The time base for these projections assumes that year zero is the time at which all research starts. It is not today's date. The curves project how the profits from a strategy could evolve assuming different levels of risk. For instance the 10% risk projections represent a 1 in 10 chance taken on a continuing basis that profits will be no better than the projection. On the other hand the blue lines described as the eventual trend are projections based on an even distribution of project successes using the assumed probabilities of success.

Our current strategy is a 4,6,7 strategy - meaning that we are concurrently conducting 4 high risk research projects, 6 medium risk and 7 low risk projects. These curves are all projections based on statistical risk calculations and are not predictions of what will actually happen. That's something we can never know for certain where research is concerned. Nevertheless, the thing which impresses me is that, as you may agree, these projections have a familiar look or pattern to them. In fact the current profits from research - which we estimate to be about 40 MM per year is right in the middle more or less of all these curves on the left.

You'll note now that the projections on the right instead suggest the potential for around 100 MM profit from research per year. What if these projections are right or even close? Apparently, we wouldn't have to change the numbers of projects we do - just change the proportions of different risk level projects.

Unfortunately, the strategy on the right, which the consultant calls a 15,1,1 strategy - would involve major changes in R&D. He says we should try to reach a decision soon, in fact as a matter of some urgency, because we are currently running a 2 in 3 risk that our profits from research will drop drastically after Sentry 1 becomes obsolete in about 10 years time.