Innovation accounting allows organizations to quantify learning in terms of future cash flows—and to make the explicit tie back to the equity structure we discussed in Chapter 3. In other words, IA gives finance a way to model the variables that go into making up a startup valuation: asset value, probability of success, magnitude of success. Early numbers, like revenue, are likely to be really small, with a possibly negative ROI. This is really politically dangerous for innovation projects, so we have to be able to explain—in a rigorous way—how those small numbers can turn into big ones
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