Final version appears in: The System Dynamics Review, Vol.17, No.1

Work reported here was supported by the MIT Center for Innovation in Product

Development under NSF Cooperative Agreement Number EEC-9529140.

For more information on the research program that generated this paper,

visit http://web.mit.edu/nelsonr/www/

1. MIT Sloan School of Management, E53-364, Cambridge, MA USA 02142. Phone 617-253-6638 Fax: 617-258-7579; lblack@mit.edu

2. MIT Sloan School of Management, E53-339, Cambridge, MA USA 02142. Phone 617-258-6889; Fax: 617-258-7579; nelsonr@mit.edu

Abstract

In this paper, we add to insights already developed in single-project models about insufficient resource allocation and the "firefighting" and last-minute rework that often result by asking why dysfunctional resource allocation persists from project to project. We draw on data collected from a field site concerned about its new product development process and its quality of output to construct a simple model that portrays resource allocation in a multi-project development environment. The main insight of the analysis is that under-allocating resources to the early phases of a given project in a multi-project environment can create a vicious cycle of increasing error rates, overworked engineers, and declining performance in all future projects. Policy analysis begins with those that were under consideration by the organization described in our data set. Those policies turn out to offer relatively low leverage in offsetting the problem. We then test a sequence of new policies, each designed to reveal a different feature of the system's structure and conclude with a strategy that we believe can significantly offset the dysfunctional dynamics we discuss. The paper concludes with a discussion of the challenges managers may face in implementing the strategy that can prevent persistent under-allocation of resources to projects.

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