by James P. Andrew, Harold L. Sirkin, John Butman
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Product Description
If you're like most people, you bet your career and company on innovation - because you must. "Payback: Reaping the Rewards of Innovation" offers you a new way to think about and manage innovation that will dramatically improve the odds of success. Authors James Andrew and Harold Sirkin, senior partners in The Boston Consulting Group, describe an approach to managing innovation based on the concept of a cash curve - which tracks investment against time. They ask the questions you need to ask: How much should you invest in a new product or service? How fast should you push it to market? How quickly can you get to optimal value? And how much additional investment should you pour into sustaining and building the product or service? "Payback" offers you practical and economically sound advice on when to pursue cash flow indirectly by first pursuing other benefits, such as brand and knowledge. It also shows you how to reshape the cash curve by using different business models - integrator, orchestrator, and licenser - each of which balances risk and reward differently. The authors then present a short list of decisions and activities that you must make - not delegate - to achieve a high return on innovation. You won't find facile answers in "Payback' - but you will find valuable insights and practical guidance for mastering one of the most challenging and critical business activities: innovation.
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Average Customer Review:
1 of 1 people found the following review helpful:
 Better alternatives exist, 2008-01-09
Overall, I was not extremely impressed with this book. The cash curve is a good idea, especially if you can accurate analyze the costs. The four S-factors are a fine way to break the problem down into smaller components. Every methodology seeks to provide a common vocabulary and this one wasn't that compelling. The real sin is that it appears a good article was turned into a book. There simply isn't enough material. Parts Two and Three (7 of the 9 chapters) consisted of short corporate anecdotes, followed by a list of items, followed by 1-3 paragraphs describing the fairly obvious items on the list. Finally, as the jacket cover says - "You won't find pat answers in Payback". That is quite accurate - no pat answers and not very much in the way of useful analytic frameworks, beyond the cash curve itself.
Recommended: Chapters 1-2 are applicable to all, Chapters 3-9 only to CEOs looking to implement innovation. Instead I would recommend
"Developing Products in Half the Time: New Rules, New Tools", 2nd Edition by Preston G. Smith and Donald G. Reinertsen. This focuses on reducing the risk in the cost curve (although they don't call it that) by getting products to market faster.
More detailed review at: [...]
0 of 0 people found the following review helpful:
 Getting the most from innovation, 2007-12-11
A lot of books on innovation make it sound like an end in itself, as if innovation carries the answer to every business problem. James P. Andrew and Harold L. Sirkin sound a refreshing note or, rather, several of them. They argue that companies must evaluate business innovation according to the direct or indirect financial returns it produces, its "payback" - and that most products fail to earn back their investment. They then discuss the issues you need to consider if you are investing in innovation: the models, factors, processes and more. While some of their discussions are a bit too sweeping or general, the authors' specific stories of innovation attempts that failed or succeeded illustrate how systematic evaluation could have helped companies estimate a product's chances of success. As a result, this book is a realistic antidote to innovation intoxication. We recommend it to anyone who is trying to plan seriously and realistically for innovation in a business context.
6 of 6 people found the following review helpful:
Great ideas without a central theme, 2007-11-19
For a while now I've followed the writings of Jim Andrew from the Boston Consulting Group. His annual survey about innovation in corporate America provides an interesting window into what's on the minds of corporate leaders about innovation. Jim and a fellow BCGer, Harold Sirkin, have just released a book about innovation called Payback, Reaping the rewards of innovation.
As you might guess from the title, Payback is about closely and carefully identifying the measurable, tangible benefits of innovation. Too often, innovation appears as a "good thing" but we don't measure the results very carefully. In these cases it can be hard, if not impossible, to indicate the direct benefits and payback of innovation. Andrew and Sirkin want to change our thinking about innovation, and make us much more hard headed about the reasons for innovation and the expectation of return.
The book is divided into three sections. The first section looks at payback from innovation and its importance. The second section is about choosing the "right" strategic model and the third section is about alignment for innovation.
In the first section, the book looks at what should be obvious but often isn't - the investment in a new idea and the "cash curve" an idea represents. That is, almost all new product or service ideas require an up-front investment before there's a return, which drives the cash curve negative. Eventually, sales begin and revenue turns the curve upward and a new product or service crosses the breakeven threshold and starts to earn money. The problem many innovations face is that we are too optimistic about the "ramp up" and investment and discount the costs of investment. The authors break these costs into four phases - Startup costs, Speed or time to market costs, Scale or time to volume costs and support costs after the product is launched. Generally speaking, we underestimate the startup costs, and larger firms fail to take into consideration the bureaucracy and barriers to new product development, so speed to market is a challenge. We overestimate the "hockey stick" or ramp up, so the cash curve for many innovations never reaches the break even threshold.
Again, we know a lot of this stuff - but where innovation is concerned, too often we fall in love with our ideas and don't take a hard headed look at the payback of the ideas.
In the second section, the authors look at three innovation models, which are really strategic decisions about how your firm should innovate. These models are: integrator, orchestrator and licensor. Of course one firm may follow several or all of these models in its various business units.
