New Product Development: The Performance and Time-to-Market Tradeoff

Morris A. Cohen, Jehoshua Eliasberg and Teck Ho ()
Additional contact information
Morris A. Cohen: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104-6366
Jehoshua Eliasberg: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104-6366

Management Science, 1996, vol. 42, issue 2, 173-186

Abstract: Reduction of new product development cycle time and improvements in product performance have become strategic objectives for many technology-driven firms. These goals may conflict, however, and firms must explicitly consider the tradeoff between them. In this paper we introduce a multistage model of new product development process which captures this tradeoff explicitly. We show that if product improvements are additive (over stages), it is optimal to allocate maximal time to the most productive development stage. We then indicate how optimal time-to-market and its implied product performance targets vary with exogenous factors such as the size of the potential market, the presence of existing and new products, profit margins, the length of the window of opportunity, the firm's speed of product improvement, and competitor product performance. We show that some new product development metrics employed in practice, such as minimizing break-even time, can be sub-optimal if firms are striving to maximize profits. We also determine the minimal speed of product improvement required for profitably undertaking new product development, and discuss the implications of product replacement which can occur whenever firms introduce successive generations of new products. Finally, we show that an improvement in the speed of product development does not necessarily lead to an earlier time-to-market, but always leads to enhanced products.

Keywords: new product development; time-to-market; new product performance (search for similar items in EconPapers)
Date: 1996
References: Add references at CitEc
Citations: View citations in EconPapers (113)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.42.2.173 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:42:y:1996:i:2:p:173-186

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().