Idea and cash flows

Many educators compare cash in a business with blood in the human body. Cash is often described as the life-giving fluid that keeps a business going. Cash flow is the circulation of the blood throughout the system.

While I prefer to avoid being too ridiculous about the human body metaphor, there is one more thing that must flow for survival. We need to breathe oxygen. The oxygen of a business is the ideas we need to survive and thrive. These must flow from all people in a business as everyone must solve problems, make decisions and help to manage change. As with oxygen, the better the quality of ideas, the more productive we will be.

Some say that managing cash flow is really nothing more than managing information. The same applies to ideas. Here is my take on how you can use cash flow principles to help you assess where you need ideas. Simply put, managing cash flow is much like managing idea flows. Both must be:

1. planned in advance in anticipation of certain changes
2. monitored to make adjustments to business operations
3. managed to average out the peaks and valleys of flow over a year.

Planning the need for ideas

The essence of innovation is the need for new ideas. Manufacturers know they must invest in research and development to create ideas for tomorrow’s profits. Executives look at future possibilities and decide where to focus their resources to create the ideas they need. Consider two aspects of every organisation in terms of the new idea flows you need:

1. to develop, improve or enhance the products and services you offer.
2. to improve the effectiveness and efficiency of your business.

Maintaining a profitable business requires that we use foresight to determine:

1. where we need new ideas
2. the size or scale of the ideas and
3. the timing of the ideas to solve the challenges we will face.

Monitoring your idea flows

A business needs enough inventory to fill orders in a timely manner. Inventory includes finished products to anticipate future sales, as well as raw materials held for future production.  If you review the challenges facing the business, you can also plan for the need for ideas to solve these challenges. Are enough ideas being generated in a timely manner? This is much like planning to have enough inventory on hand.

A tricky situation for many businesses is setting aside cash for ideas that have yet to be conceived. It may seem odd, yet what happens when great ideas occur between budgets? You must plan to take advantage of ideas that will be conceived to solve your problems and to create new business opportunities. 

Good spending disciplines focus on efficiency and effectiveness. You want to keep unnecessary expenditures to a minimum. The same applies to the processes you use to solve problems. These can be made much more effective by ensuring that all efforts by staff to solve problems are efficient and timely. Do this by:

• deciding where you need improvements in the business
• communicating these to managers and staff
• allocating idea challenges to people or teams
• empowering them to actually solve the challenge
• creating regular meetings or internal opportunities to solve these issues
• ensuring that people have the skills to brainstorm solutions to problems.

Managing to average out the peaks

Idea flow planning also means managing the timing of ideas. It’s not possible to solve every problem at once. Resources are limited. By spreading your need for ideas over 12 months, you can help to focus your resources where they are most needed and when they are best available. 

Monitoring also involves judging the effectiveness of the way people work together. Some individuals and teams may lack the expertise to solve the problems. If so, consider adding outside help or engaging customers in the process. There are many ways to involve customers.

When matched with a newer expertise in managing ideas, our expertise in managing cash is an ideal strategy for minimising the risks facing your business. Use the insight of managing cash flow to create an equally important plan to manage your idea flows.

Ed Bernacki is an international writer and speaker on innovation based in Ottawa.

Visit www.wowgreatidea.com

This commentary was originally published in Bright magazine (Issue 35) for August / September 2009.