Most companies earmark a portion of their investment for ‘innovation’ these days. But whether they get returns on this investment is highly debatable. Innovation is useless unless it generates cash over a fixed period of time, according to James Andrew and Harold Sirkin in Payback: Reaping the Rewards of Innovation. Cash is what enables a company to create organic growth and keep on innovating, they say.

Through this heavily theoretical book, buttressed by some brilliant corporate case studies, the authors offer help to business managers and executives on how to get better payback on their investment in innovation. It answers some of the most obvious questions: 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? How much additional investment should you pour into sustaining and building the product or service?

While the intention of innovation is to generate cash, it is necessary to have a disciplined and consistent way to decide how to manage it. For Andrew and Sirkin, the most effective tool is what they term the ‘cash curve’. The authors painstakingly illustrate the importance of this tool and how the level of understanding of this can make or break businesses. Cash curve is nothing but a graphical representation of the four factors that affect payback: pre-launch investment, time to market, time to scale up and support costs. The authors warn that any anomaly in any of these factors can seriously affect the payback strategy. Preparing and managing the cash curve may sound like “running the numbers” but this helps managers see the impact of their investments and thus curtail unbridled spending. It also motivates managers to “improve the curve”, they say.

Apart from cash, there are four other types of payback: knowledge, brand, ecosystem and culture. Cash, though, is king. To drive home this point, the authors cite the example of Microsoft, “the most successful innovator in business history”. Windows has probably generated the largest payback of any new product ever. It generates $1 billion a month in revenues and $9 billion annually in operating income. Other innovative blockbusters are the Model T Ford, the Boeing-747 and the cholesterol lowering drug Lipitor, one of the most successful medicines ever launched.

However, there is a cash trap that companies should be wary of. These highly successful products can become innovation-thwarting ‘dynasties’ that suck in most of the investment, leaving little room for new products to emerge. This is true of organisations where one highly successful department wheedles most of the budget allocations meant for the whole group. Microsoft, however, was smart. It did not allow its core product Windows to become a dynasty. It continued to innovate around Windows, integrating it with other services and technologies, and expended enormous resources to developing and commercialising new products such as MSN, XBOX, Tablet PC, etc.

Innovation alone is not sufficient, say the authors. Timely execution is extremely critical. They cite the classic example of Iridium global telephony network, which gobbled up close to $5 billion in the pre-launch period itself and took 12 years to launch. By that time, competitors had created their mobile telephony systems. The cash flow to the Iridium project should have stopped when it was clear the project wouldn’t materialise on time, say the authors.

In order to cash in on innovations, companies need to develop a process to collect, screen and nurture ideas and “commercialise and realise them in a way that achieves payback”. But that is easier said than done. Innovation is hard to quantify and one never knows which idea is likely to prove a bonanza.

Andrew and Sirkin believe that no organisation suffers from a lack of ideas. “Thousands of good ideas exist within every organisation, even those that don’t think of themselves as innovative.” However, these ideas are hardly put to proper use. “The real problem these companies have is how to turn their ideas into cash.”
Sometimes, too many ideas are a problem, too.

I am reading PS, I LOVE YOU by Cecila Ahern. It is a wonderful book highlighting the importance of family in every aspect of life. It is based on letters from a husband to his wife preparing her to live a life without him after his death.
Another book I recently read was Tuesdays With Morrie by Mitch Albom. It is phenomenal.

I prefer reading self-help or management books. It helps me reinforce values such as interpersonal relationships, corporate ethics, etc.

I normally buy books based on reviews and sometimes through recommendations.

This book is not about any oil-rich middle-eastern country. It is about the lifestyles of the super rich in the US as the subtitle, A Journey Through the American Wealth Boom and the Lives of the New Rich, makes clear. Wall Street Journal columnist Robert Frank details the lives of the super rich who travel in private jets, holiday in yachts and splurge billions on watches. By grouping the self-made billionaires into haves and have-mores, and dividing ‘richistan’ into different layers of affluence, Frank shows there are more classes among the well-heeled than in pleb land.

Reading Planet India, one gets the feeling that it was written as a sort of Lonely Planet guide for corporate adventurers. The author, Mira Kamdar, is out to prove that India is a showcase for everything in the world today from customised luxury cars to squalid slum dwellings. Her premise is sweeping: “As goes India, so goes the world.”

Kamdar takes the reader on a journey across the country from the swanky offices of corporate India to the crushing poverty of Dadham village in Maharashtra. Her numerous interviews and conversations not only highlight the extraordinary factors that are driving India’s progress, but also examine how these changes are impacting the lives of its citizens.

On the one hand, our ambitious business leaders, favourable workforce demographics and flourishing democracy are a guaranteed formula for success. On the other, our second-rate infrastructure, socially and economically disruptive emergencies like the AIDS epidemic and gender discrimination and endemic poverty are an equally compelling recipe for disaster.

It seems that this book is meant as a wake-up call for Indians. Someone once said, the worst thing about elephants in the room is that if you ignore them long enough, they become invisible. In that light, her passionate arguments on everything from low quality primary education, to inadequate primary health seem designed to elicit more than a mere sigh. Kamdar reports numerous examples of companies that are working to solve each of these issues around the country.

At times, however, the back-and-forth between the good, the bad and the ugly seems to have even the author confused. The narration jumps from jubilant celebrations on one page to sincere concern on the next. For example, an entire section on the country’s thriving diaspora ends up reading like an apology on their behalf.

That being said, her intimate writing style makes for believable reading although not every case is made strongly enough. A token two pages on the impact of climate change seem woefully inadequate. With Sir Nicholas Stern’s (former chief economist with the World Bank) voluminous report having come out before Kamdar began publishing her book, there certainly wasn’t any dearth of credible research material to choose from.

To go back to the Lonely Planet analogy, the quotes and statistics in the book make it read exactly like the first person accounts you would find in the travel guides. (The list of sources here runs into 18 pages!) For those interested in getting a balanced view on the dynamics that drive this country, Kamdar’s sophomore effort is a good place to start.