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September 8, 2014

Speed to Value = NPV = Project ROI

NPV-oriented decision making.  That’s what you need.  Read it again:  NPV-oriented decision making.

Admit it, now that you are thinking about it, it meets all of your needs.  It tells you which decisions are actually important and whether they have revenue (or cost reductions) associated with them.  Decisions around allocation of resources should ultimately come back to NPV.

A high revenue project that has a 2 year development window has a low NPV because it’s losing money for the first 2 years.  A low revenue project that can be completed in 2 weeks may have a really high NPV especially if there is any possible growth in the future.  Most projects would fall somewhere in between.

So, when are you going to start using this decision making process?

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