Abstract
Firms make signifi cant investments in R&D projects, yet the economic return is often diffi cult to predict because of signifi cant technological and commercial uncertainty. We present an innovative and practical method for managing R&D projects, and we discuss its application to a large R&D investment by Philips Lighting. The method, which we call the project portfolio option-value (PPO) method, provides an innovative way to represent, discuss, and value uncertainty in R&D projects. The PPO method is not about "perfect" or "complete" valuation models, but rather about providing a comprehensive but not-too-detailed view of major challenges and key criteria for success. The method is designed for a complex setting in which many uncertainties exist about technology and the market; in which the order in which uncertainties are resolved and decisions will be made cannot be specifi ed in advance; in which interdependencies exist among R&D projects; and where transparency is vital.
| Original language | English |
|---|---|
| Pages (from-to) | 37-46 |
| Journal | Research technology management |
| Volume | 54 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 2011 |
Keywords
- R&D project management
- Option value
- Value allocation
- Visualization