{"id":542,"date":"2011-05-03T20:17:29","date_gmt":"2011-05-03T20:17:29","guid":{"rendered":"http:\/\/www.projectsguru.co.uk\/blog\/?p=542"},"modified":"2011-05-03T20:24:01","modified_gmt":"2011-05-03T20:24:01","slug":"lost-opportunity-cost-pmot-in","status":"publish","type":"post","link":"https:\/\/www.amberhill.biz\/blog\/?p=542","title":{"rendered":"Lost opportunity cost…..#pmot…#in"},"content":{"rendered":"
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\"Bizplan03\"<\/p>\n

In the last post we discussed risk aversion. One of the pitfalls of being too risk averse is lost opportunity cost.<\/strong><\/em><\/p>\n

In New Product Development<\/a> Project Managers constantly balance time to market<\/a> with product quality, resource management, project costs & a host of other competing factors.<\/p>\n

In an effort to develop the perfect product with maximum process capability and meeting 100% customer satisfaction the real cost of lost opportunity is often missed.<\/p>\n

Consider a product which on release will generate, on average,\u00a0 $100,000 profit a month for 12 months. If the product release is delayed by 1 month the lost opportunity cost can be estimated as $100,000. What should be\u00a0 emphasised is that this amount will NEVER be recovered. If the product lifecycle is estimated as being 12 months depending on the competition then releasing the product 1 month late reduces the lifecycle to 11 months.<\/p>\n

If that lost $100,000 was invested at a compound rate of 5% per year over ten years it would be worth $163,000 !<\/p>\n

So here are some tips to minimize lost opportunity cost:-<\/p>\n

1) Invest in the project at the front end, providing ample resource and support.<\/p>\n

2) Fix the product spec before the end of the design phase.<\/p>\n

3) 100% perfection is great but 95% is normally good enough for most customers.<\/p>\n

4) Make it easy for engineers by setting SMART (Specific, Measurable, Aggressive, Realistic, Timely) targets.<\/p>\n

5) Publicise Project Milestone targets.<\/p>\n

6) Communicate Lost Opportunity Costs.<\/p>\n

chris@projectsguru.co.uk<\/a><\/p>\n

www.projectsguru.co.uk<\/a><\/p>\n

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