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.

“We have been discussing and reviewing our financial results with Nick Setchell since 2005 and now do this every 3 months and at the same time forecast the future expected performance of the company for the next 12 months. It is really helpful to regularly go through the process of this especially in view of the challenging conditions in the marketplace in recent years. We have found the method of reporting, plus benchmarking against other companies as well as the unbiased advice given during these sessions to be very valuable for our business.”

Carolyn Kirk, Managing Director, Richard Jay Laundry Equipment

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.

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

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.

Keep an eye out for our series of Blogs providing updates and tips regarding J-Curves! We will keep you posted!

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