New-Product Strategy and Industry Clockspeed

We study how industry clockspeed, internal firm factors, such as product development, production, and inventory costs, and competitive factors determine a firm's optimal new-product introduction timing and product-quality decisions. We explicitly model market demand uncertainty, a firm's internal cost structure, and competition, using an infinite-horizon Markov decision process. Based on a large-scale numerical analysis, we find that more frequent new-product introductions are optimal under faster clockspeed conditions. In addition, we find that a firm's optimal product-quality decision is governed by a firm's relative costs of introducing new products with incremental versus more substantial improvements. We show that a time-pacing product introduction strategy results in a production policy with a simple base-stock form and performs well relative to the optimal policy. Our results thus provide analytical support for the managerial belief that industry clockspeed and time to market are closely related.

• 저널Management Science · 50(4) · 537–549
• 토픽Supply Chain and Inventory Management · Management Information Systems
• DOI10.1287/mnsc.1030.0172
• 저자Gilvan C. Souza, Barry L. Bayus, Harvey M. Wagner