The importance of new product development is observed in recent research on Dynamic Capabilities and in research focused on Target Costing (TC). Using established concepts from both the Dynamic Capabilities and Target Costing literatures we examine possible path-dependent conflicts in introducing TC into an organization using a traditional western product design approach.

This study describes how Target Costing (TC) was attempted as an addition into a traditional Stage-Gate (SG; Cooper, 1990) product development process. Implementing TC as a separate tool in a Stage-Gate model raises the possibility that the sequential and rigorously “gated” design process will conflict with the iterative and multifunctional nature of TC.

We find that there is conflict between the Stage-Gate method and TC that is consistent with criticisms of SG raised by Sethi and Iqbal (2008). This includes limitations to learning due to truncation of sub-projects without the iterations in TC. As well, we support Sethi and Iqbal’s finding that the extremely rigorous gate-evaluations reduce flexibility in the development system.  We connect their observations with the concept of dynamic capabilities to make our analysis more granular and point more precisely to the aspects of TC that are in conflict with SG-type design processes.