The InnoCentive's Open Market Business Model

The Concept

"Crowdsourcing” is an easy way to satisfy consumers' demands; to be heard and to get free feedback at very little expense.
The “crowd sourcing”, defined by Jeff Howe, who maintains the Crowdsourcing.com blog, is "the act of taking a job traditionally performed by a designated agent (usually an employee) and outsourcing it to an undefined, generally large group of people in the form of an open call". Howe is also writing a soon-to-be-released book on the topic. Another idea is to create a private community, which you can do through platforms from companies such as Innocentive. Private social networks for customer, partner and developer relationship-building and have threaded discussion and poll functionality for information-gathering.

The Company
Developed as an e-business venture by the pharmaceutical giant Eli Lily in 2001, InnoCentive, a matchmaking system that links experts to unsolved R&D problems, allowing these companies to tap the talents of a global, scientific community and to the researchers to win bonuses. With some 125,000 scientists from 175 countries registered, the company now provides on-demand solutions to innovation-hungry titans such as Boeing, Dow, DuPont, and Novartis.
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.

The problems listed are in a broad range of domains such as Engineering, Computer Science, Math, Chemistry, Life Sciences, Physical Sciences and Business, frames them as "challenge problems", and opens them up for anyone to solve them who gives cash awards for the best solution.
InnoCentive calls the scientists who attempt the problems "solvers" and the companies these problems come from as "seekers".
In 2005 InnoCentive had 34 of these "seekers", which have posted more than 200 "challenges" in 40 scientific disciplines, of which more than 58 had been solved by over 120,000 "solvers".

Quickly, the other big companies, as Dow or Procter and Gamble, who dedicates 1,7billion dollars to the R&D, understood the interest of this shape of the world research and came to join InnoCentive.
Today, InnoCentive counts about fifty customers, such today Boeing or DuPont.

The Owner
Alph Bingham, Eli Lilly's former vice - president, one of the biggest American and world pharmaceutical companies, wondered if theycould put in thousands of researchers the problems which affected the researchers of its laboratories to finalize new medicines. The idea came to him and Aaron Schacht, who in 2001 decided to realise it by investing some million dollars in a start-up on Internet called InnoCentive (contraction of Innovation Incentive, incentive to the innovation).
Thousands of diamonds spirits were all accessible thanks to Internet, a fabulous field of grey cells was within the reach of the company.
Two other companies, Dow and Procter and Gamble, joined Eli Lilly very quickly.

How does it work?
Seekers’ organizations (corporations, government agencies, and non-profit organizations, who are looking for help with product development and other business and science problems) post their challenges on the InnoCentive web site, and offer registered Solvers significant financial awards for the best solutions.
Challenges cover a wide range of industries and disciplines including Business and Entrepreneurship, Math, Computer Science, Physical Sciences, Chemistry and Life Sciences. Each InnoCentive Challenge has a solution submission deadline and is assigned a cash award that ranges from $10,000 to $100,000.
Registered InnoCentive Solvers (engineers, scientists, inventors, and business people with expertise) can open a Project Room and begin working on any Challenge they wish. The Seeker organization reviews all submissions, and issues the award to the Solver who submits the best answer.
The Project Room is a secured on-line space,which contains details and diverse requirements bound to every problem. It is there that take place the exchanges between the researchers and the members of InnoCentive responsible for the problem posed.
Seekers' and Solvers' identities are kept completely confidential and secure, and InnoCentive manages the entire IP process.

InnoCentive provides a consultancy service to enable its clients to make the most of its "solver" network. "Science advisers" and "problem definers" help clients to identify a challenge appropriate for posting on its network. They make sure that the classic legal, scientific and commercial requirements are verified .
They then estimate an appropriate award fee by determining the complexity of the problem, the resources required find a solution, and the value transferred to the company. InnoCentive forces its "seeker" companies to agree to intellectual property audits, so that once a solution is provided to the company it can guarantee that the intellectual property is not used if the company decides not to award it.
The problems are put on-line on the site with a summary of the demand, a deadline of answer and the amount of the reward attributed to the best solution (between $2000 and 100 000).
To post a challenge, the “seeker” pays a deposit to InnoCentive, generally around $2000.

InnoCentive also provides a consultancy service to its network of "solvers". Its "science experts" provide feedback to explain the terms of the challenges as well as why submitted solutions may be deficient. It provides the logistic and legal framework for maintaining their control over the intellectual property until its sale to the seeker company.

Approximately 40 % of the problems were resolved, according to Darren Carroll, CEO d' InnoCentive. The site asserts that this formula constitutes a " very good solution for products "intermediaries" in the creation of a new product or a medicine ".

The most important Competitors offering similar services are NineSigma, Yet2.com, YourEncore, IdeaCrossing and Crowdspirits.

