Multidisciplinary Assessment of Technology Centre for Healthcare

Purpose New product development (NPD) generally requires substantial company investment. The financial cost to a company can be high if a new product subsequently fails to sell adequately. Managers therefore need robust decision-making tools for valuing potential new product investments in order to justify their development strategy and to allow them to screen out new devices that stand little chance of success at an early stage. Two major problems exist in making such complex decisions: • The need to cast the decision in words, although most analytical tools use numbers. • The need to admit a range of factors to a decision and to weight each appropriately This report is about several methods that address these two challenges, principally in order to make business decisions about products as they proceed along the development pathway. A consultation exercise with some of our MATCH industrial partners was initially carried out by postal questionnaire on project valuation/capital budgeting techniques currently used by these companies. Following on from the results of this exercise, an extensive literature review was conducted amongst engineering, management and business journal databases, as well as more generally on the internet to identify key tools and techniques that could be used in the valuation of a new medical device, screen out products that are not likely to succeed, and assist decision making in the product development lifecycle. Most companies are still using the 'traditional' valuation techniques, such as payback period and discounted cash flow methods for project valuation. Discounted cash flow techniques address the challenges above by considering everything in monetary terms: numerical assessment is easy, and money can be handled in a uniform way, regardless of the mechanism used to convert each factor into a number. These methods form the standard against which a range of other techniques are assessed. However, a number of significant weaknesses exist with such techniques, indicating the need for better decision making tools that can be applied to the medical device new product development cycle. This literature survey identified a range of alternative decision-making and valuation tools and techniques that could be used to define and estimate a new product project value in the earliest stages of product development in the medical device industry and the report makes recommendations on the strengths and weaknesses as well as specific areas of application. The following tools are discussed: • The Analytic Hierarchy Process (AHP) breaks decisions down …