In the MIT Sloan study, the researchers demonstrated how their proposed gate decision analysis method worked with a case study at BP in Houston.
The decision involved whether to move ahead with building a new pipeline inspection tool, which had not completed a required operational environment test at a preliminary engineering gate review. The options were to put the project on hold until the tool could pass the gate review, grant a waiver to continue working on the new design, or switch to the back-up plan of using existing tools.
“We used our model to consider the costs and probability of success with each option. This analysis method clearly showed that the company stood to gain the highest payoff with the waiver decision,” said Steven Eppinger, professor at MIT Sloan School of Management.
Eppinger added that the model has been applied in other industries, including in healthcare, where researchers worked with a medical device company to analyze a decision about a new auto-injector product that was not working in its current design. Using MIT Sloan’s analysis method, the company found that the development costs to implement any of several back-up plans were minimal compared with the potential payoff.
In another example from the automotive industry, the team worked with a U.S. auto manufacturer on a decision about implementing a wireless device charging system in a new vehicle model. At gate review, the project did not meet performance expectations, so the company needed to decide whether to delay the vehicle launch to allow for the time needed to rework the wireless charging design, or launch the vehicle without the wireless charger. Looking at the probabilities of success as well as the costs, the company decided to launch the vehicle without the charger, and use the project learning for future vehicles.
Credit: Source images via Shutterstock; Illustration by Catherine Dorrough
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