Behavioral traps and innovation

ME PoV Fall 2014 issue

What innovators can learn from investors’ failures

There’s a well-documented disconnect between the decisions that people make about money and the assumptions that classical economists made about these choices. Generally, individuals are not rational creatures when making choices about how to invest their money. But less-than-ideal decisions are not the sole province of investors. The biases and emotions that cloud our judgment about money and stymie well-intended investment plans are the same forces that compromise the ways companies invest in innovation and organize innovation processes. As innovation climbs corporate agendas, the understanding of how it works and how it can be managed is struggling to keep pace.

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