ARE REALLY NEW PRODUCT DEVELOPMENT-PROJECTS HARDER TO SHUT DOWN

Just as a good houseguest knows when it's time to say good-bye, effect ive managers must recognize when it's time to terminate a new product development (NPD) project. As a product progresses toward commercializ ation, a manager's reluctance to terminate a failing project becomes i ncreasingly expensive. Despite this growing expense, however, many man agers are reluctant to shut down failing NPD projects. Jeffrey Schmidt and Roger Calantone hypothesize that this reluctance may be even more pronounced for innovative new products than for incremental NPD effor ts. They suggest that perhaps the excitement that really new products engender within a company makes managers more reluctant to shut down t he NPD project, even in the face of clear-cut evidence that the projec t is nor a winner. To test these assumptions, they conducted a decisio n-making experiment in which managers were asked to make go/no-go deci sions at each stage in a hypothetical NPD project. One project involve d an innovative new product; the other project involved an incremental development-that is, a line extension that offered only marginal size and cost reductions compared to current models. At the outset of the experiment, participants were given market share and profit objectives for assessing the new product's performance. At each stage in the hyp othetical NPD project, the participants then received updated performa nce data. The performance data provided to participants was identical for the two hypothetical projects, and fell increasingly farther below the performance objectives as the project progressed. The results of the experiment support the hypothesized relationship between product i nnovativeness and managers' reluctance to terminate a failing NPD proj ect. Given identical, poor, performance forecasts, the managers who pa rticipated in this experiment were more optimistic about the likelihoo d of success, were more committed to the project, and were more likely to opt for continuing the project when it involved the more innovativ e product. In fact, the participants were more likely to allow the hig hly innovative NPD project to proceed all the way through commercializ ation, notwithstanding the progressively ominous performance feedback.