Product Development Portfolio Research Articles

When opportunity meets ability: The moderating effects of prolific inventors on novel drug innovation following product development failure in biotechnology

AbstractResearch SummaryThrough a longitudinal study of the product development portfolios of 457 US‐based firms in the biotechnology industry, we investigate how prolific inventors shape a firm's innovative direction following product development failure. Contrary to received wisdom, we argue and demonstrate that an increase in the number of prolific inventors is associated with a decrease in firm propensity to pursue novel product innovation following such failure. We further find that the presence of prolific inventors with greater collaborative strength and longer tenure negatively moderate the positive relationship between failure and the pursuit of novel product development. We discuss the implications of our results for research on learning from failure and strategic human capital.Managerial SummaryIn case of adverse events such as product development failure, managers often rely on the firm's prolific inventors to help the firm learn from failure. Our study shows that there are limits to this approach. While prolific inventors increase firm propensity for novel product development, such propensity is significantly decreased following product failure. We further establish that the presence of prolific inventors with greater collaborative strength and long tenures is especially likely to reduce firms' pursuit of novel products, while the presence of those with low collaborative strength and tenure tend to increase this propensity.

Marketing bank services to financially vulnerable customers: evidence from an emerging economy

PurposeThis study aims to explore how banks in Nigeria are marketing financial services to financially vulnerable customers.Design/methodology/approachA multiple case study research strategy was used to analyse three commercial banks and two microfinance banks. Data were collected using semi-structured interviews with the banks' directors as well as from banks' published annual reports and archival images.FindingsThe study reveals that Nigerian banks develop different product development portfolios, adopt innovative traditional marketing schemes and apply inclusive technologies to reach and extend services to the unbanked and financially vulnerable customers in the society.Research limitations/implicationsBanks should focus on consumer engagement through the proactive development of technologies and employ innovative marketing methods. Customers' banking experiences can be enhanced if banks communicate with and educate customers about technological modes of engagement. In addition, financial service transaction support and financial literacy education can assist banks in marketing their services to financially vulnerable customers, in mutually beneficial ways.Originality/valueThis study shows how financial service operators' market and extend their services to financially vulnerable customers in emerging markets. It empirically establishes the importance of financial services to financially excluded customers.

Advancing new diagnostic tests for latent tuberculosis infection due to multidrug-resistant strains of Mycobacterium tuberculosis — End of the road?

An estimated 1.8 billion people worldwide have a latent tuberculosis infection (LTBI), with wide variations in LTBI rates across countries. LTBI can be due to infection with either drug-sensitive or drug-resistant Mycobacterium tuberculosis (Mtb) strains. Accurate data on the prevalence of LTBI due to multidrug-resistant (MDR) Mtb strains are unavailable, since the strains cannot be isolated for resistance testing. There are no ‘gold standard’ tests for accurately diagnosing LTBI. Only three tests are currently available and approved by the World Health Organization (WHO) for the diagnosis of LTBI: the now outdated tuberculin skin test (TST), developed a century year ago, and the two interferon-gamma release assays (IGRAs) developed and rolled out over the past decade, the QuantiFERON (Qiagen, Germany) and T-SPOT.TB (Oxford Immunotec, United Kingdom) tests. These latter tests are not ideal due to issues of sensitivity, specificity, inability to distinguish infection with MDR-Mtb strains, and high costs. Achieving the WHO End TB Strategy target of an 80% reduction in global TB incidence by 2030 will require a major reduction in the number of persons with LTBI progressing to active TB disease. Critical to this will be the development of new diagnostic tests that are better than currently available LTBI tests at predicting who is at risk of progression to active TB disease. The diagnostic product development portfolio for LTBI appears to have reached the end of the road. Every attempt to make optimal use of currently available IGRAs using WHO LTBI guidelines for LTBI testing and treatment must be made to achieve WHO End TB strategy targets.

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.

Policy Debate

The US Food and Drug Administration (FDA), founded in 1906, is an agency of the US Department of Health and Human Services, an executive department of the United States Government and responsible for regulating and supervising prescription and over-the-counter drugs, vaccines, and biopharmaceuticals. The FDAs Center for Drug Evaluation and Research is responsible for approving three types of ethical drugs: new drugs (‘new drug applications’ or ‘biologics licensing applications’), generic drugs and over-the-counter drugs. A drug that is approved by the FDA is deemed ‘safe and effective when used as directed’. While the FDA deserves greater scrutiny of its drug regulatory review process (amended under the FDA Modernization Act of 1997) as it pertains to the approval of drugs for gravely ill patients, criticism of the agency’s overall safety record has less to do with the reduction of approvals of new drugs over the last decade than an evolution in the pharmaceutical industry business model, one based on a different allocation of R&D financial investment in drug product development portfolios. From an innovation strategy vantage point, many pharmaceutical companies are now re-focusing R&D efforts on commercial capabilities, thus recognizing that incremental innovation, in the form of drug reformulations, or new drug indications, in the form of repurposed drugs, strategically complements the occasionally successful ‘blockbuster’ drug.

