Cheap! Cheap! Cheap! That's the hungry cry of the marketplace. Faster is nice. Better is good. But cheap, cheap, cheaper is what fuels growth and accelerates market share. Innovation dangles the tantalizing promise of more for less. "More for less" is what customers say they want. Just ask Intel about its next-generation microprocessor or Merck about the impact of generic drugs on its bottom line.

That's precisely why innovators have such a tortured relationship with price. Should they go for profit margins or for market share? Are they better off bundling in benefits or proffering discounts? How much of a premium can they command? What does it mean to say that the price is right?

These are excellent questions. Unfortunately, they have precious little to do with how people and organizations actually pay for innovation. The problem is a fundamental economic confusion between "price" and "cost." Most innovators honestly believe the "price" they charge represents the customer's "cost" of acquiring their brilliant innovations. It doesn't. Not even close. Genuine innovation almost always creates a disjunction between the price that's paid to acquire it and the actual costs of implementing it.