Using Multicriteria Methods in the Early Stages of New Product Development

Abstract

The R&D manager is commonly faced with the problem of deciding which projects to fund to meet overall corporate and technical goals. Because outcomes can rarely be predicted with certainty, decisions aimed at striking a balance between cost and risk are likely to involve some amount of redundancy at the project level. The intent of this paper is to examine the difficulties that arise when trying to pursue a parallel strategy in the presence of multiple objectives. The basic elements of the problem include a set of projects, a set of objectives, the associated probability measures relating effort to success, budgetary and performance constraints, and a utility function defined on the range of outcomes. In the model it will be assumed that each project contributes to one or more objectives, and that the selection criterion is based on expected utility maximization. With this in mind, the problem is formulated as a probabilistic goal programme and solved with a heuristic that computes the K best funding schemes. Results are presented for a case involving the development of a non-petroleum-powered vehicle which demonstrate the robustness of the algorithm and the implications of the underlying decision rules.