Payback: Reaping the Rewards of Innovation [Hardcover]

James P. Andrew (Author), Harold L. Sirkin (Author), John Butman (Author)

Book Description

Publication Date: January 9, 2007

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.

Editorial Reviews

From Booklist

The authors, consultants with extensive experience assisting corporations, report that innovation problems are not due to lack of ideas but rather to how corporations turn those ideas into cash or payback. We learn about three different innovation models: "Integration," becoming the sole owner and executor of the innovation and its only or primary beneficiary of rewards; "Orchestration," partnering on significant and important phases of the process as primary "owner" of the idea that drives its development; and serving as "Licensor," the owner of the idea and sometimes of its production and launching but having limited involvement thereafter. The authors analyze start-up costs, speed to market, speed to scale (time from launch until achievement of planned volume), and support costs to evaluate potential payback success. Although the book can be taken as an infomercial for their consulting firm, the authors offer superb advice on managing innovation with a disciplined and analytical approach to determining how much and where to invest, providing valuable insight for leaders of companies large and small. Mary Whaley
Copyright © American Library Association. All rights reserved

Review

"...a detailed roadmap showing senior business leaders how to manage innovation projects and chart whether they are headed for success or failure..." -- The Financial Times, February 20, 2007

"...a helpful "how-to" for companies looking to refine their innovation process." -- Forbes.com, January 23, 2007

"One of the biggest business books of 2007 will feature innovation ... That book, more than likely, will be the newly published Payback." - Lester Craft -- Innovate Forum, January 4, 2007

There's a belief that innovation is about great ideas, but in the business context, it's also about bringing a great idea to market, and how to maximize the payback on the investment made in the idea." -- BusinessWeek.com, February 12, 2007

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Product Details

• Hardcover: 228 pages
• Publisher: Harvard Business Review Press; 1 edition (January 9, 2007)
• Language: English
• ISBN-10: 1422103137
• ISBN-13: 978-1422103135
• Product Dimensions: 9.3 x 6.5 x 1 inches
• Shipping Weight: 1.1 pounds (View shipping rates and policies)
• Average Customer Review: 3.8 out of 5 stars  See all reviews (14 customer reviews)
• Amazon Best Sellers Rank: #692,219 in Books (See Top 100 in Books)

Customer Reviews

Most Helpful Customer Reviews

11 of 11 people found the following review helpful:

2.0 out of 5 stars Solid idea; very weak exposition, May 23, 2007

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Jeff (Northern California) - See all my reviews
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This review is from: Payback: Reaping the Rewards of Innovation (Hardcover)

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.

14 of 15 people found the following review helpful:

5.0 out of 5 stars "As you sow, so shall you reap.", February 7, 2007

By 

Robert Morris (Dallas, Texas) - See all my reviews
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This review is from: Payback: Reaping the Rewards of Innovation (Hardcover)

The last time I checked, I was amazed to learn that Amazon offers 178,376 books on the general subject of innovation. One of the basic truths about selling residential real estate is that "for every house, there is a buyer." The challenge is to bring the two together. The same is true of business books and those who read them. The authors of Payback, James P. Andrew and Harold L. Sirkin, do not provide an annotated bibliography but do refer to dozens of excellent sources that helped to guide and inform their explanation of how to "reap" the rewards of innovation. Presumably they would be the first to suggest that their readers also consult a number of the sources before deciding - and in this context, I presume to invoke an agricultural metaphor -- what to "plant" where in order to produce the desired "harvest." The purpose of this brief commentary is to help those who read it to decide whether or not Andrew and Sirkin's book is worthy of their careful consideration. My guess (only is a guess) is that it will be of substantial value to most (if not to all) C-level executives.

The material is carefully organized and lucidly presented within three Parts: What Is Payback? ("Cash and Cash Traps" and "The Indirect Benefits of Innovation"), Choosing the Optimal Model ("The Integrator, "The Orchestrator," or "The Licensor"), and Aligning and Leading for Payback. In the Afterword, Andrew and Sirkin then offer a cohesive, comprehensive, and cost-effect plan for "taking action" which will maximize the ROI of whatever resources have been committed innovation initiatives.

