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The Role of design flexibility in defining products under technology uncertainty

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Product definition is increasingly recognized as a critical success factor in a firm's new product development process. In this paper, the authors focus on the problem of defininf products under technology uncertainty, which poses a major challenge to firms in the industry. They argue that the conventional pizza-bin approach of rejecting prospective technologies outright may not serve firms well in competitive environments where the pressure to differentiate products is enormous. After motivating the challenges and decisions facing firms using a real-life application from Dell Computer Corporation, the authors formulate a mathematical model of a firm that must define its products in the presence of technology uncertainty. Specifically, the firm faces two technology options: (1) a proven technology that is known to be viable and (2) a prospective technology that offers superior price to performance results but whose viability is not a fully certain outcome. To minimize the impact of technology uncertainty on development time, they consider two approaches to design flexibility, termed parallel path and sufficient design, that allow the firm to concurrently develop its products while the technology is being validated. Our analytical results help demarcate the regions of appropriateness of the pizza-bin approach is appropriate for firms with long development cycles. A firm should choose the parallel path approach when the ratio of variance to mean of the viability of the prospective technology is below a treshold value. We apply our model to the Dell portable commputer development application and translate our model findings into a managerial framework.

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