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Structuring the New Product Development Pipeline

Author

Listed:
  • 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)

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.

Suggested Citation

  • Ming Ding & Jehoshua Eliashberg, 2002. "Structuring the New Product Development Pipeline," Management Science, INFORMS, vol. 48(3), pages 343-363, March.
  • Handle: RePEc:inm:ormnsc:v:48:y:2002:i:3:p:343-363
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    File URL: http://dx.doi.org/10.1287/mnsc.48.3.343.7727
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Karan Girotra & Christian Terwiesch & Karl T. Ulrich, 2007. "Valuing R& D Projects in a Portfolio: Evidence from the Pharmaceutical Industry," Management Science, INFORMS, vol. 53(9), pages 1452-1466, September.
    2. Sam Ransbotham & Sabyasachi Mitra, 2010. "Target Age and the Acquisition of Innovation in High-Technology Industries," Management Science, INFORMS, vol. 56(11), pages 2076-2093, November.
    3. Duijzer, L.E. & van Jaarsveld, W.L. & Dekker, R., 2017. "Literature Review - the vaccine supply chain," Econometric Institute Research Papers EI2017-01, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    4. Scott A. Shane & Karl T. Ulrich, 2004. "50th Anniversary Article: Technological Innovation, Product Development, and Entrepreneurship in Management Science," Management Science, INFORMS, vol. 50(2), pages 133-144, February.
    5. M. Schoonmaker & E. Carayannis & P. Rau, 2013. "The role of marketing activities in the fuzzy front end of innovation: a study of the biotech industry," The Journal of Technology Transfer, Springer, vol. 38(6), pages 850-872, December.
    6. repec:eee:ijrema:v:25:y:2008:i:4:p:261-272 is not listed on IDEAS
    7. Yu, Jiun-Yu & Gittins, John, 2008. "Models and software for improving the profitability of pharmaceutical research," European Journal of Operational Research, Elsevier, vol. 189(2), pages 459-475, September.
    8. Shuyi Wang & Aurélie Thiele, 2017. "A comparison between the robust risk-aware and risk-seeking managers in R&D portfolio management," Computational Management Science, Springer, vol. 14(2), pages 197-213, April.
    9. Temponi, Cecilia & Bryant, Michael D. & Fernandez, Benito, 2009. "Integration of business function models into an aggregate enterprise systems model," European Journal of Operational Research, Elsevier, vol. 199(3), pages 793-800, December.
    10. Jehoshua Eliashberg & Anita Elberse & Mark A.A.M. Leenders, 2006. "The Motion Picture Industry: Critical Issues in Practice, Current Research, and New Research Directions," Marketing Science, INFORMS, vol. 25(6), pages 638-661, 11-12.
    11. Gupta, Abhishek & Pawar, Kulwant S. & Smart, Palie, 2007. "New product development in the pharmaceutical and telecommunication industries: A comparative study," International Journal of Production Economics, Elsevier, vol. 106(1), pages 41-60, March.
    12. Creemers, Stefan & De Reyck, Bert & Leus, Roel, 2015. "Project planning with alternative technologies in uncertain environments," European Journal of Operational Research, Elsevier, vol. 242(2), pages 465-476.
    13. Giarratana, Marco S. & Fosfuri, Andrea & Roca, Esther, 2010. "Community-based strategies in action: building and sustaining a product differentiation advantage," INDEM - Working Paper Business Economic Series id-10-01, Instituto para el Desarrollo Empresarial (INDEM).
    14. Colvin, Matthew & Maravelias, Christos T., 2011. "R&D pipeline management: Task interdependencies and risk management," European Journal of Operational Research, Elsevier, vol. 215(3), pages 616-628, December.

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