Book choosing Innovation projects methods

10 important questions on Book choosing Innovation projects methods

What is capital rationing, and why do firms use it?

- Involves allocating finite resources among potential uses
- Firms use it due to constraints in capital and resources
- Helps in choosing between valuable projects or seeking external financing
- Aids in formulating new product development plans within a fixed budget

Describe the concept of R&D intensity.

- Ratio of R&D expenditures to sales
- Measures research and development efforts relative to company's sales size

What are discounted cash flow methods, and how do they relate to project valuation?

- Assess future cash returns against costs
- Consider time value of money, risk, and payback period
- Quantitative methods to justify future benefits against expenditure
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Explain Net Present Value (NPV) and how it is calculated.

- Present value of cash inflows minus cash outflows
- NPV > 0 generates wealth

List and describe two disadvantages of quantitative methods in project selection.

- Cash flow estimates based on uncertain assumptions
- Bias against long-term or risky projects
- Fail to account for strategic importance

What role do screening questions play in project selection?.

- Assist in initial project filtering
- Focus on key criteria for project selection
- Help eliminate projects that do not align with organizational goals

What is the role of screening questions in project selection?

- Screening questions aid in the initial assessment of a project's potential costs and benefits.
- They structure debate and analysis by focusing on important issues such as customer needs, firm capabilities, and project costs and timing.

How does the aggregate project planning framework support project selection?

- The framework categorizes R&D projects by risk, resource commitment, and cash flow timing.
- It aligns the mix of projects with the company's strategic intent and resource capacity.
- It facilitates better decision-making and resource allocation.

What is the Q-sort method and what is its purpose in project selection?

- The Q-sort method involves ranking projects based on various criteria using a set of cards representing potential projects.
- It facilitates group discussion and consensus on the best projects by comparing individual rankings and debating their merits.

How does combining quantitative and qualitative information enhance investment decision-making?

- Conjoint analysis decomposes decisions into quantitative scores for different criteria.
- Data envelopment analysis ranks projects based on multiple criteria by measuring their distance from an efficiency frontier.
- It allows for a comprehensive evaluation of projects beyond simple financial metrics.

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