SPEED-TO-MARKET AND NEW PRODUCT PERFORMANCE TRADE-OFFS

When pressed to accelerate a development effort more than af ew manage rs have responded in terms such as ''Good, fast, cheap ... Pick any tw o.'' Time-to-market decisions clearly play an important robe in determ ining the ultimate success or failure of a new product. Just as clearl y, however, speed to market is not the sole determinant of success. Th e seemingly offhanded ''Pick any two'' response points to the tradeoff s that product development managers must make in their decisions about development time and costs. Barry Bayus discusses the relationship be tween product development time and costs, and he fomulates a mathemati cal model that simultaneously considers the decisions regarding time-t o-market and product performance levels. He applies the model to two c ompetitive scenarios, and he identifies the optimal entry timing and p roduct performance decisions for various market, demand, and cost cond itions. In the first scenario, a firm must decide whether to accelerat e development efforts to catch a competitor that has just introduced a new product. Analysis of the tradeoffs among the various parameters i n the model suggests that fast development of low-performance products is optimal under the following conditions: a relatively short window of market opportunity, a weak competitor, and relatively high developm ent costs. For example, if the competitor is weak, high performance le vels are not necessary and the firm can safely reduce time-to-market. Under the same scenario (that is, accelerating development to catch a competitor), the analysis suggests that fast development of products w ith high performance levels is optimal under conditions of relatively high sales and relatively flat development costs. lit the second scena rio, the firm must decide whether to speed development efforts to beat the competition to market. Analysis of the various tradeoffs for this scenario suggests that first-to-market status for a product with a hi gh performance level is optimal under the following conditions: a rela tively long window of market opportunity, relatively high sales, and r elatively flat development costs. With a long product lifecycle, stabl e margins, and high sales, the firm can generate sufficient revenue to offset the increased cost incurred in speeding a high-performance pro duct to market Beating a competitor to market with a low-performance p roduct is never optimal for the cases considered here.