All experience is not created equal: learning, adapting, and focusing in product portfolio management

AbstractThis study explores the contingencies relating firm experience to product development capabilities, focusing on experience type (breadth versus depth) and timing (prior versus concurrent). Results from empirical tests in the U.S. mutual fund industry offer two primary findings. First, firms increase proficiency at adapting their processes to address new opportunities as they accumulate experience in entering new niches, but face initial hurdles broadening their experience base. Second, concurrent learning is capacity constrained, as product quality increases in the number of products introduced simultaneously in one niche, but quality decreases as the firm's concurrent portfolio of new products broadens. Jointly, these findings highlight that dynamic capabilities are built through prior adaptation experience and that management of a product development portfolio is an important managerial capability. Copyright © 2011 John Wiley & Sons, Ltd.

Early Assessment of Medical Technologies to Inform Product Development and Market Access

Worldwide, billions of dollars are invested in medical product development and there is an increasing pressure to maximize the revenues of these investments. That is, governments need to be informed about the benefits of spending public resources, companies need more information to manage their product development portfolios and even universities may need to direct their research programmes in order to maximize societal benefits. Assuming that all medical products need to be adopted by the heavily regulated healthcare market at one point in time, it is worthwhile to look at the logic behind healthcare decision making, specifically, decisions on the coverage of medical products and decisions on the use of these products under competing and uncertain conditions. With the growing tension between leveraging economic growth through R&D spending on the one hand and stricter control of healthcare budgets on the other, several attempts have been made to apply the health technology assessment (HTA) methodology to earlier stages of technology development and implementation. For instance, horizon scanning was introduced to systematically assess emerging technologies in order to inform health policy. Others have introduced iterative economic evaluation, e.g. economic evaluations in earlier stages of clinical research. However, most of these methods are primarily intended to support governments in making decisions regarding potentially expensive new medical products. They do not really inform biomedical product developers on the probability of return on investment, nor do they inform about the market needs and specific requirements of technologies in development. It is precisely this aspect that increasingly receives attention, i.e. is it possible to use HTA tools and methods to inform biomedical product development and to anticipate further development and market access. Several methods have been used in previous decades, but have never been compiled in a comprehensive review. The main objective of this article was to provide an overview of previous work and methods in the field of early HTA, and to put these approaches in perspective through a conceptual framework introduced in this paper. A particular goal of the review was to familiarize decision makers with available techniques that can be employed in early-stage decision making, and to identify opportunities for further methodological growth in this emerging field of HTA.

Engineering Global Health

Resources dedicated to global health have increased significantly over the past decade. This growth has created a tremendous opportunity to engineer impactful and sustainable solutions to the most challenging global health problems. Engineering suitable solutions requires a multidisciplinary approach that extends beyond a team of engineers. An ideal team suitable in tackling these global health challenges should at a minimum include individuals with expertise in the technical, health, and business development disciplines. Furthermore, an efficient approach to developing suitable technical solutions to global health challenges should apply several basic tenets to ensure that solutions achieve maximum impact and sustainability. Several of these tenets are discussed in this article, using projects in PATH's product development portfolio as case studies.

Risk-adjusted approach to optimize investments in product development portfolios

<para xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink"> Companies invest in a portfolio of products with the financial objective of increasing revenue and net profit. They also have a limited product development budget and uncertainty around which products will be successful. In this paper, we offer a methodology to manage the allocation of a limited budget across a portfolio of products. Specifically, we provide a practical approach for quantifying the risk in relation to attaining financial objectives, and we offer an approach to reallocate the limited budget across the various products. This approach also provides long-term financial implications of investment decisions that are taken today. This practical end-to-end methodology can build on existing portfolio management practices prevalent in many companies. The approach uses all available measured and estimated data, expert opinions, and mathematical techniques for risk elicitation, Monte Carlo simulation for risk quantification, and mathematical programming with risk measures for optimal reallocation. We also introduce a web-based tool, called Portfolio Risk and Investment Management Engine, that implements this methodology along with an illustrative case study. </para>

Counting chickens before the eggs hatch: Associating new product development portfolios with shareholder expectations in the pharmaceutical sector

Drug development is the lifeblood of pharmaceutical firms and a critical source of innovation in the healthcare industry. Pharmaceutical firms maintain their competitiveness by continuously developing and introducing new drugs, which requires an efficient new drug portfolio management process. However, the current literature does not elaborate on strategies pertaining to these new drug (product) portfolios (i.e., portfolios of drugs under development), nor does it provide the means with which to understand the future cash flow-generating potential of these portfolio strategies. To address this problem, we propose a set of generic descriptors of new drug portfolio strategies (i.e., portfolio breadth, portfolio depth, blockbuster strategy, and stages of the drug development process) and relate these descriptors to Tobin's q, a forward-looking measure of shareholder expectations. The results of a latent class regression analysis show that shareholder expectations of firms with broad new drug portfolios and potential blockbusters are positive. For most firms, shareholders focus on the final stage of the drug development process and deemphasize portfolio depth. In contrast, for a minority of mostly small firms, shareholders seem to value the earlier stages of the drug development process and stress portfolio depth.

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.

The nature of NPD and role flexibility of R&amp;D/marketing in a fast growing high‐tech setting

This study investigated the mutual learning process between marketing and R&amp;D in the context of the information and communications technology industry. The relationship between product newness and role flexibility of R&amp;D/marketing was examined via correlation analysis and multiple regression against a stratified sample of 171 new products. The results showed that different aspects of product newness are associated in a different way to role flexibility of R&amp;D/marketing. Management should therefore be aware of such differences when planning their product development portfolio so that effective integration between R&amp;D and marketing can be achieved.