Development At ICI: Anthraquinone Harvard Case Solution & Analysis

BENEFITS ASSOCIATED WITH THE PROJECT

The main benefits or advantages that will flow to the organization if the project proves to be successful are:

  • The project would generate a positive net present value of around $25 million. The wealth of the shareholders of the company would, therefore, increase by $25 million.
  • The company produced Anthroquinone as a by-product which was used in pulp mill waste control and in dyestuffs.
  • The use of Anthroquinone would make the operations of the company more efficient.
  • If the company finds a process to produce Anthroquinone synthetically, it would have a positive impact on the performance of the company and the sales of the company would increase rapidly.
  • If the company achieves commercial success, it would prove to be one of the core competitive advantages for the company in future.

RISKS ASSOCIATED WITH THE PROJECT

The main risks associated with the project are many which are:

  • The estimates of the payoffs and the assigned probabilities are by no means authentic, and the situation might get to the opposite side.
  • The company is faced by the risk of financial risks which may arise due to potential economic resources.
  • The costs associated with the project are also exposed to quantifying risk. The assumptions underlying the values for the expenses to be incurred might not be correct.
  • The project is also exposed to the managing risks, for instance, if the organization fails to achieve the desired results, the losses could be huge and there might be hidden costs. If the projects fails and the company fails to find out a process to develop Anthroquinone synthetically, then the costs of reputation risk could be high.
  • If the project does not gain commercial success, it might deteriorate the morale of the employees of ICI.
  • Another important risk associated with this research and development project is that the new process currently was unpatented and was un-exploitable by the company; therefore, the board had to take a decision immediately before BASF discovers that process.

RECOMMENDATION

Before reaching any conclusion, the management of ICI needs to make sure that whether it has taken all the necessary steps to mitigate the risks that are associated with the uncertainty of costs and benefits of the research and development project. Considering the increased use of Anthroquinone in the different activities of the company to make the operations of the company more efficient it is recommended that the management goes ahead with the research and development of the project in order to identify a new process to produce Anthroquinone synthetically and then develop the commercial application. Although, there are many risks associated with this research and development process, but future returns are very high, which would certainly prove to be one of the competitive advantages for the organization in the future. On the contrary, if the management mismanages the research and development of this project, then it would still not incur any loss and the management estimates that it could at least achieve an expected breakeven outcome for the project. This might be an optimistic approach by the management of the company

CONCLUSION

In order to opt for the recommended option above, the management of ICI needs to take certain steps to minimize the negative impacts that could affect the commercial success of the project. The following steps, if taken by the management would help the company to discover the new process of synthetically producing Anthroquinone:

  • The first step for dealing with risk and uncertainty is to gather all the relevant data regarding the new process, set the standards so that the scheduling of the project does not deviates and assign experienced project managers to this project.
  • The management should also conduct a strategic assessment which assesses the risks and uncertainties surrounding the project and also perform a value-based assessment of the project which would evaluate the true value created by the new commercial application.
  • The company should enable a smart reviewer selection and timely assessment and reassessment of the project development should be performed.
  • The management should meet the established standards, prioritize the important tasks, improve the research and development process as it goes forward and make trade-offs.
  • ¬†Finally, the management should also increase uncertainty tracking, make evidence based updates, conduct baseline assessments and track the overall performance of the research and development project............................................

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