The Influence of Competition on New Product Development Project Planning Decisions

Abstract

In a typical new product development (NPD) project, there are many alternatives, ranging from incremental changes or re-engineering of an existing product in order to compete better in an existing market, to breakthrough thinking and the development of a new product using new technologies that satisfy the needs and expectations of customers in new markets. We tested the hypothesis that competition influences the decisions of entrepreneurs managing NPD projects. The findings presented in this paper are based on a controlled experiment conducted in several project management courses using a simulation game. The results reveal that a competitive environment in which participants compete for the same customers tends to impact the planning of NPD projects. The paper contributes to the managerial practice by offering integration of “What if?” analysis in the planning phase of NPD projects. It can assist entrepreneurs to evaluate the tradeoffs of the feasible alternatives in a noncompetitive environment, and explain how market conditions, such as competitor entry behavior, affect the project plan. A decision on the best project plan, among all the feasible project plans, is based on management strategy that takes into account the level of competition along with the uncertainty in the technology, market, and environment. The game, combined with a simulation-based training tool, used in this study, offer an opportunity to develop and to try different alternatives for the management of NPD projects without risking the consequences of project failure.