Scorecards For Project

Selection: Gates 1 & 3

The Seven Forces
Profiling Model
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The Seven Forces Model

A Scorecard System for Making the Right Investment Decisions
Background
Scorecards are used at gate review meetings to help make Go/Kill decisions on proposed development
projects. The premise is that often qualitative factors, gut feel and intuition are more important predictors of
success and profitability than are precisely calculated financial numbers (which at best are usually not too
precise and accurate!). And there is much research evidence to support this premise, especially for more
uncertain and less well-defined projects, such as in the case of bold innovations. In research undertaken on
various evaluation techniques, scorecards fare the best in terms of ‘effectiveness’, ‘efficiency’ and ‘suits our
management style’.

Scorecards are part of a scoring model approach to project evaluation and selection – models that are
based on the attributes of desirable or winning development projects. Some people refer to these as
profiling models or marker models. Think of the field of cancer research, where cancer researchers have
discovered that certain DNA markers can predict whether a person will get a certain type of cancer. Do
such markers exist in the field of R&D – that certain markers will predict the outcomes of development
projects?

What are the telltale signs of a winning new-product project?1 Do you know? Surely there are some key
indicators, markers, or descriptors of projects that are good predictors of success. If we knew what these
predictors were, then we could develop a scorecard and use that to rate and rank projects in a much more
professional, systematic and predictive way. But can new product success be predicted?

1. This section taken from: R.G. Cooper, Winning at New Products, 4th edition, Ch 8, see books on page
11; and from other writings by Cooper (see references on page 10)

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 Can New Product Success Be Predicted?

Yes… New Product Success Is Predicable!

For decades, people have been trying to develop such “predictive models” to pick winning racehorses,
winning dogs at the dog track, winning stocks on the stock market, and so on – without much luck. But
the situation is quite different for new products. Indeed, there have been some impressive research
investigations that have probed the key markers or predictors of success in product innovation. The
Cooper NewProd studies were some of the first research studies in this area and are reported in
numerous articles and books.2

Much research has been conducted on development projects since the early 1970s into “what drives
success” or the “critical success factors”.2 Unfortunately much of this research has not been widely
disseminated to the management community who remain largely unaware of its existence. These
research studies into critical success factors in NPD or product innovation formed the basis for scoring
model approaches to project selection: “If you can explain success, then you can predict success!”

Many scoring models are thus quite sophisticated in their development – they are research-based, having
been constructed from a statistical analysis of data from many past projects, both winners and losers.
Much of this research has been published and now is in the public domain,2 so we know what these
markers are. And some firms have privately done internal investigations of their past projects and have
come up with their own scoring models or scorecards for rating projects; some are now public.

2. See ch 1 in PDMA handbook, reference 4 on page 10.

The Seven Forces Model

These seven factors or “forces that drive success” are:

1. Strategic Alignment (fit with our strategy and strategic importance)

2. Product Competitive Advantage (unique customer benefits; differentiated; compelling
value proposition for the customer)
3. Market Attractiveness (market size, growth, margins earned in this market, competitive
intensity)
4. Leverage (leverages our core competencies and strengths – technology, operations,
marketing)
5. Technical Feasibility (size of technical gap, technical complexity, technical uncertainty)
6. Potential for Reward (we can make money; good profit and return, fast payback)
7. Risk (critical assumptions, amount of uncertainty, newness of market & technology, all-
in cost of project versus payoff)

Note that the main factors or Seven Forces remain the same from gate to gate, so you can compare scores of
projects at different gates; but the details of the questions and the scales become more rigrous as you move
from gate to gate as more information becomes available. We leave it to you to develop scorecards for the
other gates, using the two gates (Gate 1 and Gate 3) on the next pages as a guide and for content.

