ACCELERATING NEW PRODUCT DEVELOPMENT BY OVERCOMING COMPLEXITY CONSTRAINTS

The economic theory of technological change is a theory of investment. Agents invest in an activity called research; a black box process ret urns a value for a variable that shifts the production function. This paper proposes a way to open the black box. It is motivated both by th eoretical arguments for opening this box and by recent empirical liter ature on new product development that stresses the importance of nontr aditional factors in determining firm performance. An example of the f ormer is Solow: ''... the production of new technology may not be a si mple matter of inputs and outputs. I do not doubt that high financial returns to successful innovation will divert resources into R & D. The hard part is to model what happens then'', An example of the latter i s Baily and Gersbach, who discuss the determinants of operating effici ency of firms: ''Traditional determinants, such as capital intensity a nd scale were found to play a role. But innovations such as design for manufacturing and workplace organization turned out to be even more i mportant''. This paper considers technological change, and in particul ar new product and process development, from a new perspective, that o f complex problem solving. Technological change is made possible by or ganizational techniques that reduce the complexity of problem solving; differences in the technological performance of firms are attributed to their different problem-solving styles. More specifically, the pape r identifies rework as the main reason and symptom of slow NPD, and pr oposes three techniques that provably minimize rework: problem decompo sition, decision ordering, and communication before design.