New Product Development Portfolio Research Articles

Managing Knowledge Requirements in the NPD Portfolio Selection Process Using Knowledge Clustering and Prioritization: A Case Study of an Australian Train Operator

In recent decades, knowledge-oriented new product development (NPD) has turned into a significant competitive advantage. It largely depends on the proper management of knowledge processes performed by knowledge management (KM). Among different KM processes addressed in the KM literature, knowledge clustering and prioritization (KCP) has received scant attention. However, it has a significant impact on the performance of other KM processes and is an integral part of the NPD process. KCP helps KM and NPD managers identify knowledge areas’ importance, risk, and cost implications in knowledge-intensive industries such as machinery and appliances. This article addresses this issue by introducing a two-phase research approach to cluster and prioritize knowledge areas. In the first phase, the study data, including knowledge areas, characteristics, and comparisons, are collected through an interview. Then, in the second phase, best-worst method (BWM) and K-means algorithm are employed to prioritize and cluster knowledge areas, respectively. The approach is applied to prioritize and cluster ten knowledge areas adopted by the operations team of an Australian train operator. Results revealed that site and construction managements are vital knowledge areas, whereas change management, programming, and cost control are less urgent for the operation teams.

Risk Analysis: Changing the Story with the Statistical Stochastic Process and VaR

With the dramatically increased demand for data analysis, statistical techniques play a key role in modern society for both academics and practitioners. Statistical techniques have been evolving from descriptive statistics to statistical inference in fields that require the evaluation of uncertainty and the quantification of risks. With the growing complexity of various fields, such as manufacturing and industrial applications, as well as business decision-making, modeling and quantifying risks has become essential. In this paper, we aimed to use statistical risk analysis and Value at Risk (VaR) to address the decision problem for project portfolios. Traditional economic evaluation criteria used in the management of project portfolios, as they pertain to new product development (NPD), are based on the assumption that pinpoint estimations will remain constant in the future. The assumption that NPD is static, however, is clearly unrealistic due to the inherent uncertainty of NPD projects. In this study, we stress the critical role that uncertainty plays in the selection of NPD portfolios, and clarify the reasons why it must not be overlooked. Using Value at Risk measurements, we show how uncertainty plays a critical role in evaluating and prioritizing NPD portfolios. The implications of this study regarding statistically modeling NPD portfolio decisions are provided for academics and practitioners.

Sourcing portfolio diversity in new product development: Antecedents and performance implications

This paper examines the antecedents and performance outcomes of sourcing portfolio diversity in firms’ new product development (NPD). Sourcing portfolio diversity measures the degree to which a firm uses multiple sourcing choices along both organizational and geographic dimensions including domestic in-house sourcing, domestic outsourcing, captive offshoring, and offshore outsourcing. We extend transaction cost economics (TCE) to the portfolio level of analysis and predict that sourcing portfolio diversity in NPD is driven by heterogeneity in two transactional characteristics—technological application diversity, reflecting asset specificity, and variance in project-stage uncertainty. We also argue that the positive effect of sourcing portfolio diversity on firms’ financial performance is driven by aligning sourcing portfolio configuration with the sources of transactional heterogeneity, increased strategic agility, and complementarities between individual sourcing choices. Our empirical study of NPD in the bio-pharmaceutical industry confirms our predictions. We contribute to research on sourcing and NPD by conceptually building and empirically establishing relevance of the sourcing diversity at the portfolio level of analysis and bringing the question of sourcing strategy to the forefront of NPD portfolio management concerns.

An Interval-Based Evolutionary Approach to Portfolio Optimization of New Product Development Projects

The growth of large enterprises in the manufacturing market commonly depends on good New Product Development (NPD) projects; these projects represent a strategy to overcome competitors inside a competitive environment. The management of such projects is usually complex and involves risk due to the changing and conflicting environment. The approaches that tackle the problem lack an explicit consideration of the DM’s attitude facing uncertainty and imprecision related to the risk and particularly in the presence of time-interdependencies. This paper proposes a model of the time-related effects, under imperfect knowledge, and their influence in choosing optimal NPD portfolios. The proposed approach is an interval-based method to solve NPD portfolio optimization problems under different forms of imperfect knowledge. This approach has the advantage of a unified and simple way to model the different sources of imprecision, vagueness, uncertainty, and arbitrariness. The attitude of the DM facing the imperfect knowledge is adjusted by using some meaningful parameters. The research focuses particularly in creating a method useful for risk-averse DMs. The proposal was tested through an experimental design that compared the results achieved by the new method against the expected value in portfolios. The results revealed that high levels of conservatism might prevent wasting resources in failed projects.

