New Product Development Examples

New Product Development Example #1

Resource Allocation Strategy for Market Entry

  • Downstream decisions
  • Asymmetry
  • Perform subtree
  • Real option valuation

Overview: DPL Case - Market Entry
Model: Market Entry.da

DPL Influence Diagram for Market Entry Decision

Imagine a company has core technology in the embedded systems market and has connections in the automotive and telecom sectors. This has served to position them well in the as of yet non-existent internet appliances market. While most of their technology has been developed in-house -- a crucial piece of intellectual property was licensed. Final negotiations on the IP are on-going. They need to know where to concentrate their resources and present a convincing case to investors.

A rigorous DPL analysis provided the clarity needed to avoid chasing the more speculative (yet highly fashionable) internet appliances market and stick with the more established embedded systems market. The transparency of the problem structuring, analysis and results brought the parties together behind a solid plan.

New Product Development Example #2

License vs. In-house

  • Downstream decisions
  • Sensitivity Analyses
  • Local modeling
  • Risk Tolerance
  • Conditioning

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.