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 Using Scorecards at Gate Meetings
In a scoring model system, at gate meetings, senior managers each rate the project on a number of criteria
on Low-to-High or 0–10 scales on a scorecard. The scores from the gatekeepers at the gate review are
tallied and combined, and the Project Attractiveness Score is computed: the weighted or unweighted
addition of the criteria ratings. This attractiveness score is the basis for making the Go/Kill decision at
gates and can also be used to rank-order projects at portfolio reviews.

The next few pages show a best-practices scorecard model for Gates 1 (the idea screen) and Gate 3 (Go
to Development). The factors or “forces that drive success ”, as we call them, are derived from research by
the author and colleagues. The model has seven basic factors, each factor with a subset of questions. All
questions are proven discriminators between good (successful) and poor (failure) projects. We leave it to
you to develop the other scorecards and check-lists.

Gate 1: In use at the Gate 1 idea screen meeting, projects are first reviewed by the gatekeepers against a
set of Must Meet or “Knock-Out” questions to remove any obviously unsuitable projects, using a checklist
projected on a screen. A consensus No on any one Must Meet criterion kills the project. Then the projects
is scored by gatekeepers on the Seven Forces factors, using a scorecard and Lo-Med-High scales. The
scores are then averaged across gatekeepers and added to yield the Project Attractiveness Score (PAS),
but taken out of 100. Most firms seek a score of 60 or 65 out of 100 for a Go; the PAS can also be used to
rank projects against each other at a portfolio review. Gate 2 is usually much the same as Gate 1, but
using 0-10 scales on a scorecard.

At Gates 3 and beyond: The project is first reviewed against a set of “Readiness Check” questions to
ensure that all is in place for the gate review. A consensus No on any one of these Readiness Check
questions may signal a decision to send the project back for more work. Next, as at Gate 1, the project is
scored on the Seven Forces factors using a scorecard, but on 0-10 scales.

Gate 1 Must Meet Criteria

Display this chart on a screen and debate the answers, reaching a consensus yes or no.
A consensus No on any of these signals an immediate Kill Explanation

Must Meet Criterion Yes No

Project is within the strategic mandate of the business

Minimum acceptable market size – enough to be of interest

(market size likely exceeds $XXX M)
Commercially feasible – it can be done; and we probably can do it if
we decide to
Technically feasible – no obvious reasons why we can’t develop it, or
why solution is not technically feasible (at least 50-50 chance)
Project meets our business’s social, legal, safety, health,
environmental and legal policies
No ‘knock out’ or ‘killer variables – nothing evident that will severely
damage this project (examples: new legislation, a new technology,
events taking place in the Company or in the market or industry)

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Gate 1 ‘Idea Screening’ Scorecard: Print to Use
Score
Criteria: Low (0) Medium (1) High (2) (0,1,2)

The Seven Forces

1. Strategic Alignment Product not in alignment with or Product aligns with our strategy Product aligns well with our
•Fits our strategy, aligned important to our business fairly well; moderately important business strategy; very
•Important to our strategy strategy; not important to do: to do strategically important to strategy
KILL

2. Product Competitive Advantage Essentially same as Somewhat different than Clearly differentiated from
•Differentiated product; unique competition, not differentiated; competition; modest value competitive products; offers
customer benefits no compelling value proposition proposition; offers the customer unique customer benefits; a
•Compelling value proposition benefits, but not unique benefits compelling value proposition;

3. Market Attractiveness
•Market size, growth & potential
•Competitive situation (how tough &
intense?)
4. Leverages Our Core
Competencies in…
•Technology
•Manufacturing/operations
•Marketing ,distribution, brand name
& sales-force
Small or no market; low growth
& limited long term potential;
tough & intense competition
Cannot leverage our
competencies; do not have the
needed technical skills &
knowledge; cannot leverage our
sales-force, brand name &
distribution; does not fit our
operations skills & facilities
Moderate market, modest
growth, adequate long term
potential, some competition
Leverages our core
competencies somewhat; we
have most of the technical skills;
somewhat leverages our sales-
force, brand name & distribution;
fits somewhat our operations
skills & facilities
Large, growing, attractive
market; good long term
potential; weaker competition
Leverages well our
competencies; we have the
technical skills & knowledge;
can leverage our sales-force,
brand name & distribution; fits
well our operations skills &
facilities

