July 31, 2008
I have written a number of posts about innovation. Some of them have focused on the benefits of cross sector innovation, what Frans Johansson calls the “Medici Effect.” Others have discussed organizations that offer prize money to individuals or groups for solving particular problems [e.g., A New Approach to Innovation and More Prizes for Innovation]. Still others have focused on organizations that help innovators connect with companies looking for solutions [e.g., Dating Game for Innovation]. Cornelia Dean, writing in the New York Times, discusses one such company — InnoCentive [“If You Have a Problem, Ask Everyone,” 22 July 2008]. She begins her piece by relating how an innovator in one field was able to apply his expertise in another field when he was connected by InnoCentive to challenges that might not otherwise have come to his attention.
“John Davis, a chemist in Bloomington, Ill., knows about concrete. For example, he knows that if you keep concrete vibrating it won’t set up before you can use it. It will still pour like a liquid. Now he has applied that knowledge to a seemingly unrelated problem thousands of miles away. He figured out that devices that keep concrete vibrating can be adapted to keep oil in Alaskan storage tanks from freezing. The Oil Spill Recovery Institute of Cordova, Alaska, paid him $20,000 for his idea. The chemist and the institute came together through InnoCentive, a company that links organizations (seekers) with problems (challenges) to people all over the world (solvers) who win cash prizes for resolving them. The company gets a posting fee and, if the problem is solved, a ‘finders fee’ equal to about 40 percent of the prize.”
It would be hard to deny that the Oil Spill Recovery Institute didn’t get a bargain in the deal and Davis pocketed twenty grand that he would not otherwise have banked. InnoCentive, of course, must post a lot of challenges and collect a lot of finders fees to be profitable. That, however, is the beauty of the World Wide Web. The entire world of innovators becomes a potential pool of resources.
“The process, according to John Seely Brown, a theorist of information technology and former director of the Xerox Palo Alto Research Center, reflects ‘a huge shift in popular culture, from consuming to participating’ enabled by the interactivity so characteristic of the Internet. It is sometimes called open-source science, taking the name from open-source software in which the source code, or original programming, is made public to encourage others to work on improving it. The approach is catching on. Today, would-be innovators can sign up online to compete for prizes for feats as diverse as landing on the Moon (space.xprize.org/lunar-lander-challenge) and inventing artificial meat (www.peta.org/feat_in_vitro_contest.asp). This year, researchers at the Howard Hughes Medical Institute and the University of Washington began recruiting computer gamers to an online competition, named Foldit, aimed at unraveling one of the knottiest problems of biology — how proteins fold (http://fold.it). And in a report last year, a panel appointed by the National Research Council recommended that the National Science Foundation, the major government financing agency for physical science research, offer prizes of $200,000 to $2 million ‘in diverse areas’ as a first step in a major program ‘to encourage more complex innovations’ addressing economic, social and other challenges.”
While all this may sound creative, it is also a relatively cheap way to solve challenges. Take, for instance, the prize for landing a package on the moon mentioned above. The prize only goes to the winning team and even that team will likely lose money on the venture. That means that an enormous amount of expensive research and development will go into the challenge at no cost to the sponsoring organization. Yet the benefits of that R&D will still be available to be applied to new or similar challenges. Why would anybody compete for a prize that actually ends up costing them money? For the most part, the challenges involved are in areas that competing groups are already doing research. The prize money, if won, becomes an added bonus to work already in progress. As I noted in a previous post, even John McCain has jumped on the “prize for innovation” band wagon.
“Senator John McCain of Arizona, the presumptive Republican nominee for president, has proposed that the government offer $300 million to whoever invents a battery compact enough, powerful enough and cheap enough to replace fossil fuels. Offering prizes for scientific achievements is hardly new. ‘It has been around for centuries,’ said Karim R. Lakhani, a professor at Harvard Business School who has studied InnoCentive. One early example was the work of John Harrison, the 18th-century clockmaker who, in response to a prize offered by the British Parliament, solved the problem of determining longitude at sea by inventing a clock that would keep good time even in heavy weather. But, Dr. Lakhani said, ‘most laboratories, most R & D endeavors still work on the premise “we can accumulate and make sense of all the knowledge that is relevant.” The open-source models and a model like InnoCentive show that other approaches can help.’ Dwayne Spradlin, president and chief executive of InnoCentive, said in an interview that the company had solved 250 challenges, for prizes typically in the $10,000 to $25,000 range. According to the Web site (www.innocentive.com), the achievements include a compound for skin tanning, a method of preventing snack chip breakage and a mini-extruder in brick-making.”
