Professor Murmann's Blog: How to get around the difficulty of estimating returns from innovation

How to get around the difficulty of estimating returns from innovation

Bombardier Recreational Products, based in Quebec, has spent C$225m ($195m) over 11 years developing the Can-Am Spyder Roadster, a three-wheeled motor vehicle. When it goes on sale later this year the $15,000 Spyder will be aimed at baby-boomers who like the idea of riding al fresco but do not feel comfortable on a two-wheeler, says Jose Boisjoli, BRP’s boss. Mr Boisjoli admits that his firm has no idea how much demand there will be for the Spyder. One way to think about how much you should spend on innovation is to ask: how much money can I lose with a failed innovation without jeopardizing the existence of the firm.