A selection framework for derivative products: Development of an impact metric and platform value assessment methodology

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Title: A selection framework for derivative products: Development of an impact metric and platform value assessment methodology
Author: Alvaro, Arciniegas
Abstract: In today’s product development environment, most companies develop product platforms due to the time and cost advantages that are reaped on subsequent development efforts. Many Research and Development (R&D) efforts conclude with the establishment of a platform that anticipates certain technologies and/or markets. However, when a new unanticipated market or technology arises, firms often struggle to assess these opportunities. Most tools to date focus on the upfront decisions while the product platform is under development. There is little work that examines these decisions with the added constraint of a preexisting platform. This work proposes a new methodology derived from existing tools that address platform development, specifically, the development of derivative products given the constraints of existing platforms and new opportunities that were not identified during the development of the original platforms. The methodology estimates the impact of making a change in a specific part of the platform in order to integrate new technologies and develop new derivative products, using information theory and coupling indices that capture different aspects of a platform and are combined to extract the most relevant characteristics of each tool. This estimation is fed into a Real Options decision tree model that establishes the value of the opportunity conducting simulations for certain scenarios of markets to pursue, technologies to integrate, and existing platforms to use. The methodology is applied to a water cooler in order to illustrate the process using two different platforms under a common set of assumptions. This case study suggested that the proposed approach facilitated the decisions to integrate new technologies and pursue new markets from existing platforms. Opportunities for future work include examining the appropriate ways of combining Coupling Indices and Information Theory, the linkage between impact assessment and the cost of technology integration, and the relationship between the type of industry and the required investment to integrate technologies. In addition, a real application case would provide more meaningful results and allow the refinement of this approach.
Record URI: http://hdl.handle.net/1850/7357
Date: 2008-09

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