Using open innovation to solve targeted problems can help small companies compete with their larger competitors.
InnoCentive is an Waltham, Mass.-based company best known for crafting challenges that let companies, known as seekers, pose a design or development problem to a community of 180,000 independent solvers, who vie for rewards of between $5,000 and $1 million if they crack the answer. The company once catered mainly to large corporations, but according to President and CEO Dwayne Spradlin, "we are beginning to work with smaller and earlier-stage companies."
The company is also forming partnerships with venture capitalists who see these challenges as an inexpensive way for the companies in their portfolio to have more efficient R & D, according to Spradlin. This in turn means a lower risk for the VCs' investments. Over the next five months InnoCentive will be testing this expansion, dubbed InnoCentive for Start-ups, in Silicon Valley.
InnoCentive's services can do a lot to level the playing field between large companies with huge R&D budgets and small companies with tight budgets and more specific needs. Plus, when InnoCentive partners with a VC, the VC's portfolio companies can buy challenges together and get the bulk rate. Another advantage is that by tapping the masses rather than the limited roster on their payroll, small companies can brings diverse perspectives to bear on a problem and get products to market faster. Finally, crowdsourcing a problem to solvers eliminates the need for R & D departments where companies pay employee salaries for good and bad ideas. With InnoCentive, the seekers only shell out money for the successes.
The perks of the arrangement do not all flow one way and many of the solvers bask in the symbiosis. Ed Melcarek was one of InnoCentive's Top Solvers of 2007 and scored five successful ideas that year alone. He knows he's good at what he does and he's willing to forgo the potential long-term profitability of his ideas for quick cash. "The possible benefit in terms of dollars far exceeds the red tape involved in filing a patent and then waiting and negotiating the sale and licensing of that patent," Melcarek says. At first, he claims his interest is purely pecuniary, but if prompted he admits that he also enjoys the freedom of choosing which challenges to tackle and working from home. After all, it's no secret that idea people get some of their best brain work done in their pajamas.