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What Is The Price Of Innovation

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Published on Saturday, 26 March 2011 15:07

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Before we find out exactly just how much innovation costs we should think about another question: Who wants to know? Or, put slightly differently: Who cares?

Well, I care, says the CEO of the company who's bottom line depends on out-smarting their competitors and who's looking to outsource innovation to somebody that can help his company stay relevant in the market. And I care too!.. says the merchant who's in the innovation business, selling innovation to whoever is willing to pay for his services. Their reasons are obvious: the merchant cares about the price because he wants to be fairly compensated; and the CEO wants to know because it's an investment which is supposed to bring revenue to his company in the future so he wants to know how much it's going to cost and how much money he's going to make later, using the purchased innovation.

Now we know who wants to know and why. And in a market economy, the price of innovation is determined by the number of suppliers of innovation, and the number of consumers. We know what affects the price of innovation but the question remains, what exactly is the price?

It is reasonable to expect that we can put a price on innovation, right? Right! But not upfront! And here's why.

Innovation is a process. In order to put a price on it you have to quantify it, or measure it. And just how do you measure innovation when the very definition of innovation implies the creation of something new and different than what's already available. There is no algorithm, no recipe, for innovation. So there can be no measurement of it. What can be measured though, are the results of innovation. You can take the results and then look back and make a determination and put a price on the innovation that contributed to the results you obtained.

Innovation is priceless!

It's what drives our society to evolve at the rate that it is evolving and what fuels our market economies. But unfortunately for both the CEO and the seller of innovation there's just no way to put an accurate price on innovation. In other words, being a merchant of innovation is not lucrative business. And for the CEO of the company who needs innovation it makes more sense to develop an internal process and invest in an R&D department inside of his own company.

But if you're the CEO of that company and you need to purchase some innovation, understand the risks and take on the responsibility. Find a provider of innovation that you can trust and be prepared to wait until the end of the process to determine the value (and the price) of the innovation that you'll be getting.