A gated new product development process for wealth managers

A gated new product development process for wealth managers

A large percentage of investment products launched by wealth managers remain behind their targets, both in assets under management and revenues. This issue can be addressed by introducing a gated new product development process implementing i) a continuous ideation stage, ii) a concept development stage, and iii) a product launch stage. Gates between stages are passed based on a multi-dimensional set of both quantitative and qualitative metrics. A governance structure and the firm commitment of senior management round-up the framework.

In wealth management new product development using a structured approach is mainly implemented for developing structured products and launching UCITS compliant mutual funds. Apart from these two areas, in which the power of innovation is reasonably high, developing new products using a systematic and streamlined process often non-existing.

When investment professionals have an idea for a new investment product or solution, they start by putting together a pitch presentation showing how the product would look like and how it would have performed. They then talk to client facing people in an ad-hoc way to get feedback on their idea. Then the idea is presented in front of a product committee, sometimes a management committee, to obtain formal approval. Only a small number of product ideas that pass the initial stage do not make it to launch and unfortunately many of the launched products do not exhibit the expected success.

What is common practice in the manufacturing industry, namely detailed market research, proto­typing, as well as product testing before launch, is largely non existing in wealth manage­ment.

The stage-gate approach

The Stage-GateTM approach for managing the pro­duct development process was introduced in 1986 by Robert G. Cooper (Cooper, 2001). With an aim to accelerate the process from idea to successful launch, the stage-gate approach is based on a sequence of stages, each followed by a decision gate. The original approach implements the five stages scoping, building business case, development, testing and validation, and launch, each producing a set of well-defined deliverables. The goal of the gates is to eliminate unsuccessfully projects early on in the development process, thus being able to use the available resources for developing those ideas that have the highest chance of success.

Figure 1 illustrates a new product development process for developing investment solutions. There exist two key distinctions

  1. developing services requires limited capital investment, and
  2. innovation is usually rather easy to copy.

The proposed gated new product development process relies on three stages, continuous ideation, concept development, and product launch preparation.

Figure 1 – Illustration of a gated new product development process

Figure 1 – Illustration of a gated new product development process

Stage 1 – Continuous ideation

Innovation does not usually occur by chance. It is therefore essential to introduce a well-defined process, supported by tools, to stimulate and manage idea generation. This process should allow gathering lots of new ideas and quickly evaluate them for further investigation. It is common that more than 50% of all initial ideas will not pass the idea selection gate. It is important to provide objective feedback for all submitted ideas.

As show in Figure 2, idea generation should be approach from different angles relying on internal as well as external sources and using structured and unstructured approaches.

Figure 2 – A process for idea generation and management

Figure 2 – A process for idea generation and management

Open innovation techniques, as well as relying on social networks for idea generation, often found in consumer goods industry, are less prominent for developing wealth management investment solutions.

Gate 1 – Idea selection

The first gate aims at selecting those ideas that can be translated into innovations, that is, marketable investment solutions that provide value to both the client and the wealth manager in excess to those of existing solutions.

In a 60 seconds elevator pitch type presentation, each idea is presented to an audience of relationship managers, sales, and marketing experts. The pitch should answer four questions:

  1. What problem is the investment solution solving?
  2. What are the novel and unique features of the investment solution?
  3. Why will any investor buy this investment solution?
  4. How with the wealth manager earn money selling the investment solution?

In addition, the idea is presented to the product development committee and evaluated along a set of well-defined metrics. The metrics should address the meritness of the idea in the context of the wealth manager’s strategy as well as relative to other ideas and existing investment solutions.

Ideas retained move on to the second stage and are allocated dedicated development resources.

Stage 2 – Concept development

In the second stage, for each selected idea, a cross-functional project team is set-up. This team develops a detailed product concept containing the following deliverables:

  1. A targeted market segment analysis including attractiveness, market size, and expected growth rates.
  2. A competitive analysis showing against which internal and external investment solutions, the new solution will be competing.
  3. A technical production plan detailing how the investment solution will be produced. This includes at least required skills, investment processes, data, and IT systems.
  4. Back-tests showing how the investment solution is expected to perform.
  5. A business case showing the required investments and viability of the new investment solution.

