InnoCentive – A Case Study on the Open Innovation Model

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About Open Innovation

Open Innovation, i.e. the practice of being open to external sources for fulfilling ones R&D requirements, has been identified as an important management innovation of the past decade and it is also accepted to be a key trend which can influence business and management in the coming decade. Open Innovation is a more efficient, effective and fair way of innovating. It is faster, cheaper and more efficient. Big companies like P&G. Nestle, Orange, Tesco, GSK, Eli Lilly, Virgin, etc. have embraced this model. Some of them have even come up with successful products like P&G (Olay Packaging, Oral B Pulsonic Toothbrushes) and GSK (Aquafresh White Strips)

Open Innovation approach to managing innovation calls for a paradigm shift in the way R&D divisions work. Traditionally, the marketing department predicts the future needs in the market and ask the R&D department to develop products/processes which can profitably satisfy these needs better than the competitors. The R&D division then innovates internally, taking inputs from various stakeholders from inside (and to a limited extant outside) the company, and comes up with the desired products. If the product in question is a service, the innovation can come from actual practitioners, rather than the R&D department (in fact, in most service organizations, there is no R&D department).

This has resulted in the R&D divisions being very closed, secretive and solitary. Sharing of information/knowledge outside the company has been a big taboo for them. This means that the capability to innovate is dependent as well as limited by resources present in the organization.

If open innovation approach has to be followed, the R&D division has to be transform itself to be a aggregator of ideas/ information/knowledge coming from outside the organization, couple with the ideas from within and come up with something useful which meets the requirements of the organization (often articulated by the Marketing division).

InnoCentive

Collaboration and sharing between internal and external shareholders is the core of Open Innovation. InnoCentive, a company founded in 2001 by Ex- Eli Lilly Employees, acts as a platform for these stakeholders to interact and transact. They have Created an Open Innovation Market where organizations in search for solutions/inventions/specific technologies (called seekers) can share it with a larger pool of researchers, engineers, research organizations, small companies (called solvers) and reward the one which meets their needs.

Companies like P&G Eli Lilly, SAP, Janseen, Solvay as well as organizations like NASA and Rockefeller Foundation are using the InnoCentive platform to reach out to external sources to fulfil their R&D needs.

One of the major concerns for companies involved in R&D is that if they openly invite contribution from a larger number of external partners; their peers would come to know the next products on which they are working – leading to a competitive disadvantage. InnoCentive, to a certain extent, alleviates this concern by providing an option of anonymously positing requirements.

Another major concern which holds back organizations from adopting the open innovation model is the ownership of Intellectual Property. InnoCentive tries to solve this problem in two ways – firstly, it has well defined policies regarding ownership of IPRs which are communicated to all parties in advance. Secondly, it promises handsome financial rewards to successful parties, in exchange of their IPRs. These financial rewards are also announced in advance. Till date InnoCentive has paid out more than $3.5 million in awards to over 300 winning Solvers without ever having an issue around payment or IPRs.

InnoCentive – Success Stories

Oil Spill Recovery Institute (OSRI) posted 3 Challenges on the InnoCentive website, all dealing with oil spill recovery issues. The first of these Challenges was solved in November 2007 by an oil industry outsider who used his expertise in the concrete industry to come up with the winning solution. Read more here

An InnoCentive Solver came up with an ingenious low cost solar powered mosquito trap for SunLight Solar. Read more here

To know more about InnoCentive, visit their website
To know more about Open Innovation Model, visit my earlier post

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