Cash is King but Innovation is GOD

The above statement does not really mean to compare Cash Flow with Innovation in a company. But yes there are enough chances that one of them might be overlooked by entrepreneurs at times.

Let me first discuss my views about what it means by “Cash is King” and “Innovation is God” separately and how they might be related.

Without doubt a Company cannot survive for long without Cash. Let us not confuse Cash Flow with company’s profit-loss. I am not a financial guy to give an exact definition of Cash Flow and so are many of you hence I will try to keep it as simple as possible. Cash Flow is a physical thing left in your wallet or in your Bank Account whereas profit – loss are recordings in your financial statement. To understand this better consider an example of a simple transaction at a local grocery shop. You pick some groceries and pay cash in return to the shopkeeper. This ensures there is a Cash Flow to the shop owner but if you take a credit from him and say that you would pay for all the groceries at the end of the month there is no Cash Flow for the shop owner until the month end. In fact in both the scenarios there is a profit – loss account for the shop owner. Not all debtors will pay on time affecting the cash flow of the business. It is always very important to have a positive Cash flow for the business and should always find ways to keep it healthy.

Now the most important and buzzing word around all the business houses across the world “Innovation”.

Simply put I define Innovation as a “New Thinking” that will create “Value”. It can be value to an existing Product, Service, Process, Technology or to develop a new Idea accepted by economy or even finding a new market for an existing product or service.

There are many different ways to encourage innovation but I think below 2 are most important:

• Break Rules: Innovation is breaking rules which does not imply breaking laws or ethical principles. Encourage to challenge the existing product or service and let yourself ask “This is not correct” because the next question would be “what is correct”. This also involves cannibalizing your own product which Intel has been doing it for quite sometime!
• Embrace Failure: In most cases creativity depends on elements of unknown which means something you try may not work or may work differently than what you anticipated. Go with it and use that information as a feedback to improvise.

Apart from encouraging Innovation we also have to find the value of Innovation. This can be determined by Knowledge and Information the Innovator has. Every innovation has some investment into it and we need definite variables before making huge investments into that innovation. Based on the knowledge and the Information the Innovator has, can determine the ROI (Return on Investment) to an extent.

Most companies suffer innovation at adverse times. This might be because of more focused approach towards Cash Flow. Similarly few companies might encourage innovation but neglect the value of having Cash in hand. A company should never run out of Cash and to take it to the next level Innovation is the Mantra.

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Thanks,

Hari Mindi