R&D Pipeline Structuring for Product Innovation under Uncertainty

J. Wang (Taiwan)


R&D management, Pipeline structuring, Resource allocation, Dynamic programming, Monte Carlo simulation


An innovative R&D project that creates great business opportunities usually involves high technology and market uncertainty. It is easy to see that developing only one product concept to capture market opportunity is too risky. Some industries will consider developing alternative product concepts at the same time and delay the commitment to a particular concept to have a better chance to meet future business opportunities. However, there is lack of a formal approach to make tradeoff analyses between potential market return and increased R&D cost. The objective of this research is to develop a pipeline structuring methodology to determine an appropriate set of approaches for each stage of R&D pipeline to increase the success rate of product launch for capturing new business opportunity. The proposed methodology integrates the dynamic programming approach with the Monte-Carlo simulation to find an optimal pipeline structure and to examine the risk of not achieving the target market performance. The proposed methodology can help managers make the tradeoff analysis between single-development strategy and multi development strategy under uncertainty and effectively allocate limited R&D resources on prospective projects to increase the success rate of product innovation.

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