The Investment Analysis Problem and Solution

Investment Analysis is one of the top 10 problems of 20^th century management

20^th century investment analysis cannot plan the actual return on investments

How does your company analyze strategic investments in capital development? Does your company perform a cost-benefit analysis? Are all the specific investments needed for business success planned? Are the costs of the investment analyzed, itemized, and scheduled? Are the benefits of the investment analyzed, itemized, and scheduled? Is the value to be added to the business planned and set up as goals to menage the return on investment?

For the most part, 20^th century investment management cannot itemize the costs or benefits of investment, particularly investments in management improvement and business change. Costs are project expenditures rather than investments in specifically-identified capital items. Benefits are usually estimates of increases in revenues or reductions in costs.

R-pM plans and manages the return on all investments through Result-performance Development

Result-performance Management (R-pM) manages the economic outputs of the business as specific results and manages the invested capital utilized to produce results as specific performance solutions. The benefits of development investments come from adding value to specific existing or new results. The cost of investments come from developing the capital needed as specific performance solutions to produce each result. The return on investments come from the value added to results over performance costs, in excess of the value added with no development.

Result-performance Development itemizes specific result value-added benefits, substantiated by result management goals, to plan and develop new capital. Download “The R-pM Toolkit” at Result-performance-Management.com to eliminate the investment analysis and capital development problems.

The Investment Analysis Problem

20^th century management does not manage results to plan and manage the benefits of investments

20^th century investment management can itemize costs to some degree, and if it is diligent enough, it can itemize some benefits for core business investments that produce certain results that are managed as revenues, sales, products produced, and production capacity built.

But 20^th century management does not identify and manage the specific set of results of increased value to be produced and the specific set of performance solutions that must be developed to produce the results. Obsolete 20^th century management cannot plan the cost of investments in undefined capital and the benefit and return on investments that produce undefined results.

20^th century management does not manage invested capital in operation for a measured return on investments

Many enterprises have a problem in determining the potential for return on investments, since invested capital is not managed for specific utilization to reach specific goals that will produce the return. There is no experience or history to provide insights into managing future capital or gaining future returns. This make it difficult for investors to have confidence in investing in the 20^th century enterprise as discussed in the article “Investing in Corporations that cannot manage their own Investments“.

The 20^th century enterprise often turns investment analysis problem over to consultants, but consultants also lack the needed methods

The common 20^th century approach to the problem is to bring in consultants to manage investments and business change. But, the consultants face the same problems that are not solvable by their 20^th century methods. Consultants can help by using 20^th century management methods that have proved beneficial in the past. But, most consultants simply follow rigid 20^th century management methodologies.

The Investment Analysis Solution

Benefits of financial, business, and capital investments and other investment opportunities come from adding value to the specific results, produced by specific performance solutions that are developed and implemented by the investment. Investment results include interest, dividends, and profits, in addition to other business result values generated by utilization of invested capital.

The enterprise gains experience in managing result value-added in 21^st Century Management

The 21^st century enterprise gains experience using Result Performance Management (R-pM) to manage the specific performance solutions implemented from investments and the specific results that are produced by the performance solutions. With this experience, the enterprise can calculate the future result value-added, if no investment is made. This value-added must be compared with the planned result value-added over the payback period with the investment to determine the added-value-added return.

Specific managers are responsible for planning result value and other professionals for capital development costs

With R-pM the enterprise integrates business organization and management through one business structure. The enterprise has specific performance managers responsible for each performance solution involved in any investment and specific result managers responsible for the results that must increase in value. Result and performance managers are responsible for the scope of management for the development and operation of specific results and performance solutions. Investment analysis and planning is substantiated in operations by managing the actual return on investments to reach result goals.

Result symptoms are the basis of Result-performance Development Investment Analysis

With R-pM investment needs arise from result symptoms (deliveries are late, sales are down, results are rejected, etc). The value of investment comes from alleviating result symptoms, the cost of the investment comes from providing the performance solutions.

This is obvious in 21^st Century Management that utilizes capital in performance to produce value in results and has managers responsible for achieving result value-added goals and other managers responsible for providing cost-effective solutions from every enterprise investment.

Use R-pM to eliminate the Investment Analysis Problem in 21^st Century Management

Result-performance Management (R-pM) eliminates the top ten problems and other costly 20^th century problems. Slash costs, simplify business management, and boost competitive advantage through R-pM, the conventional method for 21^st Century Management.

Review the articles under Learn the Basics of R-pM or click on the R-pM banner to download information on R-pM for investment planning, capital development, and business change. Guidance on investment analysis is provided in the downloads “How to Manage Business Change” and “How to Manage Projects in the 21^st Century”.

Your 21^st Century Management Manual, The R-pM Toolkit, is available today and is under continual development to expand and refine 21^st Century Management. Get your R-pM Toolkit, and future updates, at result-performance-management.com.

This entry was posted on Friday, February 1st, 2008 at 01:18 and is filed under:
Forums: Business Change Consultants, Administration and Capital Management, Capital Development Plans and Projects, Business Change Methods, Top Ten 20th Century Problems
Topics: Business Change Methodologies, Conventional Management Methods, Investing in a Changing Enterprise, Investment Management, Project Management
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