Structuring a new product development process portfolio using decoupling thinking

The purpose is to develop a structured new product development (NPD) process portfolio for manufacturing companies that facilitates the organization of NPD processes for both standardized products, focusing on time-to-market, and customized products, focusing on time-to-customer. The research combines different literature streams, enriching and advancing the understanding of decoupling thinking in NPD processes of manufacturing companies. It includes extensive empirical data from six manufacturing companies and presents testable propositions for further research. The resulting NPD process portfolio separates technology development from product development, acknowledges the different drivers and outcomes of processes and addresses the lead-time trade-offs. It provides an overview of potential options for NPD processes and shows different pathways through the processes. Companies can use the portfolio to support decisions related to the overall configuration of their NPD portfolios, the role and the range of different NPD processes, as well as to determine when and how to engage customers.

The Effects of Decentralization in Strategy‐Making and National Culture on NPD Portfolio Planning

Traditionally, the understanding among scholars and practitioners has been that a portfolio of NPD projects is the expression of a firm's strategy and thus it must support the strategy. In keeping with this view, the current study focuses on new product development (NPD) portfolio planning, which is defined as a firm's effort to formulate portfolio decisions using a defined innovation strategy. Connecting portfolio decisions to a defined innovation strategy has been associated with higher innovation success. Surprisingly, empirical research indicates that portfolio decisions do not always support the company's innovation strategy. Furthermore, during recent years, an increasing number of authors underscore the importance of responsiveness and adaptability in portfolio decision‐making. The current study addresses these two issues by examining a direct effect of decentralization in strategy‐making on NPD portfolio planning, and a moderating effect of decentralization in strategy‐making on the relationship between NPD portfolio planning and NPD program success. The study also examines the influence of national culture on the proposed relationships. The theoretical model was tested using data from the 2012 PDMA Comparative Performance Assessment Study. Findings indicate that NPD portfolio planning positively influences NPD program success. Also, results revealed inverted U‐shaped direct and moderating effects, respectively, of decentralization in strategy‐making on NPD portfolio planning, and of decentralization in strategy‐making on the relationship between NPD portfolio planning and NPD program success. With regard to the moderating effect of national culture, results indicate that uncertainty avoidance does not moderate the relationship between NPD portfolio planning and NPD program success. Nonetheless, we found significant moderating effects of individualism and power distance on the curvilinear relationship between decentralization in strategy‐making and NPD portfolio planning.

Forward-Looking Practices and Innovation Performance: The Role Of NPD Agility

This study focuses on the role of forward-looking practices, such as those related to sensing and making sense of the future, to explain innovation performance differences by means of guiding adjustment ongoing development projects within new product development (NPD) portfolios. In this study, rather than assuming an initial NPD project idea may have been seen at the time as able to provide future success for the organisation, we look at the role of NPD portfolio adjustments to translate future projections into potential performance benefits. While some research draws a direct relationship between forward-looking practices and innovation performance, we study the more fine-grained role of forward-looking practices to drive and support decisions to adjust or even terminate NPD projects within a NPD portfolio. These adjustments or terminations to running NPD projects may be in response to future insights gained through forward-looking practices, signalling potentials for a lack of strategic fit of certain ...

Resource management process framework for dynamic NPD portfolios

This paper presents empirical results from a research on how companies developing products reconfigure their resources (we refer to human resources) as changes continuously occur to their new product development (NPD) portfolios. Although resource scheduling and allocation methods have received a wide attention in academic literature, the systematic and holistic resource management processes that support the whole organization's portfolio are still not understood. We have adopted an action research approach and worked together with different project teams of a multi-national company. This research approach has allowed us to get close contact with the difficulties faced by its managers, imposed by the need to quickly respond to the frequent changes in a coordinated manner. This research contributes to an improved understanding of the context in which resource management decisions are made. For practitioners, this proposes a process framework for organizations to effectively manage their resources in the context of dynamic NPD portfolios.

