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Questions and Answers
What was the maximum budget set for creating a profile of features?
What percentage of a typical firm's R&D budget is allocated to derivative projects when experiencing moderate growth?
What must happen if the budget for features is exceeded?
What method did Marriott use to assess the influence of service levels on customer ratings?
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How many Courtyard hotels were established by the end of 2002?
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What is the primary purpose of the Q-Sort method?
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For which type of firm is it most beneficial to allocate a higher percentage to derivative projects?
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What is the primary function of Data Envelopment Analysis (DEA)?
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Which criterion is NOT typically considered in the Q-Sort project selection process?
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In what contexts has DEA been applied?
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In a firm pursuing significant growth, which two project types are likely to receive higher budget allocations?
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What does capital rationing typically involve for firms in managing innovation projects?
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What is a potential outcome of individuals comparing their rankings in the Q-Sort method?
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What was the average occupancy rate of Courtyard hotels by the end of 2002?
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Which percentage allocation is typical for breakthrough innovation in a firm experiencing moderate growth?
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What is necessary for DEA results to be reliable?
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What does the term 'discounted cash flow method' refer to in the context of project evaluation?
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Which method is NOT commonly used for evaluating potential innovation projects quantitatively?
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What is a common source of funding for new start-ups during their initial growth stages?
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What factor typically influences the determination of R&D budget as a percentage of sales?
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Managers may use which approach when making decisions about project selection?
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How is R&D intensity typically calculated for a firm?
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Which of the following statements about combining quantitative and qualitative methods for project evaluation is correct?
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Who are 'angel investors' typically referring to in the context of financing new technology ventures?
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Study Notes
Development Budget and Capital Rationing
- Firms often face capital constraints, necessitating fixed R&D budgets and ranking of projects.
- R&D budgets commonly represent a percentage of the previous year's sales, influenced by industry or historical benchmarks.
- R&D intensity varies significantly across industries and individual firms.
Financing New Technology Ventures
- Large firms can internally fund innovation; startups frequently require external financing.
- Early-stage entrepreneurs often rely on personal resources like family, friends, and credit cards.
- Government grants and loans are potential funding sources for startups.
- Promising ideas may attract angel investors, typically providing funding up to $1 million at seed stages.
Quantitative Methods for Choosing Projects
- Quantitative analysis transforms potential projects into estimated future cash returns.
- Common methods include discounted cash flow and real options.
- Allocation of R&D budgets can vary based on growth strategy:
- Moderate growth firms: 10% to breakthrough innovations, 30% to platform, 60% to derivative projects.
- Aggressive growth firms might allocate more to breakthrough and platform categories.
- Firms seeking short-term profits may focus more on derivative projects.
Q-Sort Method
- Q-Sort is a ranking method used for evaluating ideas based on various criteria.
- Participants rank projects on cards according to selection criteria like technical feasibility and market impact.
- The process facilitates debate among individuals to reach a consensus on project selection.
Combining Quantitative and Qualitative Information
- Managers often merge quantitative and qualitative data for more comprehensive decision-making.
- Budget constraints influence feature prioritization while allowing participants to set priorities and trade-offs.
- This approach helps management grasp the importance of features across different customer segments.
Case Study: Courtyard by Marriott
- Participants rated profiles of service attributes, analyzing how specific features influenced overall hotel ratings.
- Results led to the development of the Courtyard concept, focusing on small hotels with limited amenities and affordable rates.
- By 2002, Courtyard hotels reached an occupancy rate of 72%, surpassing the industry average.
Data Envelopment Analysis (DEA)
- DEA ranks projects based on multiple decision criteria relative to an efficiency frontier.
- Uses linear programming to synthesize metrics measured in different units into a comprehensive efficiency score.
- Effective DEA outcomes depend on the quality and accuracy of the data used.
- DEA has diverse applications in fields such as healthcare, education, banking, and manufacturing for management evaluation and benchmarking.
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Description
This quiz focuses on the critical aspects of selecting innovation projects, including development budgeting, capital rationing, and various methods for project evaluation. You will explore both quantitative and qualitative approaches, as well as their integration in decision-making processes. Ideal for students and professionals involved in project management and innovation.
