Reconsidering “technical Feasibility”: the Effects of Value Ambiguity in Innovative Product Development

Following traditional product development approaches, many engineers involved at the early stages of innovative product development are charged with the demonstration of “technical feasibility” of the product of interest. Doing so ostensibly provides the justification that the product is ready to be approved for commercialization. However, engineers working towards demonstrating technical feasibility often focus too intently on demonstrating technical performance to the exclusion of evaluating whether the product will be able to produce Value for the customer and the company. This situation, which the authors call value ambiguity, often results in product development failures. This paper uses option pricing theorybased analysis to illustrate the concept of value ambiguity and its detrimental effects on the value of product development programs. The authors propose an enlightened approach to innovative product development--early Value Feasibility Evaluation--that addresses value ambiguity, thereby greatly reducing an organization’s exposure to product development risk. This approach is shown to significantly increase the expected value of product development programs.