The Real Cost Of Innovation

In the April 2002 issue of MIT’s Technology Review (one of the best technology publications in the market, and one I read faithfully), I was fascinated by Michael Schrage’s column on the real cost of innovation, called The Price Is Right.  (You can find it on the web at http://www.techreview.com/ articles/ print_version/schrage0402.asp.)

In my just-finished course at the University of Pennsylvania on Why Technologies Succeed or Fail, I tried to get my students (all mid-career professionals) to buy the idea that the price of a new product in the marketplace is an important component of whether people will buy it, but it’s not the COST to that user (and not, therefore, the only input to his buying decision). 

Users must also consider the cost of adapting their organization and its practices to use the new technology – or adapting the technology to their needs.  They may have to train workers, learn new skills, rewrite business processes, and along the way change their organizational culture.

Schrage’s article is a good take on this, further tying it to the cost of innovation, whether that’s innovation for the selling company, the buyers, or industry as a whole.  It’s well worth reading.  You might like to also take a look at another article in that same issue of the MIT Technology Review, Handhelds of Tomorrow, by Claire Tristram. (It’s at http://www.techreview.com/articles/tristram0402.asp but you’ll need to be a subscriber to read more than a long summary for this one). It makes the point that people will pay for technology (price) only to the extent that it offers them compelling value.  Value is certainly related to price, but they’re not the same thing at all – I might be willing to pay $100 for a bottle of cool water in the middle of a desert, but I’d probably think anything more than a few dollars excessive in the middle of a modern city.  That’s because I’m making my decision based not on price, but on value.

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