Product cost analysis during pre-development

Competitive product prices and target cost together with excellent functionality and quality are essential for innovations. Non-competitive costs are a failure factor, making product cost an input to innovation, not an outcome of it. Correct decision making before technology selections and cost lock-ins help to lower future product cost. The scope of this thesis is product cost analysis during pre-development - a gap in literature - as it is seen as critical activity, given the importance, the sums at stake and the high failure risk of innovations. The objective of this study is to identify, classify and describe how new product development ideas can be analyzed with cost information gathered and to study why it is done the way it is. The research uses a qualitative methodology and is done as an empirical seven-company multiple case study. Besides its descriptive part, this study uses a contingency approach to formulate theoretical outlines based on organizational contingencies of the case companies. The results start with descriptions of managerial practices. Further results are the identification of organizational contingencies, such as e.g. the innovation funnel type, that impact the product cost analysis during pre-development. Further findings are interconnections and dependencies leading to specific tool families and evolution patterns of first time cost tool use in pre-development. Besides known tool uses, a novel tool - called directional costing - has been discovered.