An integrator controls all aspects of the innovation - from ideation through product launch. The authors note that the integration strategy is important when:
* control is necessary
* the company has world-class capabilities
* risks are manageable
* knowledge assets have to be protected
* or simply, there's no better choice.
Orchestrators combine their own talents with the skills and talents of others to bring innovations to market. Orchestration is a good option when:
* A key capability is missing
* You are entering an unfamiliar market
* You don't want to invest in building a capability
* You have trusted partners
* You want to share the risk of development
The final model is licensing. The authors note that licensing makes sense when:
* the company does not have the resources to commercialize an idea and can't acquire the resources
* there's an opportunity to create critical mass through adopting a standard
* the competition can be transformed into a royalty source
The last section of the book is about aligning the organization to support and nurture innovation initiatives. The authors point out several significant challenges to innovation that are structural or cultural:
* Innovation strategy is at odds with business strategy
* Innovation is all talk and no support
* Innovation is an island
* The innovation process is fragmented
* "Dynasties" monopolize innovation resources
* Metrics (and compensation) confound the goals of innovation.
Frankly, this was my favorite section of the book. We've found that in most of the firms we've worked with, the management teams have innovation religion, but aren't sure how to change the culture and get people on board, much less how to make innovation sustainable. The list of challenges I've just provided will occur in just about any firm where the culture and the strategic intent for innovation are not firmly in place. A lot of these challenges can be chalked up to what the authors called "alignment". Strategic alignment, team alignment, compensation alignment, role alignment - all of these things and more must be aligned for innovation to succeed, since, as the authors point out "..the effect of any organization on innovation is often a negative one. This is because organizations, no matter how nontraditional they may be, are primarily designed for control, standardization and reduction of risk - and these characteristics can be the enemies of innovation."
Payback is a good book, but I would have ordered it differently. I strongly favor the last section, since it is alignment and cultural change that make sustained innovation possible. Only when you have sustainable innovation should you worry about payback on innovation. Clearly, the investment in innovation is important, and none of us will invest in concepts with very uncertain outcomes. However, getting the process and cultural attitudes are more important initially than payback. I'd then focus on the returns of innovation and how to maximize those returns. The middle section points out some of the models that are possible to pursue as an innovator - many firms will have all three of these models operating simultaneously - creating and launching ideas themselves, partnering with others to bring new ideas to market and licensing great concepts to others. Choosing a strategy for innovation is important, but I think getting the process up and running initially and tying it to strategic intent is the most important concept - what the authors call "alignment".
I found the book to be a real mixed bag - full of good advice but the sections seem to target different audiences and out of the order I'd prefer to see them. Naturally, as someone who is interested in the cultural and process aspects of innovation, I found the third section the most compelling, and the concepts and advice in that section are worth the reading by themselves. These ideas are more operational and topical, while the second section is really written to a very senior management audience who can choose the appropriate innovation models. The second section is really about the innovation strategy you'll choose. Finally, the first section seems "obvious" to anyone who has launched a new product or service, examining the costs and benefits of a new product or service and the cash curve. What the first section reminds us is that we too often fall in love with our ideas and neglect the hard evaluation of each phase of a new product or service development, underestimating costs and overestimating adoption, leading to many ideas that fail to achieve break even.
This is a tough book to evaluate, since it is chock full of great ideas and models to use to evaluate your business and implement change, yet to me it feels a little unfocused in its target and the consistency of its message. James Andrew is a noted leading thinker in the innovation space, and for that reason alone the book is worth a long look. The ideas around alignment and leadership are especially important and worth reading.
0 of 1 people found the following review helpful:
 Complain, 2007-11-15
Did not receive the books yet after about two months from order.
This is not a good service!
What about the status of delivery?
Massimo Galluzzi
9 of 9 people found the following review helpful:
 Solid idea; very weak exposition, 2007-05-23
This book bears all the weaknesses one expects from management consultants. It has a solid core concept, the cash curve, and a very simple graph to go with it. Virtually everything worth knowing gets said in the first 50 pages of the book.
What follows is a logical, step by step exposition of each point in more detail using selected examples from the authors' consulting experience. Sadly, no single customer example is longer than four pages, and details are sparsely strewn. It is especially noteworthy that they graphic of the key concept, the cash curve, is wholly absent from the second (much longer) half of the book.
One also gets the feeling that if the authors had had different customer engagements, they would have come to different conclusions. For instance, they discuss how Intel practices the integration business model in their chip business. However, virtually every other semiconductor company of any note on the planet is using outside factories (fabs in semiconductor parlance). Many, such as Qualcomm and Broadcom just to pick two examples have built market capitalizations in the tens of billions of dollars practicing the orchestration business model. It would have been very instructive to compare and contrast how two different models in essentially the same business can both lead to outstanding results for investors. Sadly, that discussion is wholly absent.
In summary, the core principal of the book is a very important one. I cannot think of a single business that could become a big success not understanding it. However, the lack of details in the customer examples keeps this book from realizing anywhere close to its real potential.
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