Structuring the New Product Development Pipeline

Ming Ding () and Jehoshua Eliashberg ()
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Ming Ding: Department of Marketing, Smeal College of Business Administration, Pennsylvania State University, University Park, Pennsylvania 16802
Jehoshua Eliashberg: Marketing Department, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104

Management Science, 2002, vol. 48, issue 3, 343-363

Abstract: In many new product development (NPD) situations, the development process is characterized by uncertainty, and no single development approach will necessarily lead to a successful product. To increase the likelihood of having at least one successful product, multiple approaches may be simultaneously funded at the various NPD stages. The managerial challenge is to construct ex ante an appropriate NPD pipeline by choosing the right number of approaches to be funded at each stage. This so-called pipeline problem is also present in, among others, advertising copy selection and new products test markets problems. We describe here a normative model for structuring pipelines for such situations. The optimal structure of the pipeline is driven by the cost of the development approach, its probability of survival, and the expected profitability. We illustrate the workability and implications of the model by applying it to some real-world scenarios in the pharmaceutical industry, and by comparing its normative pipeline recommendations against actual pipelines. Our results suggest that, for the cases we studied, firms tend to use narrower pipelines for their new drug development than they should, and thereby they underspend on research and development. We also present general qualitative insights for one- and two-stage NPD optimal pipeline structures.

Keywords: Marketing; New products; Innovations pipelines; R& D projects; Pharmaceutical industry (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (27)

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