An Empirical Investigation of the Antecedents and Outcomes of NPD Portfolio Success

Managing new product development (NPD) portfolios is difficult and little is known about how successful NPD portfolio management can improve overall firm performance. Despite regular calls in the literature for more research on NPD portfolio management, what successful NPD portfolio management means and how firms can achieve it remains unclear. For this reason, this paper combines theory and previous empirical findings to build a model of the antecedents and outcomes of NPD portfolio success. We generate and test 12 hypotheses with empirical data from 189 paired dyads in Dutch firms.Our results show that all three dimensions of NPD portfolio decision‐making effectiveness (i.e., portfolio mindset, focus, and agility) are associated with achieving the three dimensions of NPD portfolio success (i.e., strategic alignment, maximal NPD portfolio value, and portfolio balance), which in turn influences market performance. While a portfolio mindset and agility are related to all three dimensions of NPD portfolio success, focus is related only to strategic alignment and maximal value. No one dimension of NPD portfolio decision‐making effectiveness or portfolio success is sufficient to achieve overall market performance. We also found several unexpected findings with important implications. For example, portfolio balance, one recommended measure of portfolio success, has no direct link to market performance, but operates through the other two dimensions of NPD portfolio success, i.e., strategic alignment and maximal portfolio value. We conclude our paper with implications for further theory development and testing on successful NPD portfolio decision‐making, and with implications for managerial practice.

Feature based process framework to manage scope in dynamic NPD portfolios

The need to develop new products in increasingly frequent cycles of innovation drives organizations to form new product development (NPD) portfolios. In such dynamic environments, organizations need to reinforce their capabilities to deal with the simultaneity of multiple NPD projects, as well as with the frequent changes of the product scope. Many organizations, that have adopted the typical NPD process enforcing a streamlined product development process, are challenged beyond strict planning and rigorous control of their NPD projects.This paper identifies the challenges to manage the scope of a complete portfolio of NPD projects within the dynamic context that organizations face today, and using existing scope management practices. This paper suggests a novel approach to structuring the scope in dynamic NPD portfolios using feature modeling, and illustrates its use in an action-research case.

R&D Intensity and the New Product Development Portfolio

A key metric for assessing innovative activity at the firm level is R&D intensity. R&D intensity is the ratio of a firm's R&D investment to its revenue (the percentage of revenue that is reinvested in R&D). Empirical and anecdotal evidence suggests that R&D intensity within an industry tends to be remarkably consistent. Despite this consistency in R&D spending, however, firms differ with respect to their new product development (NPD) portfolio strategy and overall performance. This paper seeks to explain how R&D intensity can be so consistent at the aggregate level, while NPD portfolio strategies and firm performance are so varied at the firm level. We develop a model that considers firm level factors, such as the NPD portfolio composition and risk levels, as well as industry level factors, such as competition intensity and environmental stability. We show how a simple evolutionary process links aggregate R&D intensity and firm level portfolio choices. Our results highlight that R&D intensity alone does not explain firm performance. Rather, it is the proper alignment between R&D intensity (how much the firm invests) and an NPD portfolio strategy (how the firm invests the money) that drives profitability.

Managing uncertainty to improve decision-making in NPD portfolio management with a fuzzy expert system

The importance of new product development (NPD) for a company’s growth and prosperity is emphasized and a number of methods have been suggested to help decision-making for NPD project portfolio management. In spite of their utilities, however, little attention was paid to develop a supporting system for portfolio management that can help quick but careful decision-makings under uncertainties. Therefore, this research proposes a decision-making framework that uses a fuzzy expert system in portfolio management for dealing with the uncertainty of the fuzzy front-end of product development. For the purpose of developing the framework, we adopted the three tools – strategic bucket for strategic resource allocation, scoring models for evaluating projects and portfolio matrixes for balancing projects – to find an optimal set of projects in the portfolio. In particular, this research established fuzzy inference-based models for evaluation criteria which are too ambiguous to be numerically described. Also, based on the evaluation results, the final selection of projects is made by an expert system, which can encompass the operational knowledge and company strategy in the rule-based system. The suggested framework was applied to the portfolio analysis in an electronics firm in Korea and verified its feasibility.

Organizational politics in new product development project selection

PurposeFirms engaged in new product development (NPD) have to achieve a balanced portfolio of NPD projects. Despite the large number of models purporting to support portfolio optimization, most of them do not take into account political bias in project selection decisions. This paper aims to analyze approaches of organizational politics to NPD project selection and their implications for NPD portfolio management and future research.Design/methodology/approachA review is made of the current literature at the intersection between organizational politics and NPD project selection. With regard to the underlying assumptions of organizational politics, similarities, differences, practical implications, and research perspectives are identified.FindingsFrom the paper, insights could be gained into explaining the effects of organizational politics on NPD project selection. However, the differences in assumptions that can be generally observed in organizational politics are also reflected in the studies analyzed. Future research could benefit from integrating different political and methodological perspectives.Practical implicationsIn order to reach a balanced NPD portfolio, the potentially dysfunctional biases which characterize political processes from idea generation to project selection should be addressed. A concept of NPD portfolio management is proposed which considers the management of power and politics.Originality/valueThis paper contributes to a more comprehensive overview of political approaches of NPD project selection and serves as a sound basis for future research. The relevance and implications of politics for NPD portfolio management are demonstrated.

