The impact of generative AI on the NPD efficiency

In the last few years, artificial intelligence has grown rapidly and has become increasingly popular in daily life. As a powerful branch of artificial intelligence, generative AI (Gen AI) offers immense potential for application within the new product development (NPD) process. In this study, we investigate the impact of Gen AI on NPD by utilizing a closed-form analytical model within a single-product monopoly. The results show that the profit and productivity levels of a company adopting Gen AI technology are lower than those of a non-Gen AI company. However, the company that adopts Gen AI technology achieves better product quality than a company without Gen AI implementation. Furthermore, by increasing design costs by a small amount, the Gen AI adopting company improves its product quality level, while non-Gen AI companies experience only a slim increase in product quality. Additionally, under lower fixed costs, outcomes improve for both Gen AI and non-Gen AI companies. Our findings suggest that a company which has already adopted Gen AI technology should not reduce the cost of quality. Instead, it should focus more on increasing the cost of quality to realize greater benefits from Gen AI implementation.