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An option approach to the new product development process: a case study at Philips Electronics
Author(s) -
Lint Onno,
Pennings Enrico
Publication year - 2001
Publication title -
randd management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.253
H-Index - 102
eISSN - 1467-9310
pISSN - 0033-6807
DOI - 10.1111/1467-9310.00206
Subject(s) - new product development , electronics , process (computing) , product (mathematics) , portfolio , computer science , phase (matter) , project portfolio management , point (geometry) , development (topology) , matrix (chemical analysis) , operations research , manufacturing engineering , operations management , risk analysis (engineering) , systems engineering , process management , project management , business , engineering , electrical engineering , mathematics , marketing , physics , mathematical analysis , geometry , materials science , finance , quantum mechanics , composite material , operating system
The paper considers the product development process as a series of (real) options with reducing uncertainty over time. Criteria are developed to decide on speeding up or delaying the development process. The paper demonstrates how, in the R&D phase, any particular project may be assigned within a 2 × 2 matrix of uncertainty versus R&D option value. A similar matrix can be established for the product launch phase. The matrices support portfolio management throughout the different phases of development and enable management to decide on an appropriate point at which to abandon individual projects. The approach originates from applying real options insights into the product development process at Philips Electronics. The paper is illustrated with some actual R&D projects.