The stage (or phase) gate project development approach, as adopted by the engineering and construction industry, was designed as a business process both to meter spending prior to the investment decision and yield predictable outcomes. It has been widely implemented across industrial capital project sectors such as energy, mining, infrastructure, chemicals and pharma. While it can deliver on its intent, if applied too rigidly, it also drives deleterious, unintended consequences which increase cost, lengthen schedules and erode returns on capital employed.

As a business process, the inflexible stage gate approach does not support the needs of project development and execution. Instead, it subordinates the project to the business process and suboptimizes performance. All too often, the project team focuses merely on passing the next stage gate as opposed to keeping the end in mind. Consequently, efficiencies that would result from more laminar development and execution are lost, and exceptionally large batches of work accumulate at the stage gate by design. According to the laws of Operations Science, such accumulations of work-in-process necessarily lengthen cycle time and increase costs.

Considering the laws of Operations Science, a better approach is to adapt the business process to the needs of the project after taking into consideration the driving forces of technical, regulatory and governance requirements which form the design space for any investment.  The business investment decision should be triggered by a defined set of prerequisites or conditions precedent, the timing of which varies depending on the nature of the project. For example, a complex brownfield project would need to advance definition comparatively more before making the investment decision than an otherwise straightforward greenfield effort.

In addition, looking down the road with the advancement of computing technology, the project process will radically change and improve. Using concurrent digital engineering, thousands of alternatives within the design space will be considered to optimize the desired outcome. The chosen alternative will come with a nearly complete design, cost estimate and production schedule. This will make stage gate, as the industry knows it today, virtually obsolete and thus enabling reliable investment decisions to be made at the point of concept selection with minimal pre-investment. Some companies are already recognizing the inherent weakness of stage gate and have already moved the investment decision to concept select even using current, unreliable methods.

To learn more, watch our recent Stage Gate webinar.