Today InnoCentive, concludes partnerships with numerous companies and has around thirty customers.

Seekers
The statistics show that 75% to 95% of patented technologies stay on the shelf and go to waste and 90% of all products fail. With rising technology development costs and increasingly shorter product life cycles, the risk of innovation is almost certain. In other words, the opportunity to recoup the investment got even shorter. Having own innovation business model, and community aligned is more important.
So, the solution is in a new emerging open business model. Companies big and small are learning that many of their best ideas, approaches, and solutions come from the outside.
Moreover, by adopting the open innovation model, companies can dramatically reduce the pitfalls, costs, and risks associated with closed innovation.

Tapping into the Solver community of Innocentive can generate more potential ideas and solutions, enabling companies to produce advanced products, accelerate their development cycles and stay ahead of the competition through innovation and faster time to market.
So, using the crowdsourcing approach saves both time and money. The estimates time savings are to be about 50% faster than it would be if he used internal staffers. For Eli Lilly, for example, InnoCentive makes more than its number of researchers triple without having them as employees. What offers InnoCentive, it is not the replacement of the efforts of R&D of companies, but a complement.

In short the Advantages for companies seeker are:

Speed up time to market
Reduce the risk of innovation
Less risk guessing what the market wants
Integrated community innovation
Some of the best ideas and solutions are outside of your organization
Lower the R&D and operating costs
Supplement company’s R&D
Tap into the virtual R&D community
Shared IP can create a formidable barrier to entry


Sovers
This formula allows the scientists to receive a public recognition and a financial reward to have resolved the challenges of R&D. But defy doesn’t consist in the cash awards only, because most of scientists do that for the pleasure of intellectual work they do. They make a significant impact to the global community with innovative, creative solutions to tough problems, because the solution today could contribute to the breakthrough inventions of tomorrow.
In addition, solvers enjoy the independence that comes from choosing what they want to work on, when they want to do it, and are generously rewarded for their success.

Partners
InnoCentive, concludes partnerships with numerous non-profit companies as the Rockefeller Foundation Global Giving, The Oil Spill Recovery Institute and Charley’ Fund, which will provide funding to adapt this open innovation model to change the world and influence the lives of people everywhere by applying the planet’s human creativity and intelligence to solving the most important challenges as poverty, famine and climate change.
By combining technology, economic incentives, and human ingenuity, they see the possibility to resolve these problems better, faster, and cheaper than ever before possible.

For instance, in December 2006 InnoCentive signed an agreement with the Rockefeller Foundation to add a non-profit area designed to generate science and technology solutions to pressing problems in the developing world.

Resources

Commissions of the transfer of the rights of intellectual property
Commissions of the payment [ask to the company between 60 and 100 % of the reward offered in conformance with the payment for its service].


The open innovation model is a new progressive alternative that gives many advantages for employees, investors, communities, customers and the people all around the world.
In the one hand it exemplifies a new kind of corporation where returns to its investors and employees come hand in hand with extraordinary benefits for mankind. That’s why, I think it is sustainable because the future of humanity and the planet is in a progressive evolution and to solve its problems. And the way to do it is the Research and Development.

However, I am a little reserved because there are some Limits that have to be resolved.
At first,there is a problem with possibility of verification of the real skills of solvers and their identity.
For example, Ninesigma and YourEncore check up the solvers’ CV, but it doesn’t the case for everybody.
In second, the mode of payment of contributors - solvers also asks questions. On the base, the start-up collects the reward paid by the company seeker, and then pays its solver. At InnoCentive, "solvers" touch until 50 % of the reward. But most of the start-ups do not even clarify the amount of the percentage.
And finally, the subject of the respect for the rights of intellectual property doesn’t seem very clear.
For example, at YourEncore, they are given up to the company customer. The solver even has to sign a commitment "which covers any conflict of interest, confidentiality and transfer of rights ".
Things are even vaguer at Idea Crossing, because everything depends on the good will of the company. Solvers give up their rights against "royalties, some money or an employment ". As for the site Crowdspirit, it leaves inventors and company to manage this question between them.
So, it seems to me that there are things for the model lasts in the time.

It’s true that thanks to the Net, the open innovation model revolutionized the way of leading the R&D. As the Senior Managing Director of Eli Lilly Darren Carroll said:
“There is in the world more than a million PhD in biology and in chemistry, but no company and no university can make work on its account more than 1 % of this talented base. Imagine the increase of productivity which could take place if companies were capable of emphasizing in their profit this intellectual power.”
One of the means to accomplish this is making use of an idea marketplace that connects the knowledge of over 120.000 scientists to companies in need of innovation. And it’s possible only in the virtual world.

From my point of view many company in all industries that need of novelties would be interested in this new way to innovation as engineering, biotechnology, pharmaceutics as well as the industries of automobiles and food.