New Product Development Example #2

License vs. In-house

Techniques:
  • Downstream decisions
  • Sensitivity Analyses
  • Local modeling
  • Risk Tolerance
  • Conditioning
Files:

Model: License vs. In-house.da

DPL Influence Diagram for License vs. Inhouse Decision

This is a straightforward new product development example in which a new product is nearly ready for launch. There is a decision on whether the new product should be produced in-house and sold directly or if it should be licensed it to another company. There are several uncertain drivers that will have an impact on NPV including sales, costs, price and license fees. Furthermore, some drivers only pertain to one decision alternative. For example, we only receive license fees if we choose to license the product. The workspace includes 4 models that show the model build out in steps: from a simple, deterministic model with a single decision to a two-period probabilistic model that includes a downstream decision. All of the models within the workspace are local meaning all calculations are contained with DPL and not a linked spreadsheet.