Project Management for R&D

Business case

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A Return Map is a dynamic model that defines the flows of capital the project is expected to generate. Sometimes the model is called the Innovation Life Cycle. Usually, time is along the x-axis and cash flow along the y-axis. We recommend that costs are depicted under the y-axis because it makes the figure more easily interpreted and intuitive. For example, then Break-Even-Time appears at the point where the accumulated revenue surplus cuts the y-axis.

 

It is possible to work with different scales on the positive and negative sides of the y-axis respectively, which is sometimes necessary if differences in size are great. 

 

Many different measurements can be illustrated in a return map:

  • tO - Commercial Window Opens

  • TTF - Time to Feasibility Study

  • TTP - Time to Project Start

  • TTM - Time to Market

  • TT50 - Time to 50% Sales

  • BET - Break-Even Time

  • MFR - Maximum Financial Risk

  • AC - Accumulated Surplus

  • tF - Commercial Window Closes


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The weakest link in all return map models is most often the estimation made of future revenue, i.e., volumes and prices over a long period of time. Efforts must therefore be aimed at analyzing and discussing different conceivable scenarios on the market.

 

Three basic principles for your Return Map:

 

  1. use simple back of the envelop calculations. No incomprehensible spreadsheets should be made.
     

  2. provide simple metrics that support decision-making. For example, the cost of delaying the project one week?
     

  3. Make multiple scenarios – what happens if?

• project cost increase with 25%

• product cost increase/decrease with 10%

• sales price increase/decrease with 5%

• etc.