Tom Peters writes in the foreword of Michael Schrage’s new book that "Serious Play is simply the best book on innovation I’ve ever read." I’d modify that to say, "Serious Play is simply the best book on business prototyping I’ve ever read." Not quite the same thing, though still an endorsement.

Before reading Serious Play, I hadn’t realized quite how radical a change it is for companies to be able to rapidly and inexpensively test products, services, and business models before unleashing them. But Schrage makes a compelling case, especially in a chapter on the computer spreadsheet. He recounts how spreadsheets not only let companies develop financial models at a tiny fraction of the previous cost but, in the process, allowed people to play with "what-if" scenarios for nearly every aspect of their businesses. The result was, among other things, the financial engineering that led to the leveraged-buyout movement of the late 1980s and early ’90s. The same people in the same companies became vastly more innovative when given tools for prototyping.

And spreadsheets are hardly the only tools. Financial companies now use simulators to see how new derivatives will behave under various market conditions. Automobile companies play with computer models of new cars to refine their ideas before creating life-size models.

In a key insight, Schrage shows that prototyping doesn’t just lead to better products, it also changes the culture of the company. Spreadsheets, for instance, didn’t simply make operations more efficient, they also gave more power to chief financial officers and financial institutions. Schrage says, "We shape our models, and then our models shape us."

Schrage explores how to develop a culture of innovation and summarizes his ideas in a neat, 10-item, how-to list at the end of the book.

The problem—the reason I limit my high praise to Schrage’s writing on prototyping—is that he goes too far. He treats a culture of innovation as more important than anything else. He asks the reader to "consider the possibility that the most important product of innovation is the innovator." That’s a provocative possibility. But it isn’t true.

Schrage quotes approvingly from the French sociologist Frederick LePlay, who said, "The most important product of the mines is the miner." An interesting thought, but the miner’s product, coal, was far more important to the industrial revolution. Intel helped create Silicon Valley’s entrepreneurial spirit, but was the company’s cultural contribution more important than its invention of the microprocessor? No.

The list goes on. Xerox’s Palo Alto Research Center is a fascinating place full of smart and interesting people doing curious things, but it’s largely a failure. With few exceptions (like the laser printer), PARC has had little impact on Xerox. The same is true of MIT’s Media Lab, where Schrage is a research associate. Lots of interesting research goes on there. But surprisingly little has resulted in substantive new products or companies.

The fact is, results are more important than culture, and Schrage doesn’t do enough to explain how to turn innovation into revenue and earnings.

I was also disappointed that Schrage did not have more to say about the trend toward live prototyping—introducing products or services to the market before they have been fully tested, then modifying them on the fly. Companies are doing this more and more, particularly on the Internet, where customer feedback is immediate and direct. There is no "final" version of the product. The entire life span of the product is an extended beta test. Ready, fire, aim. Put it out, try it out, adjust it.

The biggest problem with the book was the writing. Like many aspiring gurus, Schrage can take a simple idea and make it almost incomprehensible. Here’s Schrage on the process of writing the book: "I really wasn’t playing with ideas; I was playing with representations of ideas....What’s more, I wasn’t just playing with representations of ideas; I was playing with various versions of representations of ideas." It’s a wonder he was able to put pen to paper.

But I quibble. Given the importance of prototyping, being the best book on that subject is enough. Serious Play is well worth reading.

Nee, who first met Schrage in a New York bar more than 10 years ago, can be reached at eric_nee@fortunemail.com.