Revenue-Based Metrics for Managing the New Product Introduction Process

Strategic competitiveness and profitability are heavily dependent on how rapidly a company is able to bring its new products to market. Fast companies can enjoy higher product prices and achieve larger market shares. However managers throughout a company organization, particularly in marketing, manufacturing and product development, face situations in their daily operations where actions or decisions that improve a new product´s time-to-market can result in increased costs. These managers need to make judgments concerning when an action or decision to improve a product´s time-to-market justifies this additional cost and any associated additional risks. This, in turn, requires the managers to place a value on time-to-market improvements in order to make informed value-based tradeoffs between short-term costs and longer-term revenue and market-share-related benefits. In this paper a simple revenue-based model, using parameters available early in a product life cycle, is employed to propose financial metrics to enable managers to make these tradeoffs more objectively. These metrics assess the impact on lifetime revenue and average market share of per-month changes in the three relevant time parameters impacting the new product introduction process - new product development time, manufacturing cycle time, and production ramp time.