Management of R&D Projects under Uncertainty: A Multidimensional Approach to Managerial Flexibility

Leonardo Santiago, Thomas G. Bifano

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Abstract

In this paper, we describe the practical application of a flexibility-based management approach to new product development, highlighting advantages, and limitations of this methodology. The model is concerned with the resolution of uncertainty over the product development life cycle and deals with technical, market, and cost factors all together. To this end, we consider a real options model, which uses multidimensional decision trees, to assess the development process of a high-technology product, namely, the Adaptive Optics Scanning Laser Ophthalmoscope. Moreover, we show how this project could be managed by estimating its value and determining optimal managerial actions to be taken at each review stage of the new product development process. Finally, we draw conclusions about this model's general utility and particular challenges associated with its use as a product development tool, and emphasize the need to consider a multidimensional model, instead of a single dimensional one.
Original languageEnglish
JournalI E E E Transactions on Engineering Management
Volume52
Issue number2
Pages (from-to)269 - 280
ISSN0018-9391
DOIs
Publication statusPublished - 2005
Externally publishedYes

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