An Analysis of Several New Product Performance Metrics

For most firms, new product development is the engine for growth and profitability. Afirm’s new product success depends on its ability to manage the product development process in a way that employs scarce resources to achieve the goal of the firm as well as the specific project’s objectives. Simple and measurable performance metrics have been proposed and applied to monitor and compensate the development teams. In this paper, we develop a modeling framework to analyze the implications of setting managerial priorities for three commonly used new product performance metrics: (1) time-to-market, (2) product perfor-mance, and (3) total development cost. We model new product development as a “product performance production ” process that requires scarce development resources. Setting a target for development teams for each of these performance metrics can constrain this performance production process and, thereby, affect the other performance metrics. We model the con-strained process as a restricted case of a general process that does not have such constraints. We benchmark each constrained process against the optimal, unrestricted process with respect to the level of the resource intensity employed during the development process, the time-to-market, and the performance level of the new product at launch. We show that an overly ambitious time-to-market target leads to an upward bias in resource intensity usage and