Innovation's Payback

Although critical to growth and competitiveness, few companies seem to innovate well. Our innovation work with more than 200 clients confirms this fundamental problem: Companies aren't happy with the returns they get from their innovation efforts, causing their leaders to grow increasingly frustrated.

We wrote Payback to address this critical issue.

The issue isn't a lack of ideas. But many companies confuse ideas -- or inventions -- with innovation.

True innovation must lead, directly or indirectly, to increased profits.

Unfortunately, most companies lack a structured process for turning ideas into cash. Or they're unsure which innovation efforts are likely to pay back, and which are destined to become "cash traps" -- endless sinkholes of cash.

Even at the best companies, up to a third of all innovation efforts waste valuable resources that could be better invested elsewhere.

The challenge is to identify which projects need to be cut back so that those with real potential can be brought to market faster -- with a higher probability of success.

Companies need real muscle behind their winning ideas in order to accelerate their path to market -- and payback.

As we outline in our book, the solution to this problem lies in identifying and controlling the factors that affect payback.

An important tool we introduce is the "cash curve."

Our work and research have shown that four variables contribute to -- or hamper -- payback: start-up costs, speed to market, speed to scale and support costs.

The "four Ss" are levers that can be used to fine-tune innovation efforts. When analyzed on a cash curve, these "four Ss" demonstrate whether a project is on track to generate returns. The cash curve is a reality check that gets everyone on the same page for project discussions and decision-making.

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