Masters Theses

Keywords and Phrases

Product roadmap planning, Uncertainty, Product platform, Product variants, Real options

Abstract

"Product roadmap planning helps a company to strategically visualize its future product offerings that may include various product platforms and its variants. Product platform is widely touted as a successful strategy that should be deployed by companies for mass customization. However, due diligence should be exercised before implementing a product platform strategy. The product roadmap planning exercise should account for future uncertainties. Traditional financial tools such as the net present value (NPV) method are static since they do not compensate for any exogenous and endogenous uncertainties that may occur during the course of the project. The crux of the problem lies with the financial model that is used for evaluating product planning projects. While many view uncertainties in a product planning project as problematic, it can also be a source of new opportunities. We argue that uncertainties should be an integral part of the evaluation model. If the future possibilities (or options) are not considered in the evaluation model, a corporation may face a "myopic syndrome."

In this paper, we build a comprehensive methodology to evaluate the strategic product roadmap plan using real options analysis. We view the strategic product roadmap as consisting of two phases: (1) Platform development Phase (2) Post platform-development phase. In the platform development phase, two decisions are evaluated: (a) Should the existing product lines be continued/terminated/contracted/or upgraded and (b) Which product platform should be strategically selected from various possible alternative platforms? In the post platform-development phase, the following decision is evaluated based on the information available at that time: (a) Should the product variants derived from the new platform be continued/terminated/contracted/or upgraded?

In this paper, we developed a real option-based methodology that considers technical, project implementation, and market related uncertainties into account to answer the aforementioned questions. We treat the value of the product line and product platforms as Geometric Brownian process to incorporate option evaluation techniques. The proposed real option methodology uses binomial and quadrinomial lattice approach to build the decision tree. Product planning decisions at various nodes are evaluated using a replicated portfolio method. Corporations can use the proposed methodology to select the optimal product offering for various time periods in the marketplace. We illustrate the working of the proposed methodology using an example"--Abstract, pp. 2-3

Advisor(s)

Allada, Venkat

Committee Member(s)

Enke, David Lee, 1965-
Park, Eun Soo

Department(s)

Engineering Management and Systems Engineering

Degree Name

M.S. in Engineering Management

Publisher

University of Missouri--Rolla

Publication Date

Summer 2004

Pagination

viii, 47 pages

Note about bibliography

Includes bibliographical references (pages 29-32)

Rights

© 2004 Prasenjit Shil, All rights reserved.

Document Type

Thesis - Restricted Access

File Type

text

Language

English

Subject Headings

Product management -- Decision-makingNew products -- Decision-makingNew products -- Management

Thesis Number

T 8613

Print OCLC #

58479769

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