Interestingly, InnoCentive began life within a much larger corporation.
“InnoCentive began in 2000 as e.Lilly, an in-house innovation ‘incubator’ at the pharmaceutical giant Eli Lilly, Mr. Spradlin said, with the company posting problems that its employees had been unable to solve. From the beginning the results were good, he said. ‘Most of our companies tell us they have a one-third or better solve rate on their problems and that is more cost-effective than anything they could have done internally.’ The company says solvers come from 175 countries. More than a third have doctorates, Mr. Spradlin said, and while motivated by money, they also have a desire to solve ‘problems that matter.’ The company, with offices in Waltham, Mass., has a staff of scientists who work with seekers and solvers, reviewing challenges to make sure they are clear and detailed, and guiding would-be solvers who may have a solution.”
I’m glad that Dean pointed out that money is not the only motivation for innovators. As I’ve noted before, innovation involves both a good idea and the implementation of that idea. Innovators are driven to see their ideas actualized. The key to InnoCentive’s success is breaking down challenges specifically enough that “solvers” can readily understand the problem even if it is out of their normal area of expertise.
“Specificity is crucial to InnoCentive’s operation, people who have studied the company say. ‘If you say, “find me a cure for cancer” it may not work,’ Dr. Lakhani said. But if problems can be ‘decomposed’ in
to what he called modular questions, like ‘find me a biomarker for this condition, these questions may be more tractable.’ The idea that solutions can come from anywhere, and from people with seemingly unrelated work, is another key. Dr. Lakhani said his study of InnoCentive found that ‘the further the problem was from the solver’s expertise, the more likely they were to solve it,’ often by applying specialized knowledge or instruments developed for another purpose. For example, he said, the brain might be thought of as a biological system, but ‘certain brain problems may not be solvable by taking a biological approach. You may want to cast it as an electrical engineering approach. An electrical engineer will come in and say, “Oh, here’s the answer for you.” They have not thought of themselves as being neuroscientists but now they can approach the problem from the point of view of electrical engineering.'”
That is a great description of the benefits of the Medici Effect (otherwise known as cross-sector innovation). Johansson and others have argued for years that some of the most interesting and innovative work is accomplished when people from different backgrounds get together to solve a problem. InnoCentive and the Rockefeller Foundation are also teaming to try and get non-profit organizations involved in the process.
“One critical element is encouraging organizations to take novel innovation approaches in the first place. That was the task that drew the Rockefeller Foundation to the company, said Maria Blair, an associate vice president there. Ms. Blair said the foundation was nearing the end of an 18-month pilot program after which the success of the partnership would be assessed. Anecdotal evidence so far suggests the arrangement can be useful, she said, citing as an example a challenge to devise a reliable, durable solar-powered light source that could function as a flashlight and as general room illumination. ‘The solver ended up being a scientist from New Zealand,’ she said, and his light is now being made in China.”
There are some challenges in getting non-profits involved.
“The nonprofits get a break on InnoCentive fees, Mr. Spradlin said, and Ms. Blair said the foundation could subsidize access to innovation platforms. But she said many nonprofit organizations had difficulty dealing with intellectual property rights and related issues. InnoCentive deals with these issues, in part, by requiring winning solvers to transfer intellectual property rights to the seekers, whose identities are secret, before they can claim an award.”
Companies posting problems also have some concerns.
“Dr. Lakhani said some companies worried that by posting information about their problems they risk giving valuable information to competitors. Another fear, he said, is that a solver will devise a useful solution, but refuse to turn it over for the prize or even patent it to keep it out of the hands of the organization that originally sought it.”
Lakhani goes on to indicate that those sort of “games” have not yet been played by solvers; probably because they are more interested in maintaining good relations with InnoCentive and protecting future earnings. InnoCentive hopes that by 2011 its pool of solvers would have successfully responded to over 10,000 challenges.