Accelerating New Product Development by Overcoming Complexity Constraints

The economic theory of technological change is a theory of investment. Agents invest in an activity called research; a black box process returns a value for a variable that shifts the production function. This paper proposes a way to open the black box. It is motivated both by theoretical arguments for opening this box and by recent empirical literature on new product development that stresses the importance of nontraditional factors in determining firm performance. An example of the former is Solow: "... the production of new technology may not be a simple matter of inputs and outputs. I do not doubt that high financial returns to successful innovation will divert resources into R&D. The hard part is to model what happens then". An example of the latter is Baily and Gersbach, who discuss the determinants of operating efficiency of firms: "Traditional determinants, such as capital intensity and scale were found to play a role. But innovations such as design for manufacturing and workplace organization turned out to be even more important".This paper considers technological change, and in particular new product and process development, from a new perspective, that of complex problem solving. Technological change is made possible by organizational techniques that reduce the complexity of problem solving; differences in the technological performance of firms are attributed to their different problem-solving styles. More specifically, the paper identifies rework as the main reason and symptom of slow NPD, and proposes three techniques that provably minimize rework: problem decomposition, decision ordering, and communication before design