UNCERTAINTY AND ACTIVITY SELECTION IN NEW PRODUCT DEVELOPMENT: AN EXPERIMENTAL STUDY

Abstract

Uncertainty drives project activity in New Product Development (NPD), and its resolution is
crucial to project performance. However, there is a major gap in understanding the causal
links between different uncertainty types and the project activities they trigger. Engineering
managers lack guidance on how best to respond to different uncertainty types. We close
this gap by experimentally contrasting responses to two uncertainty types central to NPD:
technical and organizational uncertainty. We describe responses with respect to core
engineering project activities: representation, information, and knowledge sharing. We
present evidence from an experiment involving 50 professionals and 74 master’s students.
The results show that uncertainty type has a significant effect on activity response, and that
there is a significant ordering effect within this response. Based on the identification of a
new response type, change of situation, our findings show that technical uncertainty drives
change of situation and representation activity,while organizational uncertainty drives
information and knowledge sharing activities. This provides the basis for three main
contributions. First, we identify “change of situation” as a new type of response to
uncertainty in NPD. Second, we describe different responses to technical and organizational
uncertainty. Third, we characterize an ordering effect in responses to uncertainty.
Managerial relevance statement This research offers important advice to managers of NPD
projects in practice. First, NPD managers are advised to understand the uncertainty type
they face and then identify a suitable response in terms of project activity. For technical
uncertainty, typical responses include representation activities (e.g. prototyping or
simulation) and changes to the situation. For organizational uncertainty, responses include
information and knowledge sharing activities to enable the NPD team to reduce this
uncertainty type and progress in the NPD task. Second, these responses to uncertainty can
be combined to offer a more substantive approach for reducing uncertainty. For example,
for technical uncertainty managers could consider varying the constraints of a problem by
changes in situation to allow more effective representation activity. Similarly, for
organizational uncertainty knowledge sharing could be followed by subsequent changes in
situation to adapt the project goals and scope based on the discovered information.
Planning for such combinatory responses would enable NPD managers to better tailor their
response to the relevant uncertainty type and thus more effectively allocate time and
resources when responding to uncertainty.