Is Innovation Expensive?

I was asked last night how companies could afford to allocate scarce resources to innovation in these unprecedented times. When every extraneous expenditure is cut back to preserve cash flow how can it be justified to lavish money on experiments that might fail?

You do not get innovation for free – you have to allocate time, money and people to the search for new products, services, methods etc. However, innovation can lead to powerful cost savings, profitable new products and competitive advantage. Indeed right now the main benefit of innovation might be survival. If you just cut costs and don’t innovate you will be bypassed in the market by more agile competitors.

There are inexpensive ways to achieve innovation. Let’s divide activities into three categories.

1. It costs virtually nothing to:

  • Communicate a vision of innovation
  • Set goals and objectives for ideas, prototypes and innovations
  • Ask your people for ideas
  • Ask customers for ideas
  • Ask suppliers for ideas

2. It costs very little to:

  • Run brainstorm meetings
  • Set up an intranet based suggestion scheme
  • Evaluate and select the best ideas
  • Build models and prototypes
  • Ask customers to evaluate your prototype products or services
  • Implement small incremental innovations in your products, services and methods
  • Empower people to try more initiatives in their areas
  • Investigate new collaborations and partnerships

3. It costs a lot of money to:

  • Roll out major new products or services
  • Try an entirely new business model
  • Re-engineer your IT systems

So you should do a lot of items from Category 1. Generate many ideas from all sources – it costs very little.

You should do a few things from Category 2. Definitely move the best ideas to the prototype stage and evaluate them (but kill them if necessary).

You should think carefully about items from Category 3, but be prepared to allocate some of your scarce resource in this area.

Innovation involves making bets. Often these bets fail. But you have to stay in the game and keep making small bets until one or more come off. Innovation is not free, but it can be done on slender means if you adopt this kind of approach.


Paul Sloane writes, speaks and leads workshops on creativity, innovation and leadership. He is the author of The Innovative Leader published by Kogan-Page.

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