When and how should the decision be made to pursue a new project in your business? I think far too often the “Go”, “No-Go” decision is made without consulting the data. Two discussion points that came up over and over in Corporate Finance include the cost of capital and net present value. The cost of capital is the rate of return you might expect if you invested the same capital in another opportunity with similar risk. This is useful because it puts you in the frame of mind of an external investor that has the option of passing on your company with his investment dollars. Using the cost of capital properly can help you make objective decisions. Present value is a calculation that takes the cost of capital into account when calculating the expected return for an investment when considering all cash flows, and their timing. The net present value (NPV)takes in to account all cash investments as well. If the NPV of a project is positive, then it should be pursued. If two projects have a positive NPV, either both or the project with the higher NPV should be pursued. Go, No-Go The point is that far too many entrepreneurs fail to determine the cost of capital that should drive their decision making or to calculate the NPV for a given project. If an NPV is negative, the project should be dropped. You might ask: Should we just do nothing then? Not at all. If you drop one project because it doesn’t produce a positive NPV, look for other projects, or invest your capital where it is likely to get the same return. My point is this: Don’t be afraid to drop a project because it has a negative NPV. The point of business is to make money, and if you can’t show ahead of time that you’ll make money, there’s little point in investing in the project. In a slightly less sophisticated way, Ed Dale, an Apple loving internet marketer by trade, is saying the same thing this...

In 1837, Ralph Waldo Emerson delivered a talk to the Phi Beta Kappa Society, at Cambridge in which he espoused his vision for the ascendancy of education in our budding republic. He draws on some rich analogy in his arguments, and even admonishes that American universities must “aim not to drill, but to create”, lest they begin to “recede in their public importance, whilst they grow richer every year.” While books are one of the primary resources he cites to facilitate education, he gave the following caution: Books are the best of things, well used; abused, among the worst. What is the right use? What is the one end, which all means go to effect? They are for nothing but to inspire. I had better never see a book, than to be warped by its attraction clean out of my own orbit, and made a satellite instead of a system. I think often about the books I read and question my relationship to them. I have observed that when a book becomes popular (e.g. a best seller), its gravity increases. I have also found that when a book provides me with a very clear and and relevant answer to a problem I have, the remaining contents of the book tend to increase in gravity. A book’s popularity and apparent relevance are good cues, but they can also interfere with the development of our own systems, making us satellites to the ideas they present. Creation is the Goal Businesses need men and women, leaders and managers, who create. When considering what qualifies as innovation in business, it’s important to acknowledge that books, while essential, do not in themselves qualify as innovation. They should instead server to inspire us to create something new, novel and meaningful. In addition to books, there are numerous programs, seminars, certifications, etc. which, if adopted whole hog (so to speak), may put businesses at risk of becoming satellites rather than systems. Some examples might include: Six Sigma Scrum Off shoring Restructuring I’m not suggesting that there’s no benefit in adding off shore resources to increase capacity or implementing Scrum for software development. Those can be very successful approaches and can enable businesses in very creative and...

A major buzzword in business today is Agile. More and more managers and CEOs want to embrace the fast moving, quick to adapt model that has fueled some of the most prolific growth in the companies of our day. Some examples of agile companies include Amazon, Google and a growing number of tech statups.  Amazon releases changes to their website for customers to use every 11.6 seconds. Google is now able to add changes to it’s live search index in a matter of hours for billions of sites around the world. Nimble startups can create a ready-to-sell product in a weekend with very little overhead. Time to Market With examples of very large companies able to move so quickly, it may be a surprise to some that Microsoft still releases a new version of its flagship product, the Windows operating system, every couple of years. One explanation may be that an operating system is more complicated than Amazon’s shopping system, but then Microsoft Window’s biggest competitor, Linux, releases several times a year: Starting in 2004, the release process changed and new kernels started coming out on a regular schedule every 2–3 months… Microsoft’s CEO, Steve Ballmer, has restructured the company several times during his 13 years at the companies head. Recently he announced yet another restructuring Microsoft. Previous restructurings at Microsoft had the aim of moving the company in a more agile direction. This was accomplished by granting autonomy to individual product groups. This restructuring appears to be going the opposite direction. The company said it will shift from largely autonomous product groups to a more horizontal structure While some of the rhetoric from Microsoft about this restructuring claims to improve their overall performance as a company, some analysts are wondering how that will be, since the proposed horizontal structure will require more discussion and meetings. Control vs. Agility Michael Gerber describes a business triad in which all business roles fall into one of three main heads: Entrepreneur, Manager and Technician. In the case of the more agile companies I cited above, there is a strong vision. The entrepreneurial clarity is communicated effectively to all employees. Managers and technicians alike understand the vision as its being passed down. Autonomous groups...

There has been a lot of press surrounding the release of Windows 8. Good and bad press are expected when a new product, especially one that deviates significantly from an established norm, is released to market. In the case of Windows 8, the amount of negative press may have taken Microsoft a bit by surprise. In May, the Wall Street Journal published an article highlighting the disconnect between Microsoft’s vision of computing and users expectations. Two notable disconnects include the developing gap in computing use cases and what appears to be a design by committee failure. Culture of Computing The culture of computing has evolved rapidly over the last three decades. This evolution had been spurred by both computing power and the cost for that computing power. As computing power increased, so did the quality of the graphics, audio and a broad range of uses that weren’t possible before. These include processing large amounts of data in applications such as spreadsheets and databases. The cost of that computing power has also come down significantly, which has created a consumer market where there was previously a majority business market. As high end computing made it into the hands of the consumer, the typical business use cases were replaced with entertainment and hobby use cases. Rather than spreadsheets, consumers wanted to listen to music and watch video. The ends to which that computing power was applied began to change significantly. The growing interconnectedness of the Internet meant that much of the computing power previously required on a personal computer was being moved onto servers, which allowed consumers to do more of what they wanted with less computing power and less specific computing know how. During much of this evolution, Microsoft’s focus on the desktop operating system maintained its focus on original business use cases and did very little with the emerging consumer use cases. Meanwhile, visionaries like Steve Jobs saw that most consumer use cases could be accommodated with very little computing power and a smaller screen. Along came the iPhone and iPad. A major shortcoming related to Microsoft’s design of Windows 8 is that it failed to recognize that the smartphone and tablet computing market serve a different set of...

The GNU General Public License (GPL) has been a hot topic, for both good and bad, ever since it was introduced to the world by the Free Software Foundation by Richard M. Stallman. Regardless of which side you argue, there has been very little case law or legal precedent established in the intervening years. One major reason for the dearth of cases related to the GNU GPL is that it is an economic zero sum outcome. As the focus of my final paper in my Business Law class, I chose to explore what litigation there has been and what it established with respect to the GPL. Surprisingly, of those cases that did involve the GPL and were started, very few actually ended up in court. In other words, they settled out of court. Here is my final paper. You can download it here: Economics of litigating the GNU General Public License...