How Development Decisions Affect Product Volatility: A Longitudinal Study of Software Change Histories
Evelyn J. Barry, Chris F. Kemerer, Sandra A. Slaughter · 2003
Research on product development often focuses on activities prior to product launch. However, for long-lived, adaptable products like software, post-launch updates can account for the major portion of life cycle benefits and costs. Thus, it is important to understand how development decisions can influence the dynamics of product evolution. In this study we develop a model that relates strategic, organizational, and tactical product development decisions to the volatility of software products over their life cycles. We empirically evaluate this model by analyzing longitudinal data on more than 28,000 changes made over twenty years to software products in a major merchandising firm. In this firm a 1% increase in volatility is associated with a 1.9% increase in life cycle costs for the software products. Specific results indicate that, controlling for the domain, complexity, size and age of the products, an increase in the use of shared product platforms and work automation tools, in team instability, and in the intensity of updates to a product’s components increases a product’s future volatility. Analysis of curvilinear effects indicates that these volatility increases occur at a declining rate. These effects on volatility can be at least partially offset by using a standard, rather than custom, design over a product’s life cycle. Finally, we find significant interactive effects among pairs of individual development choices such that the total volatility impact can be amplified or moderated with the joint use of some development practices. Our results contribute to research on product development by providing often difficult to obtain empirical insights into the dynamic behavior observed during commercial product life cycles and revealing how this behavior relates to sometimes much earlier development decisions. In addition, our findings suggest that product development costs are sensitive to changes in volatility. The insights from these analyses can help product development managers understand the importance of managing product change, improve their ability to anticipate change and estimate the life cycle implications of their development decisions.