Optimal economic result and risk of parallel development of concept options in dynamic markets

New product development is an essential competence to organizations. Launching success products requires elaborate and precise knowledge about the technological platforms, like the most important market needs and characteristics, and the project team have to employ information systems to support the project decisions, which must be rapid and accurate. However, when the market characteristics are much dynamic and change rapidly or the development project aims at a really new product, the levels of uncertainties are greater, and the project team must employ more robust strategies of risk management. Option thinking is useful to develop several concept alternatives of some crucial subsystems of the new product in order to achieve new technical and market knowledge by repeating cycles of design, built and tested by several and different prototypes in parallel. These different prototypes develop, test and can accumulate knowledge about each one, different technologies, architectures and quality attributes or the usability for potential customers.

This study achieves the optimal number of concept options to develop in parallel in order to maximize the economic performance of the development project of a new product constituted of two important subsystems. Mathematical models simulating the sequential decision process are developed to determine the economic result and risk of a two-subsystem product innovation project. Our results point the parallel development of concept options as a robust strategy to manage new product development mostly in adverse conditions, that is, with greater levels of uncertainties.