Of special interest to me is what they have to say about alignment in Chapter Seven. According to a survey conducted with BusinessWeek, the highest ranked innovative companies (in descending order) are Apple, Google, 3M, Toyota, Microsoft, GE, P&G, Nokia, Starbucks, and IBM. However different they are, "all of them are aligned around innovation and achieve payback" because they have avoided the most basic causes of innovation misalignment. Specifically, these causes are:

1. Having an innovation strategy at odds with business strategy
2. Innovation that is "all talk and no support"
3. Innovation initiatives are isolated
4. The process is fragmented and disjointed
5. "Dynasties" monopolize innovation resources
6. Metrics confound the goals of innovation

Andrew and Sirkin explain how to avoid these and other causes of misalignment, stressing the importance of achieving and then sustaining individual, unit, and companywide responsibility as well as creating and nourishing conducive conditions which include openness, and, meanwhile, "measuring what matters" with accuracy and consistency.

Efforts to "reap the rewards of innovation" require effective leadership at all levels and in all areas of operation, of course, but especially at the C-level. Leaders of innovation must have a tolerance for ambiguity; also be able to assess and be comfortable with prudent risk, be able to quickly and effectively assess an individual, be able to balance passion with objectivity, and finally and most important, be able to change.

Whatever their size and nature, all organizations need to "get their arms around [their] innovation portfolio," Andrew and Sirkin insist, and "the projects under review will fall into three categories. About a third of them will be winners that should be promoted and accelerated. Another third will be a waste of resources and should be stopped even if they are being supported by `other budgets.' These are the `walking dead,' and it takes great courage to kill them, but it must be done. The final third will be less easy to evaluate and will need further exploration and discussion to determine whether they should be kept or killed. Moving on the third that should be stopped, and reallocating resources to accelerate the third that are winners, will immediately increase payback."

Long ago, Thomas Edison asserted that "vision without execution is hallucination." While no doubt agreeing with Edison, Andrew and Sirkin take that thought a step further by insisting that execution of innovation initiatives must deliver the required return on a company's investment of money, time, and people. "Payback means one thing - cash. Cash that is realized within the planned time frame."

For decision-makers in organizations that have not as yet achieved and then sustained such payback, Andrew and Sirkin's book is a "must read"...and I mean now.

16 of 19 people found the following review helpful:

2.0 out of 5 stars I must have read a different book, April 9, 2007

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Mark P. McDonald (Chicago, IL United States) - See all my reviews
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This review is from: Payback: Reaping the Rewards of Innovation (Hardcover)

Based on the other reviews I must have read a different book. But seriously Payback bills itself on the ideas behind creating practical and actionable innovation, how else could you meet the promise of 'reaping the rewards of innovation.'

Unfortunately the rewards they are talking about are all in terms of cash and profits making this book a 101 finance book built around the authors notion of the Cash Curve with the following basic tenants:

- don't spend to much to create an idea because that consumes upfront cash
- don't take too long to commercialize and bring the idea to market
- get your idea into volume production as soon as possible
- support the idea with a measured post launch investment.

Sorry but that's it. The book is heavy on the finance 101 side and extremely light on the idea of practices and ideas. Sure they say that you can play different role: innovation integrator, orchestrator, or liscensor but you pretty much know what the authors are going to say just by the role names.

The book does have an number of case studies, many that are available in the public domain, however these cases are more narrative telling you what happened without being analytical and telling you why the did this or that and the result it took.

Overall this book is very light on the ideas and actions required to deliver the rewards of innovation because it treats innovation as a financing event that is intended to generate cash. While that view is true, there is allot of insight, actions and practices that must happen before we can start thinking about how to get cash out of an innovation. I only hoped that the authors had taken the time to tell us that.