Gate 2 – Investment solution prioritization

At the second gate, the product development committee should evaluate each project based on the deliverables of stage 2. Projects that do not satisfy the set criteria should be killed. Projects retained should be prioritized in line with the wealth manger’s product strategy and his current investment solutions pipeline, as shown in Figure 3. Some projects may be put on hold rather than being killed outright.

Figure 3 – New investment solutions pipeline structure

Figure 3 – New investment solutions pipeline structure

Stage 3 – Launch preparation

During the third stage, the investment solution launch is prepared. Deliverables are:

  1. Internal communication plan (product awareness, training, etc.).
  2. Marketing plan (customer value, product positioning, competitive reaction, marketing material, etc.).
  3. Sales management plan (target accounts, sales budget, campaigns, etc.).
  4. Investment solution handling plan (process from clients, through sales, to production, and back to clients, support, exception handling, etc.).

Gate 3 – Launch readiness

The final gate to be passed is the “go for launch” gate. Based on the deliverables the final approval to launch the investment solution is given. This gate should also include any external dependencies involved in the launch process, as, for example, getting regulatory approval.

Once an investment solution is launched, its res­ponsibility is transferred from the product development team to the product lifecycle management team which will accompany it throughout its lifecycle.

Metrics at the gates

Metrics are the twin side of management. They should be based on strategic objectives and avoid gaming the system. They should be kept simple, transparent, and easy to obtain. Best practice suggests structuring metrics around four dimensions:

  • Financial metrics (return on investment, revenues, sales volumes, break-even, etc.).
  • Product strategy metrics (acceptance, profit goals, competitive advantage, fit with business model, etc.).
  • Process metrics (short-term project objec­tives, medium-term product objectives, long-term business objectives).
  • Reality check metrics (client satisfaction, employee satisfaction, learning effect, productivity, resource utilization, product control).

All metrics should be transparently communicated. Simplicity should be favored over completeness. In addition, it is key to bear in mind that innovating is about the “unknown” and therefore precise metrics are usually not available.

Governance is key

Product development is paradoxical in that it requires creativity, insight, flexibility, and individual ideas but also control structure, and collaboration. Best practice has shown that successful organizations base their governance structure on five key roles.

  • Process owner – Senior manager with high visibility within the organization coaching and promoting the new product development process.
  • Process manager – Mid-level manager running the new product development process.
  • Product development committee – Members of the senior management with resource and budget responsibility representing all key functional areas.
  • Product development team – Cross-functional project team responsible for executing the new product development process and providing the required deliverables at the gates.
  • Business line employees – Employees acting as idea generators as well as potential resources to participate in product development projects.

Lessons learned

  • Collaborative ideation – Innovation requires an appropriate environment. Ideas are usually not the fruit of a lonely individual, but the result of cross-functional collaboration.
  • Clear and disciplined process – Introducing a new product development process accelerates the process from idea to successfully product launch. It also allows prioritizing product ideas and managing the product pipeline.
  • Multi-dimensional metrics – Measuring the unknown is hard. Selection and prioritization metrics should be multi-dimensional to illuminate the multiple facets of new product ideas.
  • Roles and responsibilities – A sound governance structure is required to assure that people know who does what and who is responsible for which decisions.


Cooper, Robert G. (2001). Winning at New Products, 3rd edition, Basic Books, New York, NY
Baumgartner, Jeffrey (2010). The Way of the Innovation Master JPM, Erps-Kwerps, Belgium
Stark, John (2011). Product Lifecycle Management, 2nd edition, Springer Verlag, London, United Kingdom
Morris, Langdon (2011). The Innovation Master Plan, Innovation Academy, Walnut Creek, CA

  1. Comment by Claude Diderich on November 18th, 2012 | Reply

    You can only present an idea for the first time, once! So when you have the chance to present it, be aware that a new idea is not only ‘a creative product’. Gijs van Wulfen presents in his post A good new business case in 7 slides a simple but efficient approach to presenting new ideas. His approach could be used to structre the ideation input into the new product development process.

  2. Comment by Claude Diderich on August 19th, 2012 | Reply

    You may want to have a look at the associated training course Training – New Product Development in Wealth and Asset Management.

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