Chapter 13-Minicase 1
Chapter 13-Minicase 1 (page 598)
Intranets: Invest First, Analyze Later?
1. Where and under what circumstances is the “invest first, analyze later” approach appropriate? Where and when is it inappropriate? Give specific examples of technologies and other circumstances.
Invest first is justified if a new technology is the reason for the investment. There may not even be data to base an analysis on.
It is inappropriate if the investment is big and could ruin the firm. Also, if data is available for analysis it should be used.
Internet pre-1999 was such a technology. Wireless internet is one in 2001.
2. How long do you think the “invest first, analyze later” approach will be appropriate for intranet projects? When (and why) will the emphasis shift to traditional project justification approaches? (Or has the shift already occurred?)
It was appropriate until 1999. The shift should happen when data for analysis is available. For dotcoms or internet-based business the awakening came in March 2000 when the stock market of the dotcoms crashed.
3. What are the risks of going into projects that have not received a thorough financial analysis? How can organizations reduce these risks?
The risk of no payback is big for that kind of endeavor. By assessing the outcome at several stages of the process, the risk can be reduced. Managers need to keep the option open to kill such projects.
4. Based on the numbers provided for Candence Design System’s intranet project, use a spreadsheet to calculate the net present value of the project. Assume a five-year life for the system.
|$ 8,104,691.08 |
At 8%
5. Do you see any relationship between the “invest first, analyze later” approach to financial analysis and the use of behavior-oriented charge back systems?
A BO approach encourages experimentation. But its 2nd step is to determine measures for the users. See text page 583. Consequently, the thing to do is to change to
Intranets: Invest First, Analyze Later?
1. Where and under what circumstances is the “invest first, analyze later” approach appropriate? Where and when is it inappropriate? Give specific examples of technologies and other circumstances.
Invest first is justified if a new technology is the reason for the investment. There may not even be data to base an analysis on.
It is inappropriate if the investment is big and could ruin the firm. Also, if data is available for analysis it should be used.
Internet pre-1999 was such a technology. Wireless internet is one in 2001.
2. How long do you think the “invest first, analyze later” approach will be appropriate for intranet projects? When (and why) will the emphasis shift to traditional project justification approaches? (Or has the shift already occurred?)
It was appropriate until 1999. The shift should happen when data for analysis is available. For dotcoms or internet-based business the awakening came in March 2000 when the stock market of the dotcoms crashed.
3. What are the risks of going into projects that have not received a thorough financial analysis? How can organizations reduce these risks?
The risk of no payback is big for that kind of endeavor. By assessing the outcome at several stages of the process, the risk can be reduced. Managers need to keep the option open to kill such projects.
4. Based on the numbers provided for Candence Design System’s intranet project, use a spreadsheet to calculate the net present value of the project. Assume a five-year life for the system.
|$ 8,104,691.08 |
At 8%
5. Do you see any relationship between the “invest first, analyze later” approach to financial analysis and the use of behavior-oriented charge back systems?
A BO approach encourages experimentation. But its 2nd step is to determine measures for the users. See text page 583. Consequently, the thing to do is to change to