Time‐to‐market,window of opportunity,and salvageability of a new product development

The time‐to‐market in the presence of a window of opportunity is analyzed using ;a probabilistic model, i.e. a model where the completion time of new product development is a random variable characterized by a gamma distribution. Two cases are considered: the first, a case where the discounted return‐on‐investment exceeds the return expected from a conservative investment—e.g. investment in bonds—termed ‘the profitable case’; and the second, a case where the discounted return‐on‐investment just balances the cost of new product development, termed ‘the salvageable case’. The model constructed is focused on the financial aspects of new product development. It allows a decision‐maker to monitor, as well as terminate, a project based on its expected value (at any time prior to completion) by computing the mean time‐to‐market that provides profit, investment salvage, or loss. The mean time‐to‐market computed by the model may be compared with that estimated by the technology development team for decision‐making purposes. Finally, in the presence of a window of opportunity and for the specific cases analyzed, we recommend to always keep the expenditure rate lower than the expected return rate. This will provide the decision‐maker a salvageable exit opportunity if project termination is decided. Copyright © 2002 John Wiley & Sons, Ltd.