Daily Archives: June 23, 2006

Outsourced Innovation

Back in 2001, pharmaceutical Eli-Lilly funded a new endeavor by the name of Innocentive as a way to connect with brainpower outside the company – specifically, people who could develop drugs and speed them to market – and threw open the doors to other firms eager to access the network of ad-hoc experts. These companies post their most ornery (scientific) problems on InnoCentive’s Web site and anyone interested on the network can take a shot at cracking them, for a prize that ranges from $10,000 to $100,000 per solution. To date, more then 30% of the problems on the site have been cracked, which is 30% more problems than would have been solved using a traditional in-house approach (since these companies typically post the problems only after their internal R&D team has taken a shot and failed).

Furthermore, a study by Kaim Lakhani, a lecturer in technology and innovation at MIT, and his coauthors that surveyed 166 problems on Innocentive, found that “the strength of a network like InnoCentive’s is exactly the diversity of intellectual background” and that “the odds of a solver’s success increased in fields in which they had no formal expertise”. Why? He believes it is due to a central tenet of network theory, “the strength of weak ties”. The most efficient networks are those that link to the broadest range of information, knowledge, and experience.

Outsourced Innovation works – companies like Colgate-Palmolive, Boeing, DuPont, and P&G are using it to reduce costs and propel innovation forward. For example, Colgate-Palmolive paid an InnoCentive member who found a solution to a fluoride powder injection problem a mere $25,000, a fraction of what it could have cost Colgate-Palmolive to dedicate their R&D team to the problem until it was solved internally.

Furthermore, companies like Big Idea Group that bring together creative inventors with new ideas and innovation-driven companies looking to license new discoveries are also doing well. Big Idea Group has brought over 50 products to market.

Finally, some companies are bringing in systems built by third party experts to manage their innovation process and using these same companies to guide them. For example, companies such as Honeywell International, Reliant Energy, and Stryker use products and services from BrightIdea.com to jumpstart and manage their innovation processes. And it works. Honeywell reported a 300% return on investment within sixty days.

In other words, just don’t look inside your four walls for sources of innovation, look outside as well. You never know what you might find!