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Rational Approach to New Product Development

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Submitted By famankwaatia
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It is always necessary for a firm to have a rational approach in new product development. This article by Eric Bonabeau introduces a more rational approach to new product development. Drug companies have had big bets on unproven projects with the hopes that they will help make the company lots of money. Sometimes it works, more often than not it doesn’t.

The pharmaceutical business views all projects as belonging to one of two different groups: a truth-seeking group and a success-seeking group. The truth-seeking group of projects is focused on evaluating novel new product possibilities and weeding out the bad bets. The success-seeking group of projects is focused on making those products that have been cleared for development as profitable as possible. In the article the choice of model ‘chorus’ designed by a pharmaceutical company Eli Lilly in 2001 used this two-step approach to manage their new product development. What they’ve discovered is that it has been able to deliver products at twice the speed and for about 1/3 of the cost. However, there are some side effects to using this two-step strategy: It will postpone the start up of successful projects.
The purpose of a new drug development project in the truth seeking plan is to minimize the work conducted to support the crucial experiment. Experiment on 4AB found molecules which might have a promise for a certain neurological disorders. The project was abandoned prior to clinical testing because similar molecules were found to affect vision at therapeutic doses. After evaluation with chorus and running several trials, it turned out that 4AB did not because vision problem and was likely to be of clinical benefit. What this means is that for a product management team that is supposed to successfully launch new profitable products, they must avoid making both of these errors. Using the two-group method allows a new way of thinking to be used to evaluate new drug development.

With a more rational approach to new product development, companies often treat NPD as a monolithic process. NPD can be more rationally divided into two distinct stages. Separate stages are more beneficial if the development cost and time consumption is high and a company has an extreme uncertainty. The model will make less sense for companies with low development and failure rates.

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