2.07.2008

InnoCentive Business Model or Cash for answers on the largest scientific online network



1. Brief description of the business InnoCentive as a virtual R&D lab:

InnoCentive is a privately-held company which provides a web-based service to Fortune 500 companies to tap into a global community of more than 125,000 engineers, technologists, scientists, inventors, and entrepreneurs for solving development and innovation challenges.Founded in 2001, InnoCentive connects companies, academic institutions, and non-profit organizations, all hungry for breakthrough innovation, with a global network of more than 125,000 of the world's brightest minds on the world's first Open Innovation Marketplace.InnoCentive, based in Andover, Massachusetts, matches scientists and researchers worldwide with companies that have challenging problems to solve and which have exhausted internal means to find real and valuable solutions.

Here bellow is a very interesting interview with InnoCentive CEO about its Business Model:





Thomas Edison, the quintessential inventor, once said that genius is 1 percent inspiration and 99 percent perspiration. But Ralph Bingham the Founder of InnoCentive thinks it's time to update that equation : "There will always be a lot of perspiration involved," Bingham says, "but should the inspiration be 1 percent, or should we make it 10 percent by opening it up to a diverse net of human beings before you put the perspiration in? I think it's time to turn on the radio."

The idea of lanching InnoCentive goes back to the late 1990s, when pharmaceutical giant Eli Lilly wondered if it was getting enough bang for its r&d buck, Rakph Bingham president in research and development for Lilly recalled his student days when his professors of organic chemistry would turn to the graduate students and post-docs in their research group and ask for their help in solving some complicated problem or another. The students would come back with different answers, some of which might prove more useful in resolving the problem, others less so.

The idea of InnoCentive came to him from this experience and practical fact and as a strong advocate of open Innocation he submitted the project to Lilly.
Lilly invested several million dollars in 2001 to launch InnoCentive, implementing Bingham's vision of an online marketplace where companies with questions and scientists with potential answers could find each other.It sounds like a business and intelectual 'dating' website, but realistically it is market place to buy and sell intellectual power.

2. What problems does it solve:

To Understand the way InnoCentive works and which kind if problems does it solve we may first watch the way industry works, where a problem only gets exposed to a handful of minds, things get invented, or problems get solved, based on resource allocation. In other words, who is available, and not necessarily because of who's best qualified to respond to that particular challenge.
But in fact,who's 'best' may not even be knowable as solutions often involve a complex interplay between training, experience and serendipity. Sometimes Short of turning to a few high-priced consultants who may or may not solve the problem, the question to ask is : Is there a way for the company to tap into the vast pool of potential knowledge outside its walls and overcome hitches in development that the company's own researchers had been unable to overcome? Or, even to simply improve the solution speed and productivity?

Thinking about the way scientific creativity manifests, it's not always given that the next problem busineses encounter will be solved by a Nobel laureate. Perhaps it will be by some guy at a rural, private college in Mexico or a small research facility in China or a Deutch startup.

So, if there is enough diversity of exposure, would we get new solutions to given problems? the answer is yes.
Bingham has likened his concept to talk radio: If he broadcast an obscure question to millions of listeners, someone out there was likely to call in with the correct answer.

InnoCentive as a platform of open innovation is Changing the world. For example InnoCentive Solvers develops solution to help clean up remaining oil from the 1989 Exxon Valdez disaster. "Green" groups taking advantage of prize-based Innovation to help solve long-term environmental problems: please Check out the InnoCentive Oil Spill Cleanup video , and this is the solver John Davis talking about his innovation and solution to the problem, he won $20,000 for solving the Open Innovation Challenge posted by the Oil Spill Recovery Institute.

In fact, what InnoCentive provides is a "spot" market where companies can get a problem worked on immediately. where companies and innovators can buy and sell intellectual power without the costs associated with facilities, recruiting, career management, negotiations, custom contracting, etc."

Bingham compares this Business model to bounty hunting. While companies have spent more than a million dollars on challenges they've solved through InnoCentive, that's much less than it would have cost to invest in internal r&d to resolve them. Most importantly, they've paid ONLY for solutions and not for attempted solutions in the risky venture of R&D.
Innocentive, provides an exchange where “seekers’’ can offer cash to “solvers’’. Both sides are anonymous, which is one of the selling points of innovation prizes: they reward neither connections nor seniority, but solutions alone.

