An approach to balancing the risks of R&D performance goals

Abstract

In setting the performance goals for a product development project, the project manager is faced with two risks: the risk of early obsolescence of the product, and the risk of project failure. If the performance goals are set too low, a competitor may bring an improved product on the market shortly after completion of the project, thus drastically curtailing the product's market life. If the performance goals are set too high, the project may be a failure, especially if the project team selects a high-risk, high-payoff technical approach in an attempt to meet the high performance goal. This paper presents quantitative methods for assessing the two risks, allowing the project manager to balance them according to company strategy.<>