Time-to-market, window of opportunity, and salvageability of a new product development

A. Messica, A. Mehrez

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

The time-to-market in the presence of a window of opportunity is analyzed usinga probabilistic model, i.e. a model where the completion time of new product development is a random variable characterized by a gamma distribution. Two cases are considered: the first, a case where the discounted return-on-investment exceeds the return expected from a conservative investment—e.g. investment in bonds—termed ‘the profitable case’; and the second, a case where the discounted return-on-investment just balances the cost of new product development, termed ‘the salvageable case’. The model constructed is focused on the financial aspects of new product development. It allows a decision-maker to monitor, as well as terminate, a project based on its expected value (at any time prior to completion) by computing the mean time-to-market that provides profit, investment salvage, or loss. The mean time-to-market computed by the model may be compared with that estimated by the technology development team for decision-making purposes. Finally, in the presence of a window of opportunity and for the specific cases analyzed, we recommend to always keep the expenditure rate lower than the expected return rate. This will provide the decision-maker a salvageable exit opportunity if project termination is decided. Copyright.

Original languageEnglish
Pages (from-to)371-378
Number of pages8
JournalManagerial and Decision Economics
Volume23
Issue number6
DOIs
StatePublished - 1 Jan 2002

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