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There’s a big difference between an idea and an innovation. It’s called cash. In Payback, authors Jim Andrew and Hal Sirkin argue that companies must sharpen their focus on achieving payback -- in the form of cash and other assets that ultimately generate cash -- to fund growth, stay competitive, and successfully address the biggest challenge facing most com,panies today: increasing the returns from their innovation spending.
The authors introduce the “cash curve,” an approach executives can use to skillfully work the fundamental levers that affect payback: size of the prelaunch investment, speed to market, time to scale, and extent of support costs. The cash curve forces everyone on the senior team to speak the same language and candidly debate the inevitable tradeoffs.
Payback also reveals when it makes sense to deploy innovation to pursue noncash goals -- such as the acquisition of new knowledge, enhancement of the company’s brand, a stronger ecosystem of partners, and collaborators, and revitalization of the organization and its people.
In addition, Andrew and Sirkin show how companies often fail to use different innovation business models to reshape the cash curve and export financial, technical, and market risks to outsiders who are better positioned to take them on. They explore in detail the advantages and disadvantages of the three models -- integration, orchestration, and licensing -- and explain when and how to employ each one to maximize payback.
Payback also includes insights about the organizational and leadership aspects and innovation. Using a wealth of examples, the authors describe how successful innovators align their organizations around payback. And they consider seven important decisions a leader must make -- not delegate -- when managing innovation for higher cash return.
You won’t find pat answers in Payback. But you will find valuable insights and practical guidance for mastering one of the most challenging -- and critical -- business activities.
James P. Andrew is a Senior Vice President and Director of the Boston Consulting Group (BCG), leads BCG’s Innovation practice, and helps companies worldwide improve the return on their investments in innovation.
Howard L. Sirkin is a Senior Vice President and Director at BCG and leader of the firm’s Global Operations practice. He consults with companies in many business sectors about their innovation activities.
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