A holistic approach to manage risks in NPD process

Abstract

New product development (NPD) is expensive as well as risky endeavor for any organization owing to high product failure rates. A holistic risk management (RM) model may play a significant role in identifying, analyzing and mitigating the risks involved in NPD process, enabling a reduction in product failure rate. This paper aims at developing an integrated approach to assess and effectively manage risks in NPD process. A holistic methodology based on quantitative tools is proposed for assessment of the risk factors prevalent in the NPD process. The proposed approach is a three-stage holistic methodology for overall management of risks underlying the NPD process. The risk identification stage involves thorough exploration of risk elements acting in various phases of NPD process; and usage of factor analysis tools which render a pool of key risk factors. Interpretive structural modeling is applied on the risk factors in each functional risk domain and NPD risk taxonomy is established. The risk assessment step involves quantification of the criticality of the identified risk factors for prioritization. The evaluation of risk degree of the factors is based on probabilistic likelihood of occurrence and severity of the risk factors, to measure the criticality of the risk factors. The authors suggest usage of fuzzy theory to reduce subjectivity and vagueness in the assessment process for calculating the risk degree of the factors. A technique is developed to capture the riskiness of the entire NPD process into a single ‘risk score’ value. This approach may be used to develop ‘Product Development Risk Reference Model’ as a comprehensive guideline for assessing risk factors occurring in the NPD process in an organization. The approach leads to calculation of a single numerical value which could be easily comprehended by the product developers and help them in assessing their NPD initiatives and take ‘Go-Kill’ decisions in accordance with the prevalent riskiness in their project as per the risk profile of the organization. Further studies would be directed towards analyzing the change in risk situation over a period of time due to the changing market scenarios and the related risk factors.