5. Technical Feasibility
•Size of technical gap
•Newness of technology
•Technical complexity
Low feasibility; big technical gap
(must invent new science); new
technology; complex
technically– many technical
barriers
Quite feasible, moderate
technical gap; not too difficult
technically; some technical
barriers, but can envision
solutions
High feasibility; small technical
gap; a repackage of existing
technology; simple technically –
few/no technical barriers

6. Potential for Reward Limited potential reward; difficult Moderate /adequate potential Huge potential reward; we can
•Size of prize to make money here; I would reward; we can make fair money make good money here; I would
•Can we make money her? not invest my own money in this here. I would invest my own invest my own money in this
project: KILL money with some concern here project

7. Risk
•Uncertainty level
•Newness of market & technology
•Cost to do versus payoff
High uncertainties & many
unknowns; new area for us
(technical or market); big cost to
do relative to payoff
Moderate uncertainties & some
unknowns; somewhat familiar
market & technology; moderate
cost to do relative to pay-off
Low uncertainties & few
unknowns; familiar market &
technology for us; low cost to do
relative to payoff
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Gate 3 Readiness Check Criteria

Display this chart on a screen and agree on the answers. Task or deliverable must be in
place or done, but also have quality work (data integrity). A consensus No on any of
these usually signals the need for rework

Work is done & data integrity exists Yes No

1. VoC study done, with data integrity

2. Market analysis done, with data integrity
3. Competitive analysis done, with data integrity
4. Technical feasibility done, with data integrity
5. Operations assessment (source of supply) done, with data
integrity
6. Concept tests done with users/customers, with data integrity
7. Product Definition in place – robust
8. Financial analysis done, with data integrity
9. Business Case in place, with data integrity
10. Tentative Plans through to Launch in place, quality work
11. Preliminary Launch Plan in place
12. Preliminary Operations Plan in place 8
Gate 3 Go to Development Scorecard
Print to Use at Gate Meeting (Also for Gates 4 & 5)
Score
Criteria: 7 Forces 0 5 10 (0-10)

1. Strategic Alignment Product not in alignment with or Product aligns with our strategy Product aligns well with our
•Fits our strategy, aligned important to our business strategy; fairly well; moderately important to business strategy; very important to
•Important to our strategy not important to do: KILL do strategically our strategy

2. Product Competitive Advantage
•Differentiated product; unique customer
benefits
•Compelling value proposition
•Based on customer feedback in Stage 2
3. Market Attractiveness
•Market size, growth & potential
•Competitive situation (how tough &
intense? margins earned)
•Backed by facts from Stage 2
4. Leverages Core Competencies in…
•Technology
•Manufacturing/operations
•Marketing ,distribution, brand name &
sales-force
Essentially same as competition,
not differentiated; no compelling
value proposition; negative or
neutral customer feedback:
Small or no market; low growth &
limited long term potential;
tough & intense competition, low
margins
Cannot leverage our
competencies; do not have the
needed technical skills & knowledge
cannot leverage our sales-force,
brand name & distribution; does not
fit our operations skills & facilities
Somewhat different than
competition; modest value
proposition; offers the customer
benefits, but not unique benefits
Moderate market, modest growth,
adequate long term potential, some
competition; adequate margins
earned,
Leverages our core competencies
somewhat; we have most of the
technical skills; somewhat
leverages our sales-force, brand
name & distribution; fits somewhat
our operations skills & facilities
Clearly differentiated from
competitive products; offers unique
customer benefits; a compelling
value proposition; based on strong
customer feedback in Stage 2
Large, growing, attractive market;
good long term potential; weaker
competition; good margins earned;
supported by facts
Leverages well our competencies;
we have the technical skills &
knowledge can leverage our sales-
force, brand name & distribution; fits
well our operations skills & facilities

