This project is a continuation of the Total Technology Development (TTD) Framework which has been derived by Schulz (1998). The TTD is divided into four phases:
a) Integrated Technology Strategy (Defining next generation technologies)
b) Concept Generation and Enhancement (Overcoming psychological inertia)
c) Robustness Development and Analysis
d) Technology Selection, Transfer and Integration
The Integrated Decision Model (IDM) is partially going on with the ideas of the phases a), b) and d) of the TTD. It proposes and derives new methodologies for the evaluation and selection of new concepts. Furthermore, it considers – in contrast to the TTD – the development process as a continuous process which has to be evaluated continuously as well. That is, the attributes and influencing factors of the concepts are often changing during the development process which makes competing concepts possibly more valuable and attractive for the developer or changes the value of the concept to be developed.
Improvement in standards of living depend to a remarkable degree on the success of industrial innovations, but the odds of any one idea becoming an economic success are so low that many ideas are needed.
Table of Contents
1 WORDS AHEAD
1.1 ACKNOWLEDGMENTS
1.2 THE CIPD AND ITS OBJECTIVES
1.3 GUIDE TO THE THESIS
2 INTRODUCTION
2.1 CHANGED MARKETS AND BUSINESS ENVIRONMENT
2.2 PROBLEMS WITHIN PRODUCT- AND TECHNOLOGY DEVELOPMENT
2.3 OBJECTIVES OF THIS PROJECT
2.4 ESSENTIALS OF SUCCESSFUL PRODUCT- AND TECHNOLOGY SELECTION
2.5 APPROACH WITHIN THIS PROJECT
3 THE DECISION FRAMEWORK
3.1 AIM OF THE MODEL
3.2 BLOCK 1 TO 3 IN SHORT
4 TECHNOLOGY MODEL
4.1 INTRODUCTION
4.1.1 Questions to be answered
4.2 WHAT IS TECHNOLOGICAL CAPABILITY?
4.2.1 Determine the expected and actual level of invention associated with the technology.
4.2.2 Firm’s performance relative to competition and technology limits
4.3 WHAT DOES TECHNOLOGICAL CAPABILITY NEED TO BE?
4.3.1 Problem Identification and Formulation
4.3.2 Identify and Evaluate Future Opportunities
4.3.3 Prioritization and Sequencing of Problems and Opportunities
4.4 WHAT TECHNOLOGIES WILL BE PURSUED TO ENABLE THIS CAPABILITY?
4.4.1 Creation of list of superior solution concepts and technologies
4.4.2 Determination of ideality and risk associated with concept technologies
4.4.3 Narrow the candidate list
5 MARKET MODEL
5.1 INTRODUCTION
5.2 MULTI-ATTRIBUTE UTILITY ANALYSIS
5.3 CONJOINT ANALYSIS
5.3.1 Essentials: How conjoint analysis works
5.3.2 Guidelines for use
6 INVESTMENT MODEL
6.1 STRUCTURE OF RESEARCH AND DEVELOPMENT
6.1.1 Short-term
6.1.2 Mid-term
6.1.3 Long-term
6.1.4 Conclusion
6.2 DISCOUNTED CASH FLOW
6.3 DECISION TREE ANALYSIS
6.4 REAL OPTIONS APPROACH
6.4.1 History, Introduction and Overview
6.4.2 Uncertainty creates opportunities
6.4.3 The Nobel Price Winning Breakthrough of Black&Scholes
6.4.4 A four step real options solution process
6.5 SUMMARY
6.5.1 Option – real option
6.5.2 Real options – NPV and decision tree analysis
7 THE INTEGRATED DECISION MODEL
7.1 INTRODUCTION
7.2 APPROACH
7.3 SUMMARY OF THE IDM
8 CONCLUSION
8.1 THESIS SUMMARY
8.2 DISCUSSION
8.3 FUTURE WORK
9 APPENDIX A
9.1 BIBLIOGRAPHY
9.2 WWW-REFERENCES
10 APPENDIX B
Research Objectives and Themes
The primary objective of this thesis is to develop an Integrated Decision Model (IDM) that improves current R&D valuation practices by addressing challenges related to uncertainty, the sequential nature of research and development, and the inherent complexity of valuing project benefits. The research aims to move beyond traditional financial valuation methods by integrating technical, market, and investment models into a unified framework that supports more effective decision-making for long-term R&D investments.
- Integration of technical capability valuation with market analysis and investment models.
