Book Review: Payback (Harvard Business School Press, 2006) by James P. Andrew and Harold L. Sirkin

How does one reap the business value out of innovations? This question has puzzled me for the last 24 months. Along with several colleagues, I have been investigating models and mechanisms that firms can use to manage, track, and evaluate the contributions of innovation activities to their business value. Let me say that this no easy feat to accomplish. To date, we have arrived at a mechanism that can be used to measure the business value of innovation (for the interested reader, please contact me for details, or see some of the many talks and presentations that have described our findings, for example - Demystifying the Link between Innovation and Business Value: A Process Framework at the Management Roundtable, July 18, 2007). Given this context, I welcomed the opportunity to read Payback (Harvard Business School Press, 2006) by James P. Andrew and Harold L. Sirkin.

In Payback, the authors, both of whom are senior executives with the Boston Consulting Group, construct the concept of the “cash curve”, as a guide for executives to manage their investments in innovation. The concept is fairly simple, intuitive, and yet helpful. The authors show how to manage critical drivers such as size of investment, speed to market, time to scale, and support costs, so that one can reap the largest payoff out of innovations. The authors describe various measures of business value for innovation beyond cash, such as acquisition of new knowledge, enhancement of brand image, linking to business partners, and energizing employees within the organization.

Overall, I found the book to be very interesting. The most interesting aspect of this book is the discussion on choosing the right innovation model (Chapters 4-6): the integrator, the orchestrator, and the licensor. In these chapters, the authors talk about the various models and how should organizations choose the right model, or a combination of models, to address the various innovation investments they make. The book is good for managers who wan to plan innovation investments. However, this book does not provide a guide whereby to track innovation efforts, the process of innovation (from ideas to prototypes to commercialization) and its effects on the business value of innovation. Put another way, this book will give you a good (or even excellent) understanding of how to manage the investments you make into innovation strategies and efforts. However, once these investments are made, how do you actually manage the innovation process, improve it, and link it to business value is not covered. For those interested in these aspects, I encourage you to review previous posts on this Blog and get involved in our ongoing research efforts.

An excellent read for anyone in the innovation business or even for anyone running a business….