The Whys and Hows of Stage gates
Governance is part of corporate innovation: how do you keep a grip on your innovation portfolio? You have already seen one of the instruments depicted in our Innovation Roadmap as a neat orange banner; the stage gate. But how does that work?
Disclaimer: I’m aware that there is a lot of jargon in this blog, but I think that best takes you into our reality.
Within the bank we have a certain budget available for innovation. How do we ensure that we spend that money in the best possible way? On the one hand by doing the right things, on the other by doing those things in the right way. This blog is about the latter. But what is ‘right’ exactly?
The stage gate
Part of the right way is the process we follow. Within the bank, we use a Lean Start-up framework called Innovation Roadmap.
The Innovation Roadmap consists of a number of phases. The initiatives work their way through those phases, from left to right. At every transition from one stage to the next — see the happy flag — the business champ organizes a stage gate meeting. That’s a meeting in which a given group of people agree (or don’t) on the ask.
With the Innovation Roadmap and the stage gate phenomenon, we are therefore creating what in investment land is called ‘staged funding’.
How do we organize a stage gate?
Within Rabobank, we deliberately keep the stage gate committee small, in order to be able to organize quickly and to save time and costs. The Innolead under whom the innovation falls is in it; she or he is the one who is ultimately responsible for innovation in a business line. In addition, a senior Innovation Expert, the portfolio manager, and a CLR manager (an expert on Compliance, Legal & Risk). The team is welcome as an audience.
The Business Champ is the driving force behind innovation. The latter determines itself when the initiative is ready for a stage gate, just like a start-up determines itself when it starts looking for an investor. There are also organizations that use periodic stage gates, for example, every six weeks, but we believe that this comes at the cost of responsibility and entrepreneurship.
Should an initiative come to the conclusion along the way that additional funding is needed, without a new stage gate having been reached, the same group will be called together and the request for additional funding will be discussed.
We have standardized the requested information per stage gate over the past year, just like investors would like to see. This prevents questions and ambiguities about the format and allows the Business Champ to focus on the substantive answers. Preferably — but that turns out to be difficult in a corporate environment — she/he does not pay too much attention to the design, because that only takes time, after all.
The information is sent to the committee three days prior to the stage gate. They can study this extensively so that we can quickly enter the content during the meeting.
Content of the stage gate
A stage gate usually lasts up to an hour and a half. I sometimes hear from other organizations that with them it is quite a busy and hasty meeting, for example in 20 minutes. We don’t believe in that; it also doesn’t do justice to all the work and complexity of many banking propositions.
During the stage gate, clarifying questions are asked to answer three themes:
- Have you completed the previous stage, and have you proven that the outlined end goal is (still) interesting for the bank?
- Is this plan for the next phase the shortest (fastest, cheapest) way to that end goal?
- Which obstacles (partly from a Compliance, Legal & Risk perspective) could still throw a spanner in the works?
The stage gate: controlling & supporting
In the stage gate, we see more and more that our joint innovation maturity is increasing, and that the stage gate has multiple functions.
The stage gate is primarily a governance instrument in the sense that it performs a sanity check on the plans, with the allocation of the budget as a control tool. It is a moment when we record where the initiative stands, which provides a benchmark for portfolio management.
We see more and more that it is also a supportive meeting. We share experiences, give each other practical tips and refer to people from our network.
Governance vs Responsibility
The stage gate committee, therefore, decides whether or not the start-up can continue with the presented plan. That sounds logical from a governance perspective, but it also has a side effect.
After all, in the previous blog, I described how the innolead is responsible for the innovation of his or her business line, and how he/she delegates that responsibility to the Business Champs.
But can that Business Champ be responsible if she/he does not have the 100% mandate to do it as he/she thinks is right, but is possibly (additionally) directed by a stage gate committee? Whose responsibility is it ultimately that we do the right things? And vice versa: who could excel then? The answer is: together.
Together is an important theme within Rabobank. After all, we are originally a cooperative, so together is in our blood. But what does together look like in a stage gate?
Sometimes there are innovation teams that try to convince the stage gate committee that this initiative will be a guaranteed success, that there is no problem whatsoever, and that as a committee you would be completely mad if you didn’t say ‘yes’ to this within a second. Pronto!
That is the dynamic in which I gradually start looking for the risks in my Venture Board role, because of course they are always there, so also now and here. It quickly feels a bit like an Easter egg hunt, where the team knows where they are hidden, and the Venture Board has to find them. I’m sure that in many corporates this is seen as ‘the game that just has to be played that way’, but I don’t think that suits us as Rabobank.
In the stage gate meetings, where the team itself actively identifies more uncertainties and risks and brings them forward, we see that we get more out of them. Uncertainties are not a reason to say ‘no’, but a reason to arrange help and result in a different mindset on both sides.
I like to be critical if I think that will yield the best result for the bank. But then there must be mutual trust that everyone has that in mind — the best for the bank — and that we only have to agree on what that means for how to get there.
One of my metrics for a successful stage gate meeting is whether I come out with less or more energy than I went in, regardless of the outcome. And that often works out well.
It remains a hot topic, the stage gate. Teams sometimes talk about it as a ‘hoop you have to jump through’, but that basically makes the team a poodle, the stage gate committee a trainer and the stage gate nothing more but a circus trick, and that just doesn’t do justice to the process.
The stage gate is a powerful tool to steer and accelerate innovation. It makes innovation a more conscious process, and helps to embed it in the organization. And every time, we are learning how to get the most out of it.