Design Con 2015
Breaking News
Comments
Newest First | Oldest First | Threaded View
Navelpluis
User Rank
CEO
6th reason to cancel a project
Navelpluis   9/11/2014 5:00:43 PM
NO RATINGS
Your management team has burned away soooo much money in preparing and scoring the project to sell it to the customer for too lowsy money. Now it is in a stage that it is impossible to implement it: Engineers often recognize this. The budget is way too small to succesfully implement the project. Then, at this stage, it is better to cancel it. I have seen this too often....

jessica77
User Rank
Rookie
Re: Very good reasons
jessica77   8/24/2014 9:37:11 AM
NO RATINGS
Outsource those to China.

Larry Desjardin
User Rank
Blogger
Re: Sunk opportunity cost
Larry Desjardin   8/20/2014 12:59:02 PM
NO RATINGS
The opportunity cost is simply the missed opportunity of the best non-staffed project. I think it is fairly static. Once it is identified, that is the cost. It would only change if an even better project is identified. If anything, you could argue that the opportunity cost diminishes with time, since the effort to finish the staffed project should be diminishing with time, leading to fewer resources to invest as an alternative. Example: If you only need one more day to wrap up a project, the opportunity cost is minimal, since it is hard to imagine you could refocus that remaining day of effort to get any appreciable return from an alternative. 

Sunk costs are merely costs that have already occured. The point of mentioning them is that you should be comparing future returns and investments. That is, ignore the costs that have already occurred, e.g. sunk costs.  

These two dynamics are why so many projects are completed, even if in retrospect some should not have been started.  If you are half done with a project, the return on remaining investment has doubled. Most likely, the opportunity cost has halved as well, since the available investment has halved.  A project looks increasingly attractive as it marches towards completion- except for the cases I outlined in my column, where new information has caused a reevaluation.

I hope this helps.

resistion
User Rank
CEO
Re: Sunk opportunity cost
resistion   8/19/2014 9:11:58 AM
NO RATINGS
Ok, thanks for the explanation. So would the opportunity cost really be the value of the alternative subtracting the sunk costs? I'm thinking the value of the alternative is not static, may also be growing.

Larry Desjardin
User Rank
Blogger
Re: Sunk opportunity cost
Larry Desjardin   8/19/2014 8:44:03 AM
NO RATINGS
Think of opportunity cost as the income from your best availabe alternative. That is the income you are forgoing by choosing the original project.  Strictly speaking it is not a cost, as there isn't an actual cash flow.  I brought up this concept to illustrate that project selection is a choice between alternatives, and would not mix it up with other concepts, such as sunk cost. As a project progresses, the opportunity cost decreases, only in so much as the smaller remaining resources to complete the project mean less resources to execute an alternative as well.

Another way to think of this is to always compare future investments and future returns. 

 

resistion
User Rank
CEO
Sunk opportunity cost
resistion   8/18/2014 9:35:22 PM
NO RATINGS
On one hand, "sunk costs don't matter". On the other hand, opportunity cost keeps increasing as time goes by. It's a bit conflicting. Opportunity cost is a sunk cost. It has to matter. But it's difficult to know when to stop from this alone. The situation with competition or competing technologies seems a faster or clearer way to judge. Yet when the competition scores, not keeping up by cancelling the project is also a big risk. But it would mean the project goal(s) would be changed. The majority of projects are stopped just for the first reason: successful completion.

Anand.Yaligar
User Rank
Rookie
Reasons are deal breaking
Anand.Yaligar   8/17/2014 9:04:41 AM
NO RATINGS
A project in development must go through periodic checks to ensure that the project is of value as of that date. Also, analysts come up with the idea for the project, and the clock starts ticking. Opportunity costs start decreasing from that point on, and if the project (talking about electronics) takes a long time then the company has to ensure other companies don't have enough market buzz on that same product.

resistion
User Rank
CEO
Very good reasons
resistion   8/16/2014 1:42:32 AM
NO RATINGS
1 saves
Now shall we cancel almost all the projects in the electronics industry?



Most Recent Comments
Top Comments of the Week
Flash Poll
Like Us on Facebook

Datasheets.com Parts Search

185 million searchable parts
(please enter a part number or hit search to begin)
EE Life
Frankenstein's Fix, Teardowns, Sideshows, Design Contests, Reader Content & More
Max Maxfield

Want a Voltera Desktop PCB Printer?
Max Maxfield
9 comments
I just received an email from my chum Javi in Spain. "Have you heard about Voltera (VolteraInc.com)? It's a Canadian company that is going to offer desktop-size PCB printers for fast ...

Aubrey Kagan

Have You Ever Been Blindsided by Your Own Design?
Aubrey Kagan
37 comments
I recently read GCHQ: The uncensored story of Britain's most sensitive intelligence agency by Richard J. Aldrich. The Government Communication Headquarters (GCHQ), Britain's equivalent of ...

Martin Rowe

No 2014 Punkin Chunkin, What Will You Do?
Martin Rowe
2 comments
American Thanksgiving is next week, and while some people watch (American) football all day, the real competition on TV has become Punkin Chunkin. But there will be no Punkin Chunkin on TV ...

Rich Quinnell

Making the Grade in Industrial Design
Rich Quinnell
15 comments
As every developer knows, there are the paper specifications for a product design, and then there are the real requirements. The paper specs are dry, bland, and rigidly numeric, making ...

Special Video Section
The LT8640 is a 42V, 5A synchronous step-down regulator ...
The LTC2000 high-speed DAC has low noise and excellent ...
How do you protect the load and ensure output continues to ...
General-purpose DACs have applications in instrumentation, ...
Linear Technology demonstrates its latest measurement ...
10:29
Demos from Maxim Integrated at Electronica 2014 show ...
Bosch CEO Stefan Finkbeiner shows off latest combo and ...
STMicroelectronics demoed this simple gesture control ...
Keysight shows you what signals lurk in real-time at 510MHz ...
TE Connectivity's clear-plastic, full-size model car shows ...
Why culture makes Linear Tech a winner.
Recently formed Architects of Modern Power consortium ...
Specially modified Corvette C7 Stingray responds to ex Indy ...
Avago’s ACPL-K30T is the first solid-state driver qualified ...
NXP launches its line of multi-gate, multifunction, ...
Doug Bailey, VP of marketing at Power Integrations, gives a ...
See how to ease software bring-up with DesignWare IP ...
DesignWare IP Prototyping Kits enable fast software ...
This video explores the LT3086, a new member of our LDO+ ...
In today’s modern electronic systems, the need for power ...