Bhattacharya, S., & Krishnan, V. (1998). Managing New Product Definition in Highly Dynamic Environments. Management Science, 444(11), 550-564.
Format: Peer-reviewed article
Type: Research — Non-experimental
Experience level of reader: Advanced
Annotation: This article discusses the process of product definition and the factors involved in determining the optimal time to define the product specifications. A model of real time definition is presented showing the optimal time to define a product based on various levels of inputs, including; consumer price and performance sensitivity, team flexibility, integration needs and competition.
Setting(s) to which the reported activities/findings are relevant: Large business, Small business (less than 500 employees), University
Knowledge user(s) to whom the piece of literature may be relevant: Manufacturers, Researchers
Knowledge user level addressed by the literature: Sector
This article uses the Commercial Devices and Services version of the NtK Model
Model: The product definition is refined in real-time using customer information resulting in improvements in the product's attractiveness and sales potential. Risk aversion of the firm is modeled using the certainty equivalent of the firm's profit. Using this model, it is found that early definition is optimal only in a limited set of situation: when the market conditions do not experience significant uncertainty, the firm is not risk-averse, its development team is inflexible, the specifications have high integration needs, and the market is price (not performance) sensitive. If any of these conditions do not hold and the firm forces an early definition, it would earn less than optimal profits and considerably lower margins.
Case Study. Researchers developed model of real time definition.
Occurrence of finding within the model: Step 4.3, Step 2.1
Method: Senior management and the product development team review the work periodically at "review" points, when key managerial decisions are made. Such decisions include whether to finalize the specifications now or in a future review, and even whether to redirect or cancel the project because of the product's low profit potential.
Case Study. Researcher identified themes of the product development processes of three different firms.
Occurrence of finding within the model: Gate 1, Gate 2, Gate 3, Gate 4, Gate 5, Gate 6
Method: During the definition phase, input data and information about customer preferences and competitive products are used to finalize key specifications of the product such as its target customers, functionality, and features. (Bacon et al. )
Occurrence of finding within the model: Step 4.12, Step 2.2, Step 2.1