5. Technical Feasibility
•Size of technical gap
•Newness of technology
•Technical complexity
•Demonstrated technical feasibility
(proof of concept)
Low feasibility; big technical gap
(must invent new science); new
technology; complex technically–
many technical barriers; have not
been able to demonstrate proof of
concept
Quite feasible, moderate technical
gap; not too difficult technically;
some technical barriers, but can
see solutions; no proof of concept
yet, but close – based on work tin
Stage 2, solution appears quite
feasible
High feasibility; small technical gap;
a repackage of existing technology;
simple technically – few/no
technical barriers; have been able
to demonstrate proof of concept in
Stage 2

6. Potential for Reward NPV negative at risk-adjusted
•Profitability, (NPV, IRR) discount rate; IRR<10%;
•Payback Period Payback Period > 5 years;
Productivity Index < hurdle
•Productivity Index
KILL
NPV just about zero at risk-adjusted
discount rate (i.e. meets financial
criterion); IRR = 20%;
Payback Period about 3 years;
Productivity Index = hurdle
NPV very positive at risk-adjusted
discount rate; (i.e. exceeds financial
criterion); IRR > 30%;
Payback Period < 2 years;
Productivity Index >> hurdle

7. Risk Highly uncertain project, many
•Uncertainty level unknowns; new market or
•Newness of market & technology technology for us; many critical
assumptions; risk/reward (max all in
•Validity of critical assumptions
cost of project/ NPV) not
•Risk/reward ratio
acceptable)
Moderate uncertainties & some
unknowns; somewhat familiar
market & technology; assumptions
are reasonable; risk/reward (max all
in cost of project/ NPV) is
acceptable)
Project has few or no uncertainties
& unknowns; familiar market &
technology to us; few critical
assumptions; risk/reward (max all in
cost of project/ NPV) is very
acceptable) 9

References
1. A good summary of best practices in portfolio management is in: R.G. Cooper, “Portfolio Management
for Product Innovation”, Chapter 7.2 in: Project Portfolio Management: A Practical Guide to Selecting
Projects, Managing Portfolios, and Maximizing Benefits, ed. By H. Levine (San Francisco: Jossey-Bass
Business & Management, John Wiley & Sons Imprint), 2005. See also Portfolio book, next page..

2. A scorecard for advanced technology (technology development) projects appears in: Cooper, R.G.,
“Managing technology development projects – Different than traditional development projects,”
Research-Technology Management, 49, 6, Nov-Dec 2006, pp 23-31. Available on Cooper’s webpage.

3. How to sharpen the gates and Go/Kill decisions is revealed in: R.G. Cooper, “Effective gating: Make
product innovation more productive by using gates with teeth”, Marketing Management Magazine,
March-April 2009, pp 12-17. Available on Cooper’s webpage.

4. A first-class summary of the many research studies into what drives new product success and the
success predictors in NPD is provided as Chapter 1 in the PDMA handbook, written by Cooper: See:
Cooper, Robert G. (2013), "New Products -- What Separates the Winners from the Losers and What
Drives Success," in the PDMA Handbook of New Product Development, 3rd Edition, edited by Kenneth
B. Kahn, Hoboken, New Jersey: John Wiley & Sons, Inc. Chapter 1. Available on Cooper’s webpage.

5. Project selection methods for bolder, higher-risk projects are outlined in: Cooper, R.G., “Where Are All
the Breakthrough New Products? Using Portfolio Management to Boost Innovation,” Research-
Technology Management, Vol 156, No 5, Sept-Oct 2013, pp 25-32. Available on Cooper’s webpage

 Webpage www.bobcooper.ca See also books next page.

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References – Books: see www.amazon.com

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