Managing technology development for safety-critical systems
This paper presents a model that determines the optimal budget allocation strategy for the development of new technologies for safety-critical systems over multiple decision periods. The case of the development of a hypersonic passenger airplane is used as an illustration. The model takes into account both the probability of technology development success as a function of the allocated budget, and the probability of operational performance of the final system. It assumes that the strategy is to consider (and possibly fund) several approaches to the development of each technology to maximize the probability of development success. The model thus decomposes the system's development process into multiple technology development modules (one for each technology needed), each involving a number of alternative projects. There is a tradeoff between development speed and operational reliability when the budget must be allocated among alternative technology projects with different probabilities of development success and operational reliability (e.g., an easily and quickly developed technology may have little robustness). The probabilities of development and operational failures are balanced by a risk analysis approach which allows the decision maker to optimize the budget allocation among different projects in the development program at the beginning of each budget period. The model indicates that by considering reliability in the R&D management process, the decision maker can make better decisions, optimizing the balance between development time, cost, and robustness of safety-critical systems.
|Date of creation:||24 May 2002|
|Date of revision:|
|Contact details of provider:|| Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN|
Web page: http://www.iese.edu/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Abdul Ali & Manohar U. Kalwani & Dan Kovenock, 1993. "Selecting Product Development Projects: Pioneering versus Incremental Innovation Strategies," Management Science, INFORMS, vol. 39(3), pages 255-274, March.
- Matthew J. Liberatore & George J. Titus, 1983. "The Practice of Management Science in R&D Project Management," Management Science, INFORMS, vol. 29(8), pages 962-974, August.
- Aoki, Reiko, 1991. "R&D Competition for Product Innovation: An Endless Race," American Economic Review, American Economic Association, vol. 81(2), pages 252-56, May.
- C. Derman & G. J. Lieberman & S. M. Ross, 1976. "Optimal System Allocations with Penalty Costs," Management Science, INFORMS, vol. 23(4), pages 399-403, December.
- James E. Smith & Robert F. Nau, 1995. "Valuing Risky Projects: Option Pricing Theory and Decision Analysis," Management Science, INFORMS, vol. 41(5), pages 795-816, May.
- Jensen, Elizabeth J, 1987. "Research Expenditures and the Discovery of New Drugs," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 83-95, September.
When requesting a correction, please mention this item's handle: RePEc:ebg:iesewp:d-0465. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Noelia Romero)
If references are entirely missing, you can add them using this form.