J Curve Management

Implement this evaluation and management tool to track the number of J Curve investments that you’re currently undertaking, the 3 phases of each, and the 5 rules for managing them.

The Importance of J Curve Management

The Importance of J Curve Management

Any strategic decision to spend money today for a benefit tomorrow is called a J Curve investment. The J Curve investments create short term financial loss with the intention of recovering the investment in the future, and overriding it with long term strategic gains.

Every business has J Curves:

  • Adding a new product line
  • Accessing a new market
  • Making a new staff hire
  • Purchasing new equipment
  • Opening a new location
  • Moving manufacturing overseas
  • Investing in R&D
  • Acquiring competitors

The process of identifying, prioritizing, and managing J Curves is the most important determinant of entrepreneurial success. The business landscape is littered with companies that have choked from having too many J Curves, or starved from having too few.

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J Curve Stages

Our J Curve management process starts with tracking all company J Curves and understanding the three phases of each. The phase of each is important to understand and track because your behavior will vary, depending on the stage you are in:

  1. Investment – Cash going into the investment
  2. Catch Up – Invest begins to produce cash
  3. Blue Sky – Investment has paid back the initial investment
J Curve Stages

Rules for Managing J Curves

In addition to our J Curve management tool, we condition subscription clients to adhere to the five rules for managing J Curve investments:

1. Measure and manage depth and breadth of the valley
‍Be prepared for the valley to be deeper and wider than anticipated. Encourage discussion about costs and create an environment where new ideas are welcomed.

‍2. Do NOT become emotionally connected to a J Curve
‍Watch out for ski slopes and emotional arguments to keep them going. Examples are sunken costs and people management.

‍3. Do NOT take on too many macro J Curves at once
‍Identify, prioritize, and stagger J Curves. Understand how many your company can handle at one time. Understand “aggressive” versus “passive” introduction, and ask two questions when considering any new J Curve – Will it benefit the business? Is now the right time?

‍4. Create and manage a plan to quickly move from Phase 1 to Phase 3 Focus on the critical transition between the innovator and the implementer by using clear communication, documentation, and procedures. And beware of innovators who will not let go of their baby!

‍5. Update your J Curve register
‍The register will track the number of J Curves active in the business. Maintain the register in a spreadsheet and update it every 30 days. The register isn’t a project management system; it’s a higher level view of all strategic investments in the business.
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