Modeling Success

Model Used to Reduce The Uncertainty of the Pilot result

Pilot will be developed, as a tool to be used for capital investment decision, with measurable and quantifiable returns. The firm that will be contracted to develop this assessment Business Decisions Economics (BDE) .

Service Overview  

Business Decisions Economics, Inc helps executives evaluate projects as ongoing capital investments with measurable benefits and risks. The results are a powerful enhancement to the usual methods (CBA, EVA, ROI, Scorecards etc) reducing the uncertainty about the economic justification and life cycle value.

With the Business Economic Value (BEV) methodology, Business Decisions Economics consultants:

  1. Use a unique BEV framework and toolset to calculate the value of investments by improving the accuracy of valuation before, during or after the fact.  This is accomplished by reducing the uncertainty about 1. the costs, 2. the benefits including intangibles, and 3. the risks of the investment.

  2. Apply an approach combining empirically derived concepts in Economics, Statistics, Decision Analysis, Information Theory, and other scientific disciplines.

  3. Believe and demonstrate: 1. You can measure anything, 2. You can make decisions based on rational valuations without perfect information, 3. Anything that has value has economic value, and 4. Information has an economic value that you can calculate.

  4. Quantify benefits that seldom appear in a CBA analysis because analysts erroneously think they are “fuzzy” and can’t be quantifiably measured.  As a result, funding decisions are often made on incomplete evidence and compelling information is not adequately considered.

  5. Identify the investment’s most sensitive variables and quantitatively compare the cost of gathering additional information to the value of reducing the uncertainty of those variables.

  6. Calculate the economic impact of the investment’s risks (e.g., cancellation, acceptance, technology atrophy, etc.) and justify risk mitigation strategies (e.g., real options, multiple alternatives, etc.) to offset the risk and optimize the investment.

  7. Prioritize portfolios, using modern portfolio theory, on the basis of a complete economic profile of each investment. Using scientific methods, graph corporate objectives and past successes to create a decision confidence chart for acceptance, rejection or further analysis of project requests.

  8. Understand and model the “Cost of Waiting’’, “Revenue Deceleration” and the “Expected Opportunity Loss” if the project is delayed or not implemented.

  9. Use the BEV framework and tool kit for business system life cycle value management.

  10. Deliver project valuation in less than 6 weeks (usually 4 or less) at a total analysis cost of 1/2 % to 2% of the project’s investment cost.  The economic value received from a Business Decisions Economics analysis is documented and typically exceeds 10 times the fees and effort needed for the analysis.

  11. Deliverables consist of:

    1. Business Decisions Economics findings, recommendations and consultative review

    2. A full report, including one section for each BEV process step

    3. The final Excel spreadsheet model reflecting the investment’s costs, benefits, risks

    4. All deliverables prepared use your preferred metrics, such as ROI, IRR, NPV, EVA, etc.