Managing uncertainty during r&d projects: a case study

Marc Wouters, Berend Roorda, Ruud Gal

Research output: Contribution to journalArticleAcademicpeer-review

9 Citations (Scopus)

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 languageEnglish
Pages (from-to)37-46
JournalResearch technology management
Volume54
Issue number2
DOIs
Publication statusPublished - 2011

Keywords

  • METIS-274995
  • IR-97451

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