Personally I find Innocentive’s problems ads rather funny because they read a little like the small ads on the world’s least romantic lonely-hearts website: for example “A technology is desired that produces a pleasant scent upon stretching of an elastomer film’’ ($50,000). “Surface chemistry for optical biosensor with high binding capacity and specificity is required’’ ($60,000).


a. For InnoCentive Customers

In order to achieve and maintain competitive leadership and create breakthrough discoveries, corporations and non-profits face the challenge of continually seeking out new ideas and solutions. So,by signing up as a Seeker organization, these progressive companies can supplement internal R&D and Product Development resources by reaching out to some of the world's most creative thinkers; people who thrive on solving tough challenges.
There is about 40 'seeker' companies which have signed up with InnoContive, posting challenges in a wide range of scientific disciplines, including the fields of chemistry and applied sciences—such as material and polymer sciences—and the life sciences, and offering rewards ranging from $10,000 to $125,000 for working solutions. Now, over 40 blue chip companies, from Boeing to Dow Chemical, DuPont, Lilly, Novartis, and Procter & Gamble are among the seekers and thy post problems with InnoCentive.


Still, many companies are reluctant to turn to outsiders like the InnoCentive Open Innovation platform for help with products in the pipeline. Fundamentally, most places still run the old, classic, 'my lab, my walls' system, so there is a huge market oportunity for Innocentive in the future.

b. InnoCentive Suppliers

Nearly 135,000 'Solvers' from some 175 countries have registered on the InnoCentive website, where they can find new challenges each week. Tens of thousands of solvers might read the abstract of a challenge, but only a few hundred who think they can realistically solve it continue to the details.



c. Innocentive Partners

The company has partnered with 59 research institutions and scientific organizations in Russia (35), China (20), and India (4) to access more scientists.

The Rockefeller-InnoCentive Partnership enableS researchers and entrepreneurs addressing the needs of poor or vulnerable people to access the same cutting-edge resource to innovate as Fortune 500 companies.The Rockefeller Foundation-InnoCentive partnership brings the benefits of this model to those working on innovation challenges faced by poor or vulnerable people. The Rockefeller Foundation will pay access, posting and service fees on behalf of these new class of “seekers” to InnoCentive, as well as funding the awards to "problem solvers."


I see this as what we call Teaching an old dog new tricks.For an organisation that has suffered from “not invented here” syndrome, Rockefeller by teaming up with InnoCentive, the online business that posts problems and offers rewards to innovators who solve them. Rockefeller will provide funding to adapt this “open innovation” model to helping the poor. Next are likely to be projects on climate change and on the growing economic insecurity that many people experience. Whether all of this will accomplish remains to be seen.

d. InnoCentive Owner:
As an open Innovation strong advocate Alpheus Bingham is the Co-Founder of InnoCentive he is himself an innovator by launching this succesful and original website which he runs with InnoCetive management team .
InnoCentive's President and CEO, Alpheus Bingham, was a senior research executive at Eli Lilly and has over 28 years experience as a scientist, and its Chief Marketing Officer and VP of Global Markets, Ali Hussein, is a leading expert in Chinese, Indian and Russian scientific communities, and was Director of Marketing and Business Development for Amazon.com's wireless initiative, Amazon Anywhere. So this is a company where R&D expertise meets the ultimate in internet know-how.

3. Innocentive customer groups

In the past, R&D departments worked more or less on their own, while today the so-called Open Innovation concept is becoming increasingly widespread Companies are thus able to cost- effectively "outsource" highly specialized tasks to a large pool of inventors around the world when they lack the in-house expertise.Innocentive's site, which is essentially a marketplace for inventors, has expanded considerably since pharmaceutical giant Eli Lilly started it in 2001. Now even some of Lilly's competitors use the site, including BASF, Novartis, Nestlé and Procter & Gamble, which has increased the share of product ideas accepted from outside inventors from 20 to 35 percent over the last three years.

Of the 350 challenges posted on InnoCentive since it opened, about a third have been solved. The average posted reward is about $30,000; the highest awarded amounts to date have been three awards at $75,000 each (though higher bounties have been offered.) In return, scientists who present solutions sign over the intellectual property rights.



