The Impact of Short Term Investing / Financing on New Product Development

Rating

The Impact of Short Term Investing / Financing on New Product Development

🔥 Dear all,
I am currently carrying out an investigation on the impact of short term financing and short term capital investment.
B2B industrial markets are facing constant pressure for product innovation. The fast paced advances in technology over the past decade have accelerated the innovation process and most companies are under pressure. On one hand they have this market pressure and on the other hand they face the dilemma of risk averse investors who can be fearful of these fast paced advances in technology and unwilling to invest on a long term basis. As a result, investments are being granted on shorter terms, requiring returns on capital finance faster than the technology becoming obsolete, putting many investments at risk.
This realistic scenario is challenging the selection of projects to take to market, new product development and market launch strategy, and is pushing firms to change their attitude and decision making process related to these things.
B2B companies are also seeking to have a more well defined scope before initiating any investment; one that guarantees a return on investment in the short term through the involvement of customers. These customers at times may be used to partly finance product development whilst providing a reassurance of sales, shortening market acceptance and thus faster returns for amortisation of capital finance.
What are the implications of this scenario on the performance of the launched product, the internal dynamics within the firm, the managerial behaviour of different business functions, the customer relationships, market reputation, the role the skill of employees plays in the success of the product and market launch, the growing dilemmas for more effective and thus costly marketing eroding available financing, the capacity of sustaining current technology portfolio on the market and the risk of being unable to sustain newly launched products from a capacity and financing standpoint.
I would appreciate your views and opinions on this matter. Specifically how do you think this way of financing affects the decision making and strategy of related business functions? What risks and threats do you think this way of financing presents to the organisation and such investors?
Thank you for your participation and contribution.

		Comments by date▼ Comments by rating Rating
		2 Jaap de Jonge Editor, Netherlands
	Short Term Financing is a Leadership / Management Issue You are describing the scenario as a consequence of technology possibilities/market tendencies of quick changes etc. and of investors being unable or unwilling to consider long term investing. Indeed these things could be contributing to the complexity of attracting capital for companies. However, in my opinion attracting the right investors is predominantly a top management issue. I believe in general, each company gets the investors it deserves. It is up to the leaders and top management to convince investors on the company's long term vision, strategy, product plans and resulting business results. If they are unwilling or unable to create, communicate and implement a good long term vision, strategy and prospects (outlook), this will attract investors who are in only for quick wins. That will easily become a vicious circle from which it is hard to escape.

		0 Mehul Doshi CxO / Board, India
	Short Term Financing is Short Term Thinking and Definitely a Leadership / Management Issue An organization is started with a mission, for a purpose and value systems are derived from the organization DNA influenced from the initial stage or inception and developed/ matured across time. When we look at sources of finance for a company they can come from internal sources or external sources. The reason organization factor in the short term financing is either they have an opportunity which they want to capitalize among other areas and functions and this is the calculated plan for the company. Each well calculated project however planned well shall have its residual risk and the organization is and should be well prepared to ride this wave. No business is risk averse to market situation, changing technology and the cycle of changes are too fast for certain industries to even reap the benefits of previous investment. So do we stop investing? Management and leadership as highlighted by Jaap de Jonge are crucial parameters as technology innovation is so fast that short term financing I correlate to short term thinking for not only experiential reasons but quantification reasons. Even every metric of measurement cannot capture the brand and business plan execution win or lose and if the Investors are too short term oriented they do not have trust in the leadership / management team and are experimenting in name of short term decision or short term provision of capital. Consistency is the plan among Successful Brands which have invested across the years and have paid handsome results. The second half of the question is a resultant of the first plan, and if they are short term the resultant project even though might have converted to good gains would have being declared a failure due to short term thinking and planning based on short term capital availability. Time and maturity of business model cannot be aligned to short term finance availability. Hope the above helps in your research.

		1 Andrew Portelli Student (MBA), Malta
	The Impact of Short Term Investing/financing Hi Jaap de Jonge and Mehul Doshi, thank you for your contributions. Whilst I do agree the leadership should shoulder responsibility, one cannot argue that they are always able to influence the nature of the investor. Take a publicly traded company as an example. How would you deal with that scenario? If short term financing is the only way to go with some, maybe all development projects, what implications do you see for the firm from a strategy and decision making standpoint? Do you see only downsides to short term financing or is there a hidden benefit to it too which maybe is not evident to the majority?

		2 Mehul Doshi CxO / Board, India
	The Impact of Short Term Investing/financing (Replies for Andrew) @Andrew Portelli: If short term financing, especially for development projects, has implications that are not in the interest of project long term goal but only some short term benefits or they are short sighted as development project the only benefit I can foresee is Cash flow for keeping the project alive for sometime. If the project and its gains do have a public benefit and can sustain from public contribution then this risky strategy can be a way to take brave decisions. The downside is if the perceived benefits do not appeal to the beneficiary at large in the initial round it gets a slow death and the hidden benefit can be to the project owner to make the cash flow positive so that it sustains and gets out of the clutches of financing. The "ifs and thens" are plenty and it all depends on the situation and project undertaking such short term financing and specially when you are mentioning a development project it can only benefit when public interest at large is involved. Hope the above helps.