- Evaluation and selection of superior solution concepts based on technological performance and customer needs.
- Application of Real Options and Decision Tree Analysis to quantify the value of flexibility in R&D projects.
- Reduction of R&D uncertainty through systematic problem identification and formulation.
- Development of a comprehensive decision framework that helps companies optimize their R&D portfolio performance.
Excerpt from the Book
6.4.2 Uncertainty creates opportunities
By explicitly incorporating uncertainty the whole decision-making framework changes. One of the most important shifts in the way of thinking based on a real options approach is illustrated in the figure 6.5 : Uncertainty creates value through the increasing number of opportunities. Therefore, one should welcome and not fear uncertainty (Nichols, 1994).
In the traditional way of thinking, a higher level of uncertainty leads to a lower asset value. But the real option approach shows the opposite: an increasing uncertainty can lead to a higher asset value if one identifies and uses the options to flexibly respond to unfolding events (Nichols, 1994). So managers must try to view their markets in terms of the source, the trend and the evolution of uncertainty and incorporate their conclusions in the decision process.
Summary of Chapters
1 WORDS AHEAD: Provides the acknowledgments, research objectives of the Center for Innovation in Product Development (CIPD), and a guide through the thesis structure.
2 INTRODUCTION: Discusses the shifting global market environment and common problems in product and technology development, such as technology push and disregard for the voice of the customer.
3 THE DECISION FRAMEWORK: Outlines the conceptual approach of the thesis and the three sub-models (technical, market, investment) that comprise the integrated framework.
4 TECHNOLOGY MODEL: Details the process of formulating a technology strategy, including S-curve analysis and identification of performance gaps.
5 MARKET MODEL: Examines methodologies like Multi-attribute Utility Analysis (MAUA) and Conjoint Analysis to value complex R&D benefits and consumer preferences.
6 INVESTMENT MODEL: Analyzes financial valuation techniques, comparing Net Present Value (NPV), Decision Tree Analysis, and the Real Options approach for R&D project valuation.
7 THE INTEGRATED DECISION MODEL: Describes the comprehensive integration of all previous models into a step-by-step decision process for evaluating and funding new technologies.
8 CONCLUSION: Summarizes the thesis findings, discusses the advantages of the IDM, and suggests potential future work for model refinement.
9 APPENDIX A: Lists the bibliography and internet references used for the research.
10 APPENDIX B: Provides supplementary calculations and methodology for linking NPV and option value metrics.
Keywords
Integrated Decision Model, R&D Management, Technology Development, Real Options, Decision Tree Analysis, Product Valuation, Multi-attribute Utility Analysis, Conjoint Analysis, Technological Capability, Risk Management, S-curve, Investment Evaluation, Innovation Strategy, Uncertainty, Portfolio Management
Frequently Asked Questions
What is the core focus of this research?
The research focuses on improving how companies value R&D projects by addressing the uncertainties and complexities that traditional financial models often fail to capture adequately.
What are the main thematic fields addressed?
The core themes include technology strategy, market attribute valuation, financial investment models, and the synthesis of these into a decision-making framework for innovation.
What is the primary objective or research question?
The primary goal is to create an Integrated Decision Model (IDM) that allows firms to make better investment decisions in new products and technologies by treating the R&D process as a sequential, uncertain, and flexible development path.
What scientific methods are utilized?
The thesis utilizes systems engineering processes, S-curve analysis, Multi-attribute Utility Analysis, Conjoint Analysis, Discounted Cash Flow (DCF), Decision Tree Analysis, and the Real Options approach.
What is covered in the main body of the work?
The main body details the construction of a three-part model (technology, market, investment), discusses the limitations of traditional financial methods, and explains how to integrate these approaches into a single cohesive system.
What key terms best describe this work?
Key terms include Integrated Decision Model, Real Options, R&D management, Conjoint Analysis, and technological capability.
How does this model treat uncertainty compared to traditional methods?
Unlike traditional methods that often view uncertainty as a negative factor reducing asset value, this model treats uncertainty as a source of potential value through the management of flexible options.
What is the benefit of using the Real Options approach?
It allows managers to quantify the value of waiting or adapting strategies as new information becomes available, which better reflects the reality of high-risk technology development.
- Citation du texte
- Clemens Bauer (Auteur), 2000, An integrated decision model for strategic evaluation of the viability of new technologies, Munich, GRIN Verlag, https://www.grin.com/document/185472