4. InnoCentive revenue sources

From the “seeker,” InnoCentive collects posting fees for the use of its platform. In addition, depending on the type of challenge, InnoCentive receives a commission on awards made by the “seeker” to the “problem solver.” So, for a relatively modest fee and comparatively minor effort , “seekers” significantly increase their research capacity.practically speaking at InnoCentive, companies pay an annual $80,000 access fee to post problems anonymously on the website. They also pay the rewards for the best solutions and a commission of 20% or more to InnoCentive.


5. InnoCentive main competitors


InnoCentive's growth has mirrored a developing trend in open innovation and external collaboration, a trend that has also spawned competitors such as NineSigma which enables clients to source innovative ideas, technologies, products and services from outside their organizations quickly and inexpensively by connecting them to the best innovators and solution providers from around the world. Its unique "Discover-Connect-Solve" approach is based upon the principles of Open Innovation. Their clients access one of the the largest and most comprehensive open network of scientific researchers in the world to solve their business needs.

- another 'competitor' is :status quo.

- an other example of these companies is Netflix, a film rental website which offers recommendations based on what you looked at, bought, rented or reviewed in previous visits,Netflix has skipped middlemen like Innocentive. In March 2006, the chief executive of Netflix, Reed Hastings, met some colleagues to discuss how they might improve the recommendation system, Cinematch. Hastings, inspired by the story of John Harrison, suggested offering a prize of $1m to anyone who could do better.

The Netflix prize, announced in October 2006, struck a chord with the Web 2.0 generation. Within days of the prize announcement, some of the best minds in the relevant fields of computer science were on the case. Within a year, the leading entries had reduced Cinematch’s recommendation errors by more than 8 per cent – close to the million-dollar hurdle of 10 per cent. And it has cost Netflix very little to mobilise all this effort. The company has had to pay out a mere $50,000 progress award, to a team of three AT&T data analysts.Even Netflix is surprised at how well it’s been going. “We just didn’t think the relevant research community was so big,’’ says Steve Swasey, vice-president. Source


6. Can the model apply offline as well, or it is unique to the web? I think that as a virtual R&D LAB and being the largest scientific online network the model can not apply offline because its success is closely related to the development of the Web 2.0 generation, as a virtual laboratory,InnoCentive has developed a unique virtual platform reducing both the time and the risks providing solutions faster then any offline R&D platform and community.


7. Scalability and sustainability of InnoCentive Business Model
InnoCentive capitalized on the fact that major companies spend billions of dollars on research and development that could more effectively be outsourced. What if a company had not just a handful of problem solvers, but a worldwide network of problem solvers all working on their hardest nuts-to-crack, and at a fraction of the typical R&D cost? In what it terms as a “virtual laboratory,” the company’s website, is accessed by over 90,000 scientists and scientific organizations located in over 175countries (and like everything on the worldwide web, this number continues to organically grow).
it is sustainable beccause it is a very innovativ e-business operation. Lilly's idea was to use the "power of the Internet" to enhance scientific collaboration. The Internet offers an unparalleled means of exchanging information and connecting people. InnoCentive has taken advantage of this, logging thousands of miles, literally and electronically, to build its network.


Fast Company’s Most Innovative Business People of 2007



8. Stretching of the idea:

What first caught my eye in this business model analysis is InnoCentive's novelty. I love when a company makes me say, “Why didn’t I think of that?!"). Its business model is one that comes directly out of our new, modernized world. We live in a world full of smart people out there, and now with the internet, we have the ability to reach them. Why should companies limit their brainpower to those found on their individual payrolls?

a. How to increase InnoCentive users or customers:
This business is expanding in leaps and bounds internationally, but in order to reach more customers it has to be launched in many languages and open the platform to new feilds of research and innovation.


b. We can Expand revenue sources – not just increase revenue from existing sources by:
- opening the platform to new disciplines such as law and finance and also publishing.
- In an ideal world :opening the platform for "solvers" to submit new innovative concepts and ideas and connect them with companies and investors who may be interested to make them real.peôple may have innovative ideas to problems that companies havent encountered yet, so it will be a sort of anticipation process.

2 comments:

eac said...

Good work. What industries could benefit from this?

Anonymous said...
This comment has been removed by a blog administrator.