Managing Experimentation in the Design of New Products

Experimentation, a form of problem-solving, is a fundamental innovation activity and accounts for a significant part of total innovation cost and time. In many fields, the economics of experimentation are being radically affected by the use of new and greatly improved versions of methods such as computer simulation, mass screening, and rapid prototyping. This paper shows that a given experiment (and the related trial and error learning) can be conducted in different "modes" (e.g., computer simulation and rapid prototyping) and that users will find it economical to optimize the switching between these modes as to reduce total product development cost and time. The findings are confirmed by a large-scale empirical study of the experimentation process in the design of integrated circuits containing either (1) electrically programmable logic devices (EPLDs); or (2) application-specific integrated circuits (ASICs). In comparing their different experimentation strategies for analogous design projects, I found that the former (EPLD)---an approach that utilizes many prototype iterations---outperformed the latter (ASIC) by factor of 2.2 (in person-months) and over 43 percent of that difference can be attributed to differences in experimentation strategies. The implications for managerial practice and theory are discussed and suggestions for further research undertakings are provided.