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Technology Selection and Commitment in New Product Development: The Role of Uncertainty and Design Flexibility

Author

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  • V. Krishnan

    (McCombs School of Business, The University of Texas at Austin, Austin, Texas 78712)

  • Shantanu Bhattacharya

    (INSEAD, Boulevard de Constance, Fontainebleau, 77305, France)

Abstract

Selecting the right technologies to incorporate in new products is a particularly challenging aspect of new product definition and development. While newer advanced technologies may offer improved performance, they also make the product development process more risky and challenging. In this paper, we focus on the problem of technology selection and commitment under uncertainty, a major challenge to firms in turbulent environments. We argue that the "pizza-bin" approach of rejecting prospective technologies outright may not serve firms well when the pressure to differentiate products is enormous. After motivating the challenges and decisions facing firms using a real-life application from Dell Computer Corporation, we formulate a mathematical model of a firm that must define its products in the presence of technology uncertainty. Specifically, the firm faces two options: (i) a proven technology that is known to be viable and (ii) a prospective technology that offers superior price to performance results but whose viability is not a fully certain outcome. To minimize the impact of technology uncertainty, we consider two approaches to design flexibility, termed parallel path and sufficient design, which allow the firm to concurrently develop its products while the technology is being validated. Our analysis helps understand appropriateness of the different flexible design approaches. We illustrate our model with the Dell portable computer example and note the managerial implications of our analysis.

Suggested Citation

  • V. Krishnan & Shantanu Bhattacharya, 2002. "Technology Selection and Commitment in New Product Development: The Role of Uncertainty and Design Flexibility," Management Science, INFORMS, vol. 48(3), pages 313-327, March.
    • Handle: RePEc:inm:ormnsc:v:48:y:2002:i:3:p:313-327
    DOI: 10.1287/mnsc.48.3.313.7728
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    References listed on IDEAS

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    1. V. Krishnan & Karl T. Ulrich, 2001. "Product Development Decisions: A Review of the Literature," Management Science, INFORMS, vol. 47(1), pages 1-21, January.
    2. Arditti, Fred D & Levy, Haim, 1980. "A Model of the Parallel Team Strategy in Product Development," American Economic Review, American Economic Association, vol. 70(5), pages 1089-1097, December.
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    4. Thomke, Stefan H., 1997. "The role of flexibility in the development of new products: An empirical study," Research Policy, Elsevier, vol. 26(1), pages 105-119, March.
    5. Shantanu Bhattacharya & V. Krishnan & Vijay Mahajan, 1998. "Managing New Product Definition in Highly Dynamic Environments," Management Science, INFORMS, vol. 44(11-Part-2), pages 50-64, November.
    6. Christoph H. Loch & Christian Terwiesch, 1998. "Communication and Uncertainty in Concurrent Engineering," Management Science, INFORMS, vol. 44(8), pages 1032-1048, August.
    7. Graves, Samuel B., 1989. "The time-cost tradeoff in research and development: A review," Engineering Costs and Production Economics, Elsevier, vol. 16(1), pages 1-9, February.
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