Aveneu Park, Starling, Australia

The process, decision-making should be multiplied to

The resource-allocation
is important for a company. It helps the company to keep a certain control on
the risk of placing resources in a new project or product. It is quite
important for a company to decide how they are going to distribute their resources
for a specific new project because the market contains many unpredictable variables.
In the traditional (tunnel) approach, every new project gets accepted if they can
provide a high average expected return, depending on budget constraints. The
company then invest until the product succeed on the market or stop investing
because of the project or product’s weak performances. This type of approach can
create problems because more projects are being accepted without the organization
considering the amount of resources that will be required. It is important for
businesses to make sure they have many choices. If a company have various options
in resource allocation, it will make better strategic decisions. Indeed, having
the possibility to fully commit to a project at a desired condition, helps the
firm to avoid a high uncertainty, error of omission and error of commission. In
fact, it will minimize bad decisions. Is never guarantee that a project will be
successful or will generate profit. This is a reason why during the allocation
process, decision-making should be multiplied to ensure the possibility to realign
the resources. In this approach, the funnel, through-out the process business
establish checkpoints or gates that will allow a project to go further or not. In
the traditional approach, these gates don’t or it barely exists. These gates
identify the project who has a high commercial potential. If the project had
been accepted throughout the several checkpoints, it means that the project had
pass thought different criteria that reflects the moment’s context.  It will then receive a full commitment. The
funnel, or the new approach, offer businesses flexibility. If offer the
business to decide if they will allocate more resources to a product or to reallocate
them. Also, at each gate, it able the company to adjust to a complex changing
market with all the customer’s trends, technological developments or
competitions. Indeed, the funnel approach provide the company with a better
projection for their innovation. Therefore, the option logic approach is better
because every establishment is trying to gain high innovation success. A way to
attain that is by owning flexibly and consecutive resource allocation decisions.
To prove this last point, Centre for Strategic did a research who shows that
the use of the funnel can increase by more than 50% the average net profit and expand
the proportion of new products that exceed the internal rate of return by up to
20%.1

 

1 1nd PDF –
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