Gate Decisions: The Key to Managing Risk during New Product Development

Schmidt, Jeffrey B.

doi:10.1002/9780470172483.ch21

Cited by 4 publications

(4 citation statements)

References 7 publications

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“…Continuing to invest in poorly performing projects uses resources inefficiently, lowers profits, and damages employee morale. These suboptimal decisions also can harm brands and erode the credibility of an organization in the eyes of its stakeholders (Schmidt, ). Consequently, de‐escalation techniques, tools, and preventive procedures, which in this paper are grouped under the rubric of “mechanisms,” can lessen the occurrence of these expensive mistakes.…”

Section: Discussionmentioning

confidence: 99%

De‐escalation Mechanisms in High‐technology Product Innovation

Sarangee¹,

Woolley²,

Schmidt³

et al. 2014

J of Product Innov Manag

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Many decision‐makers struggle to reduce commitment to failing endeavors. While de‐escalation mechanisms have been documented and tested in information technology, accounting, psychology, and organizational behavior, little work has addressed de‐escalation in innovation. This study identifies and examines the applicability of de‐escalation mechanisms specifically in new product development (NPD) projects. Initially, we conducted an extensive literature review to identify de‐escalation mechanisms found in research across different academic disciplines. Subsequently, we conducted a qualitative study using semistructured interviews to gather primary data. In total, using a sample of organizations that compete in high‐technology industries, 31 managers and engineers in 15 NPD projects that were terminated prior to completion were interviewed regarding mechanisms used to de‐escalate commitment to failing new product innovation projects. Several mechanisms reportedly used for innovation projects parallel those identified in the previous literature. More importantly, the authors uncover novel and previously undocumented ways to discontinue or redirect poorly performing projects. Specifically, internal competitions, feature‐level de‐escalation, continual assumption assessment, benchmarking, roadmaps, and comprehensive product testing are particularly well suited for innovation projects. These findings extend the body of extant literature on de‐escalation of commitment to include innovation, notably in high‐technology settings. The study also highlights that organizations may want to accept or even encourage failure, thereby increasing the efficacy of resource use. Implications for further research and practice are offered.

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Section: Discussionmentioning

confidence: 99%

De‐escalation Mechanisms in High‐technology Product Innovation

Sarangee¹,

Woolley²,

Schmidt³

et al. 2014

J of Product Innov Manag

Self Cite

View full text Add to dashboard Cite

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“…Business case analysis is a method to determine whether a certain business opportunity, investment or a product, etc., should be selected or rejected [30]. Companies have limited financial resources and personnel at their disposal, which means that not all new ideas can be implemented [31]. Therefore, each business case must be critically evaluated before any investment decision is made.…”

Section: Business Case Analysismentioning

confidence: 99%

“…Therefore, each business case must be critically evaluated before any investment decision is made. Many projects are implemented without necessary analysis, which means that they take away resources from other projects and keep creating unnecessary costs the further they advance, if they eventually end up getting dropped [31,32]. According to Kinnunen et al [32], the business case analysis consists of market assessment (market potential), technical assessment (technological feasibility), financial analysis, evaluation of strategic fit and decision-making.…”

Section: Business Case Analysismentioning

confidence: 99%

Productization of Industrial Side Streams into By-Products—Case: Fiber Sludge from Pulp and Paper Industry

Leppänen

Mustonen

Saarela

et al. 2020

Journal of Open Innovation: Technology, Market, and Complexity

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The increasing pressure on natural resources and the climate has been noted by businesses and governments worldwide, who now face the difficult task of integrating paths of environmental sustainability and economic growth. One promising approach to sustainable development, reducing the pressure on natural resources and solving waste problems is circular economy. From different ways of implementing circular economy, this study focuses on the productization of industrial side streams, which carry a great deal of underutilized potential. In this article, the productization of pulp and paper industry side stream, fiber sludge, for commercial use as a dust-binding agent is studied via a descriptive, in-depth case study. Apart from inconsistent quality, fluctuating supply, cost of storage and logistics, what makes industrial side stream utilization challenging is the lack of knowledge that stakeholders have about side streams and their utilization and the lack of new value chain development for their commercial use. Therefore, it is essential for all parties involved to have a clearer vision of what is being sold for what purposes, through productization. This study found that the productization of side streams follows the same steps as the productization of any other traditional product, and the productized side streams can be added to the company’s product portfolio as by-products.

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“…Prespecified criteria are used at each evaluation gate to assess whether various tasks have been done efficiently and effectively (Hart, Hultink, Tzokas, and Commandeur, ). Typical gate decisions are high‐stakes bets where managers put their money on the NPD projects with the greatest potential payoff (Schmidt, ).…”

Section: Theoretical Developmentmentioning

confidence: 99%

Clinging to Slim Chances: The Dynamics of Anticipating Regret When Developing New Products

Sarangee¹,

Schmidt²,

Wallman³

2013

J of Product Innov Manag

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This paper focuses on the effects of anticipated regret during large‐scale investment projects—namely new product development. Anticipated regret means worrying about the future, and decision‐makers experience it prior to both making a decision and knowing the outcome of that decision. It is forward‐looking while actual regret is backward‐looking. Decision‐makers must make project continuation/termination decisions with conflicting pressures. If they continue it, they might receive disconfirming information in the future and therefore regret their decision. If they stop it, they also might regret that decision later, too, if they subsequently conclude it was an error to do so. We term these conflicting pressures anticipated “keep” and “drop” regret, respectively. In the main study, nearly 300 individuals completed a decision‐making exercise in which a failing new product development project was evaluated, and various factors were measured, including both types of anticipated regret at multiple points in the project. The results show that decision‐makers anticipate regret when making project continuation decisions, and anticipated keep and drop regret exert pressures that differ in direction and magnitude. Most interestingly, anticipated drop regret does not diminish as the failing project progresses whereas anticipated keep regret increases as more negative information is received over the course of the project. A second, smaller study was conducted using a different population, and the results of the main study were replicated in this supplemental study, thereby adding confidence in these findings.

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Gate Decisions: The Key to Managing Risk during New Product Development

Cited by 4 publications

References 7 publications

De‐escalation Mechanisms in High‐technology Product Innovation

De‐escalation Mechanisms in High‐technology Product Innovation

Productization of Industrial Side Streams into By-Products—Case: Fiber Sludge from Pulp and Paper Industry

Clinging to Slim Chances: The Dynamics of Anticipating Regret When Developing New Products

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