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This chapter is from the book

The Business Investment Roadmap

This book focuses on what really matters: making and executing investments that grow the value of your company. Traditional approaches to investment analysis typically involve performing complex financial analysis primarily before an investment decision is made, rather than throughout the investment process. In addition, these approaches tend to be focused on execution only after the investment decision has already been made. One of the most important ways that the Business Investment Roadmap is different is that both execution and evaluation are important before, during, and after making an investment. With the Business Investment Roadmap, your assessment of investment opportunities begins by considering execution-related issues even before the detailed financial analyses. You will see that financial metrics are still quite relevant in your analysis of investments, but you must also think of returns in terms of risks and execution.

You will also be asked to evaluate investments that your company has already made. Historically, companies have devoted too much time and energy to analysis prior to making investments. Once investments have been started, however, they are often treated as if they are irrevocable. It is rare that companies devote sufficient resources to looking back and learning from past investments to improve the success of future investments. Some failures are much more dramatic than others, and some of the worst failures are investments that could have been stopped earlier, if someone had just taken the time and effort to reassess the investment after the initial decision was made and as conditions changed. For example, think about the investment of more than $1 billion made (and lost) by IBM in OS/2, an operating system that was supposed to compete with Microsoft Windows. At some point along the way, once Windows was clearly established in the marketplace, IBM should have pulled the plug. Most investments are not the equivalent of jumping off a cliff with no returns, but, rather, journeys that can be stopped along the way or changed when you run into detours along the road.

Using the Business Investment Roadmap, you will be able to develop and use methodologies that do the following:

  1. Link your evaluation of investments directly to your company's strategies to grow value.

  2. Improve your investment management competencies to minimize the risk of failures.

  3. Enable you to evaluate past investments and determine the key factors for success in the future.

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