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Managing New Product Definition in Highly Dynamic Environments


Author Info

  • Shantanu Bhattacharya

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

  • V. Krishnan

    (Department of Management, The University of Texas at Austin, Austin, Texas 78712)

  • Vijay Mahajan

    (Department of Marketing Administration, The University of Texas at Austin, Austin, Texas 78712)

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    In highly dynamic environments, characterized by changing customer preferences and uncertainty about competitive products, managing the development of a new product is a complex managerial task. The traditional practice, recommended in the literature, of reaching a sharp definition early in the new product development (NPD) process may not be optimal, desirable or even feasible in such dynamic situations. Under high uncertainty, forcing early finalization of specifications may result in a firm getting locked into an incorrect definition. Based on our study of NPD in the high technology industry, we present a model of an approach called real-time definition, in which a firm adapts its product definition process to the market and competitive environment. Uncertainty in the product definition is resolved through frequent, repeated interactions with customers and using a flexible development process. We find that early definition is optimal only in a limited set of situations. To maximize its anticipated profits, a firm should tune its definition process to the prevailing level of market uncertainty, the marginal value of information obtained from the customer during the NPD process, and its own risk-profile and internal development capabilities. Effects of competition on a firm's definition approach are also examined, and implications for managers of a NPD process are presented using a conceptual framework.

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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 44 (1998)
    Issue (Month): 11-Part-2 (November)
    Pages: S50-S64

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    Handle: RePEc:inm:ormnsc:v:44:y:1998:i:11-part-2:p:s50-s64

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    Keywords: New Product Development; Product Definition; Dynamic Environments;


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    Cited by:
    1. Zhang, Qingyu & Vonderembse, Mark A. & Cao, Mei, 2009. "Product concept and prototype flexibility in manufacturing: Implications for customer satisfaction," European Journal of Operational Research, Elsevier, vol. 194(1), pages 143-154, April.
    2. Lacourbe, Paul, 2012. "A model of product line design and introduction sequence with reservation utility," European Journal of Operational Research, Elsevier, vol. 220(2), pages 338-348.
    3. Mouricou, Philippe & Garreau, Lionel, 2011. "La fabrique de la stratégie dans un projet immobilier : Construire du sens sur la base de représentations visuelles," Economics Papers from University Paris Dauphine 123456789/6461, Paris Dauphine University.
    4. Laciana, Carlos E. & Oteiza-Aguirre, Nicolás, 2014. "An agent based multi-optional model for the diffusion of innovations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 394(C), pages 254-265.
    5. Thomas Gillier & Gérald Piat & Benoît Roussel & Patrick Truchot, 2009. "Portfolio Management Of Innovation Fields : Applying Ck Design Theory In Cross Industry Exploratory Partnership," Post-Print hal-00416790, HAL.
    6. McKelvie, Alexander & Haynie, J. Michael & Gustavsson, Veronica, 2011. "Unpacking the uncertainty construct: Implications for entrepreneurial action," Journal of Business Venturing, Elsevier, vol. 26(3), pages 273-292, May.
    7. Elmaghraby, Salah E., 2005. "On the fallacy of averages in project risk management," European Journal of Operational Research, Elsevier, vol. 165(2), pages 307-313, September.
    8. Andrea Fosfuri & Marco S. Giarratana & Esther Roca, 2010. "Community-based strategies in action: building and sustaining a product differentiation advantage," Business Economics Working Papers id-10-01, Universidad Carlos III, Instituto sobre Desarrollo Empresarial "Carmen Vidal Ballester".


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