Coping with Bounded Rationality, Uncertainty, and Scarcity in Product Development Decisions: Experimental Research

Using a serious game for experimental economic research, we obtain insights in how human subjects cope with market and technological uncertainty and their bounded rationality in solving product development challenges. We find not only remarkable differences in the overall performances of cohorts of subjects, but also in the evolution of the product development ‘roadmaps’ across repeated challenges. Generalizing results, we argue that product development engineers may be (1) targeting products for mainstream markets although unknowingly technically unattainable, (2) cognitively overburdened due to combinatorial complexity caused by insufficient technological focus, (3) lacking a contextually sensible ‘product development roadmap’, e.g. taking product design purely as a technical challenge without market requirements. Benchmarking outstanding subjects, preliminary recommendations are to dismiss fast and frugal strategies; the complexity of the design challenge does not lend itself for those. Moreover, during the onset phase of development: engineers are to engage in exploration to determine the technological structure as well as market segmentation. This may then be used to determine the research direction to start focused and hence efficient, depth-first pruning of technological opportunities, which, in turn, reduces combinatorial complexity.