofounded SmartOrg, which provides software and services to support decision-making and managing uncertainty.
This episode is sponsored by PDMA, the Product Development and Management Association. PDMA is a global community of professional members whose skills, expertise, and experience power the most recognized and respected innovative companies in the world. PDMA is also the longest-running professional association for product managers, leaders, and innovators, having started in 1976 and contributing research and knowledge to our discipline for nearly 50 years. I have enjoyed being a member of PDMA for more than a decade, finding their resources and network very valuable. Learn more about them at PDMA.org.
Summary of some concepts discussed for product managers
[2:39] What is decision quality?
How do you know if you’ve made a good decision? Suppose my son, who is in his early twenties, goes to a party and has to make the decision whether to have a sober or drunk driver drive home. Suppose his whole group gets together and they decide to drive home drunk and everybody is safe. I would say that was a pretty bad decision. Suppose on the other hand, he says he is going to be the designated driver. I would say that’s a good decision even if he gets into an accident. What was the difference?
At this conference we asked people what makes a good decision in their stage gate process. Most people said alignment with goals or expectations or that people were excited about it. People’s naive view is that alignment makes a good decision. It’s the equivalent of saying if everyone at a party decides to drive home drunk, that’s a good decision. People don’t think about what it means to make a good decision.
Decision quality means looking at your options and seeing if they’re rich enough that there is a really good choice. See if the information you’re getting is relevant to the choices you want to make. Do you have metrics and goals you’re pursuing? How does the information come together into an integrated story to make a recommendation? Are the inputs connected to the outputs?
You’d be surprised how many times people bring a great stage gate package and then decide to do something completely irrelevant based on what they want to do. You have to have commitment, including committing resources and having the intention to move forward on your decision.
[5:23] What are some challenges with decision making in an innovation context?
The Society of Decision Professionals, a professional society for people who are serious about decision-making, made a card to assess whether a decision is complicated indicating you should slow down when you’re making it. It asks questions like:
- Is there a lot of uncertainty, particularly of a kind you haven’t faced?
- Is there conflict that might be difficult to resolve?
- Do the best solutions require cross-functional perspectives or integrating different views and practices?
We did a poll with about 40 people and asked them to use this card to score innovation decisions they make. About two thirds of the decisions were high-scoring, indicating you should slow down when making these decisions. If you’re making a decision that is very high-scoring, you should talk to a decision expert. Eight out of the 40 people listed decisions that were very high-scoring.
On the one hand, decision making in innovation is just serious decision making, which is good news. On the other hand, not seeing the upside is a unique challenge in innovation. People are very worried about risk when they should be worried about upside. There’s uncertainty in innovation. Everybody wants a reliable promise, so people make a promise they can keep rather than doing something that matters. Decision making tends to reflect an aversion to risk, but in innovation it is necessary to push toward something better. People lose sight of that. They don’t think about uncertainty as upside and downside. They think of it primarily as risk, which has an emotive quality. Their job or success might be at stake.
A large company’s portfolio might have one in six projects that has upsides five or ten times the size of the stated business cases. It’s being left to chance. They aren’t doing anything to pursue the upside.
[11:04] How are decisions made in gate reviews?
Often the decision is made outside the formal gate review process. The purpose of the gate review is to make sure the investment in the next phase of work is appropriate for what we know and don’t know. One of the jobs of a gate review is to make a yes/no decision. But that’s not all. If you’ve said yes to investing in the next stage of work, does that team have the time, money, and resources to be successful in the next stage? Alignment is important. If you say you need a full-time equivalent in marketing, name names. If you can’t tell me who that person is, you haven’t said yes.
You make strategy and portfolio choices fairly infrequently. Where the rubber hits the road is in the gate review. Are those projects consistent with your strategy and portfolio choices? If a project goes away, is there a clean link between portfolio and the gate review? That’s really important work of the gate review.
In a gate review, an army of senior experienced managers has an opportunity to cultivate the next generation of innovation leaders, help them think through the decision, and impart a lot of wisdom that will serve those leaders well in the future.
If anyone says no to a project at a gate review, it should be the project team and not the review board.
Some decisions just propagate the momentum of the past, like a caterpillar choosing which bite to eat next. These decisions don’t threaten anybody and have no emotional content. You can just make the decision on its merits. Other decisions involve a future that does not follow the momentum of the past, like a caterpillar transforming into a butterfly. That has a lot of emotional content. We make our decisions emotionally and justify them rationally. Good decision leadership involves dealing with the emotional content of the decision and how people feel about the possibility of change. Innovation drives changes, which might be eating a little faster or becoming a butterfly.
Sometimes people have hidden fears. They nod and smile in the meeting and then the leader learns about their holdbacks later. In this case, the leader hasn’t made it safe to talk about emotional content of the decision and has no mechanism to deal with it. A good decision process will account for emotional content, bring people together, and have people share their emotions. This is so people will intend the result—not just say yes but intend the outcome so when something falls apart a little bit, they mean to fix it.
The human element of decisions making isn’t baked into the process very well.
[19:32] How do you make sure gate reviews actually matter?
It’s a good practice to have a gate review process owner, a person who is mature and respected by the people on the team. They should coach the teams on how to tell their story in advance. The leaders should get information related to the decision in advance. A facilitator who is not on the project team should facilitate the review to make sure the right conversations are happening and to call out rubber stamping.
[21:46] What are some processes to make gate reviews and decision making better?
In innovation, we do a good job getting the right information in the room. A lot of the other elements of decision quality are opportunities for our communities to grow. When I was a gate review facilitator, we scheduled our gate reviews a year in advance so we knew all the decision makers were going to be there. I knew which decisions did and did not need to be made at a gate review.
Stopping something is one of the hardest decisions to make. Sometimes the best way to say no to something is to say yes to something else. One thinking lacking in stage gate decision making is a relevant portfolio context. You try to kill projects, but people have their hopes and dreams tied up with those projects. If you get a good portfolio review, you can often get people to walk away from their projects because they want to work on something better.
Another best practice is identifying killer issues. Get the team to acknowledge early on that there is one thing that there is one thing that will kill the project. Agree in advance that if you can’t satisfy that requirement, the project should die.
Similarly, someone may have a giant dream that seems completely unreasonable. Ask what you could learn that would show you it’s less crazy than you think. Innovation is a search for the unreasonable. You can find killer issues that will kill projects, and you can find reasons a project is possible. You can build momentum through evidence and excitement about discovery and new upside.
Action Guide: Put the information Wayne and David shared into action now. Click here to download the Action Guide.
- Product Development and Management Association (PDMA)
- Society of Decision Professionals (SDP)
- IIGY, SDP’s and PDMA’s Innovation Interest Group
- Rockdale Innovation
Samson from the Old Testament killed a thousand men with the jawbone of a donkey. That many great ideas are killed every day using the same weapon.
“The best way to predict the future is to invent it.” – Alan Kay
Thank you for taking the journey to product mastery and learning with me from the successes and failures of product innovators, managers, and developers. If you enjoyed the discussion, help out a fellow product manager by sharing it using the social media buttons you see below.