Achieving sustained innovation performance through strategic flexibility of new product development

Sustained innovation performance is traditionally measured in terms of New Product Development (NPD) Strategic Flexibility (SF), which is defined as the readiness to adapt to, anticipate or create future NPD performance requirements. SF is seen as a prerequisite to NPD Operational Effectiveness (OE). This article analyses the innovation performance and NPD portfolio balance of more than 200 companies in Australia, Belgium, Denmark, The Netherlands, Finland, Spain, Norway and Turkey. A factor analysis leads us to suggest that SF actually is only made possible in practice by OE and quality of market information; both of these factors thus jointly lead to sustained innovation. Also, we suggest that flexible strategies are the best choices for current Western business environments such as our sample. Further analyses and some clarifying case studies will be conducted to strengthen or reject either of these propositions.

A Theoretical Framework for Managing the New Product Development Portfolio: When and How to Use Strategic Buckets

Developing the “right” new products is critical to firm success and is often cited as a key competitive dimension. This paper explores new product development (NPD) portfolio strategy and the balance between incremental and radical innovation. We characterize innovative effort through a normative theoretical framework that addresses a popular practice in NPD portfolio management: the use of strategic buckets. Strategic buckets encourage the division of the overall NPD resource budget into smaller, more focused budgets that are defined by the type of innovative effort (incremental or radical). We show that time commitment determines the balance between incremental and radical innovation. When managers execute this balance, they are often confounded by (i) environmental complexity, defined as the number of unknown interdependencies among technology and market parameters that determine product performance; and (ii) environmental instability, the probability of changes to the underlying performance functions. Although both of these factors confound managers, we find that they have completely opposite effects on the NPD portfolio balance. Environmental complexity shifts the balance toward radical innovation. Conversely, environmental instability shifts the balance toward incremental innovation. Risk considerations and implications for theory and practice are also discussed.

Revenue Driven Resource Allocation: Funding Authority, Incentives, and New Product Development Portfolio Management

The first step in transforming strategy from a hopeful statement about the future into an operational reality is to allocate resources to innovation and new product development (NPD) programs in a portfolio. Resource allocation and NPD portfolio decisions often span multiple levels of the organization's hierarchy, leading to questions about how much authority to bestow on managers and how to structure incentives for NPD. In this study, we explore how funding authority and incentives affect a manager's allocation of resources between existing product improvement (relatively incremental projects) and new product development (more radical projects). Funding may be either fixed or variable depending on the extent to which the manager has the authority to use revenue derived from existing product sales to fund NPD efforts. We find that the use of variable funding drives higher effort toward improving existing products and developing new products. However, variable funding has a subtle side effect: it induces the manager to focus on existing product improvement to a greater degree than new product development, and the relative balance in the NPD portfolio shifts toward incremental innovation. In addition, we highlight a substitution effect between explicit incentives (compensation parameters) and implicit incentives (career concerns). Explicit incentives are reduced as career concerns become more salient.

Impact of tactical and operational policies in the selection of a new product portfolio

The effective management of a new product development (NPD) pipeline is critical to guarantee the survival of the organization in the long term while maximizing the creation of value. This is a challenging goal, due to one or more of the following factors: intensive research and development investment, long and uncertain development times, low probability of technical success, and uncertain market impact and competition. In NPD management, as in any other area, decision making is commonly broken down into three independent hierarchical levels: strategic, tactical and operational; where each level uses data and models whose degree of aggregation depends on their corresponding scope and their dynamic or static character. In principle, this decomposition strategy allows managers to concentrate on the variables that are relevant to each level and therefore generate decisions that will be reflected in optimal or near optimal performances. However, there are no empirical or theoretical results reported in the literature that validate this assumption. The aim of this study is to characterize the optimality gap between the set of decisions based on a decomposition strategy and those obtained by using a comprehensive decision support approach, in which the dynamics of all the different decision making levels are considered simultaneously. For that purpose a multi-phase, multi-level Sim-Opt decision support framework capable of accommodating any set of decision making levels with any degree of detail is proposed. A specific instance of the framework is used in the context of the pharmaceutical industry to determine the effects of considering the resource allocation strategies on the composition and prioritization of an NPD portfolio. Results show that if an integrated strategy is not considered it is not even possible to roughly estimate the performance of the pipeline for the chosen composition and prioritization. The performance of the portfolios selected using a tactical decision making strategy slightly different than the one implemented in the real system proved to be significantly suboptimal, off target and sometimes unreachable.