
Operations, Information and Decisions Papers
Document Type
Journal Article
Date of this Version
2000
Publication Source
Manufacturing & Service Operations Management
Volume
2
Issue
4
Start Page
337
Last Page
349
DOI
10.1287/msom.2.4.337.12341
Abstract
For most firms, new product development is the engine for growth and profitability. A firm's new product success depends on its ability to manage the product development process in a way that employs scarce resources to achieve the goal of the firm as well as the specific project's objectives. Simple and measurable performance metrics have been proposed and applied to monitor and compensate the development teams. In this paper, we develop a modeling frame work to analyze the implications of setting managerial priorities for three commonly used new product performance metrics: (1) time-to-market, (2) product performance, and (3) total development cost. We model new product development as a “product performance production” process that requires scarce development resources. Setting a target for development teams for each of these performance metrics can constrain this performance production process and, thereby, affect the other performance metrics. We model the constrained process as a restricted case of a general process that does not have such constraints. We benchmark each constrained process against the optimal, unrestricted process with respect to the level of the resource intensity employed during the development process, the time-to-market, and the performance level of the new product at launch. We show that an overly ambitious time-to-market target leads to an upward bias in resource intensity usage and a downward bias in product performance (i.e., evolutionary product innovation). In addition, our results suggest that the target time-to-market approach may ignore the effect of cannibalization and, thus, can perform suboptimally if a significant degree of cannibalization in the existing product market is expected. Given a target product performance, we show that the coordination between marketing and R&D is easier because the resulting development resource intensity and time-to-market decisions becomes separable. However, an overly ambitious product performance target leads to an upward bias in the development resource intensity and a delayed product launch that misses the window of opportunity. Finally, we show that the target development cost approach can lead a downward bias in product performance and a premature product launch. The above analyses are performed for a monopolistic firm, and they are extended to passive and active competitive environment.
Keywords
new product development, product performance, time-to-market, development costs, performance metrics
Recommended Citation
Cohen, M. A., Eliashberg, J., & Ho, T. (2000). An Analysis of Several New Product Performance Metrics. Manufacturing & Service Operations Management, 2 (4), 337-349. http://dx.doi.org/10.1287/msom.2.4.337.12341
Included in
Business Administration, Management, and Operations Commons, Marketing Commons, Other Business Commons
Date Posted: 27 November 2017
This document has been peer reviewed.