[SOUND] Hi, welcome to this video on stage gate models. When executing innovation projects, stage gate models are important for firms, and can help to make formal and well informed decisions about innovation projects. Let's take a look at three examples of innovation projects that illustrate why good and formal decision making is essential. What you see here is a vending machine that dispenses fries. Why would one need such a machine, you might ask. Well, the inventor of this machine, a Belgian man, thought it was rather strange that a popular snack, like French fries, could only be bought in canteens and snack bars. He thought that it would be a good idea to solve this. He therefore built this vending machine which would provide French fries after inserting a couple of coins. His name was Jean Hoeberigs, and he designed The Frit-O-Matic that was well received by the outside world. Several companies were enthusiastic about his idea. He even won the inventors Oscar for it, in Belgium. And, he managed to build a working prototype. Another indication of the attractiveness of the idea, of this machine, is that 50 other companies had try to develop a fry machine as well. Also, there are about 50 patents related to fries machines. So, Jean Hoeberigs' invention seemed very promising. However, Jean Hoeberigs and all the firms that tried, failed to make a properly working machine. And the problems are predominantly technological. First of all, the grease in these machines is a real pain. Once you start frying with such a machine, of course you want your fries to be fresh. However, the grease gets all over the place and the machine turns really dirty. As a result, the machine also smells terribly. Your fries do not seem fresh, and also, where are you going to locate these machines? No one wants to have them in their building. Another thing is that the oil needs to be replaced frequently. And the first five bunches of fries appear to taste pretty well. After that, the taste really declines and becomes unacceptable. So, no fries machine has become a success, despite its initial attractiveness. May be applying a stage gate approach to this project would have prevented the project from getting as far as it came. And would have saved a lot of costs. Another example, the Habakkuk. It the boat made of ice. The boat was actually the solution for the problem that the airlines had in World War II. The problem was that the Germans ruled the Atlantic Ocean with their U-boats, and they torpedoed 10,000 ships. A lot of cargo and people got lost. Strategically, the major problem for the Allies was that fighter planes and bomber planes could not fly from the Americas to Europe in one single flight. They therefore wanted to put their airplanes on ships and sail them to Ireland to enable them to fly to the European mainland from there. But this was too risky because of the German U-boats. So, there was this inventor named Geoffrey Pyke. He thought of making a very big boat of ice on which you could load dozens of airplanes. If such a boat would be hit by a torpedo, there would be no problem. Maybe there's a hole in the boat, but because it is made out of ice, it will not sink. Jeffrey Pyke presented his idea to Winston Churchill in 1942, who was very enthusiastic. They actually managed to build a first prototype, which was 700 meters long and 100 meters wide. And it seemed to work out pretty well. In 1943, the Canadians joined the project. And they discovered the first problem with this prototype of ice. The ice melted too fast. So they understood that by the time they could arrive in Europe, the entire boat was going to be gone. But they solved the problem and came up with the material of Pykrete. Named after Jeffery Pyke. The material was a mix of ice and wood chips. And the prototype built out of Pykrete actually was a success. However, eventually, the boat never got built. Let's take a look at the reasons why. First of all, at a certain moment, the Allies got a base in Ireland. In addition to that, the airplanes, both the fighters and the bombers, were further developed and their range increased. So, they could fly to Ireland, have a short stopover, fly to the United Kingdom, and from there the airplanes could reach European mainland. Also, the radars and the sonar equipment of the Allies improved. The U-boats, therefore, became less dangerous and less effective. So, the boat of ice thereby became useless because of developments in other areas. Let's take a look at a third and last example. Probably the most familiar to you, the Concorde. This project was initiated with the idea that a lot of business travelling was going on between Europe and Northern America. However, it was not possible at the time to fly from New York to London and back on the same day. It always took at least two days to get there and back, because planes are relatively slow. So, engineers thought, let's build a super plane that can fly between London and New York in 3.5 hours time. And they decided to build this plane, the Concorde. The project started in 1961. France and England were strongly involved, and they managed to build the first prototype. 40 years later, in 1975, this prototype was ready and functional. It was very fast and it made the trip in 4.5 hours. This meant that you could fly from London to New York and back on the same day. Still, in 1978, the production of the Concorde was stopped. They had built 61 planes and after that they said, well this is the limit. This is not going to work out, let's stop production now. You have any ideas on why this was the case? Well, first of all, the Concorde made too much noise. This limited the geographical regions that it could take home from and land on. So in that sense, you could say that the range of the Concorde was restricted. The price of these planes was also incredible. They planned to build on for 31 million, but eventually it cost almost 10 times that amount. Costs were huge. As a result of increasing fuel prices, tickets for people that wanted to fly with a Concorde could also cost up to $11,000. Also, Boeing offered strong competition and developed its 747 around that time. The Concorde could fly from Paris to New York or from London to New York. But it could not fly from New York to Munich, which is slightly further. So, if you were a businessman living in Munich, you would need to first take a plane from Munich to Paris. And then take the Concorde from Paris to New York. A Boeing 747 could take you from Munich to New York with a direct flight. So the Concorde had difficulty competing with planes like the Boeing 747. So, what was going on in these projects? We saw three examples of innovation projects that all took much longer than expected. For the Concorde and the boat of ice, changes in the environment reduce the attractiveness of the ideas that the developers initially had because completing developments were going on. Projects can also become way too costly. Eventually the Concorde was incredibly expensive. Of course, this can be partly explained from the fact that England and France saw it as a prestige project, but if you look at the price, it might have been smarter to stop the project much sooner. Projects often do not fit the market. Partly because of other developments that take place. For example, the development of the Boeing 747. But also, if you think about the fryer, the quality of the fries in the machine was not good enough. Certain projects are certainly not feasible. Stage gain models can partly provide a solution to such issues. Stage gate models can prevent projects from getting out of hand. Let's take a look at how this would work. In this picture, you see a representation of a staged gate model. At the top, you see the first stage. The small red dots are all ideas for new products or services that a firm has. At the end of the first stage, each idea is being evaluated. Those ideas that are sufficiently promising, can move on to the next stage. And at that stage, for example, business cases need to be built around each idea. Once this is done, each business case will be evaluated at the next stage. As you can see, only a selection of these business cases then moves on to the next stage. In this picture, eventually just two of the initial ideas are being developed into marketable products and services and only one of them succeeds. Now, the main function of the stage gate model is to discriminate between those initial ideas that may eventually become a success, and those that are likely to fail. A good stage gate model increases the chance that possible successes move on to the next stage and increases the chance that eventual failures are killed as early as possible. A good stage gate model might have killed the The Frit-O-Matic, the boat of ice, and the Concorde in a more timely fashion. So, now that you have an idea of why stage gate models are important and how they work, let's take a more detailed look at stage gate models in the next video. Thanks for watching.
