About 3 weeks ago I sat together with Andy Zynga, CEO Europe of NineSigma. For those that may not know the company: NineSigma is an open innovation intermediary that matches the technology needs and questions from companies (referred to as Innovation Seekers) with the possible solutions from a huge network of scientists, university researchers and technology incubators (referred to as Solution Providers). As such they directly compete with other intermediaries like Innocentive, TekScout and YourEncore. NineSigma claims to have the largest amount of Requests For Proposals (RFPs) on its platform and thus to be the market leader. Their clients include companies like P&G, Xerox, Kimberly-Clark and DuPont.

I had a very nice chat with Andy Zynga about their expansion strategy in Europe (NineSigma is headquartered in the US and has already expanded to Japan with a local office there). In order to broaden the current client base in Europe, they are now building up a European Office in the area of Louvain (Belgium). On average NineSigma plans to double its business year by year as more and more companies are adopting this kind of open innovation initiatives. If you are interested in their services or just want to know more, references to the newly founded European Office can be found here.

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A recent article in the Creativity and Innovation Management journal (March 2008) takes on internet marketplaces for technology such as yet2.com and Innocentive, and shows that there’s still a bumpy road ahead for totally open innovation. Specifically, the success rate has been far lower than expected.

In their study of 25 large Swiss and German firms (on average, 8 457 employees and 2 135 million € in revenue), Ulrich Lichtenthaler and Holger Ernst find that markets for technology have remained imperfect, resulting to high transaction costs and limited adoption by industry incumbents. Although all the firms surveyed were aware of different service providers, and several firms had invested substantial time and resources to decide on their technology offerings, the maximum number of transactions for a single company was only one out-licensing and one in-licensing agreement.

It might be no wonder, therefore, that most industry experts interviewed by Lichtenthaler and Ernst “have relatively reserved attitudes towards these marketplaces”. Only two out of 25 firms wanted to give the internet marketplaces another chance in the short to medium term, while the rest are presumably waiting for the markets to shed their imperfections. Thus, a vicious circle is set up: firms do not want to spend their resources on imperfect markets, while markets remain imperfect as long as firms do not participate more actively.

According to the authors, the most severe deficit is that the commercialization of technology through internet marketplaces constitutes a relatively unsystematic and passive approach. Specific technology needs or customers are not addressed, and problems and solutions are communicated very broadly. This makes matching technologies with buyers difficult, and numbers tell the rest of the tale: in 2004, yet2.com, with its 90 000 registered users, concluded only 10 technology transfers. Companies also tend to publish only relatively unattractive, residual technologies that have limited value, further weakening the attractiveness of using the marketplace. Read the rest of this post >

While there is a lot of buzz about crowdsourcing, there is mainly a great lack of insightful tools to give the concept a meaning and place within existing organizations. As a result, not many companies know what crowdsourcing actually is, let alone they are able to integrate it in their businesses. The IOC-model^TM is a very simple tool that shows how and when crowdsourcing can be relevant by integrating it in your decision-making processes.

In traditional business thinking, there are two viable generic options for performing a certain activity: either you do it In-house, either you Outsource it to a specific party (with levels of collaboration in between). Coase’s theorem provides basic insights in this choice on the level of transaction costs. With the rise of the internet however, transaction costs are lowered furthermore, resulting in a new, third option: Crowdsourcing. In this third option, the task is formulated as an open call towards an undefined, generally large group of people. As such, the IOC-model^TM looks at leveraging the wisdom and skills of the crowd, not necessarily only your customers. Crowdsourcing is bottom-line a new generic option to perform activities/tasks/functions, and should be integrated that way in business decision-making.

How to use this tool? Print-out the figure above, and try to apply it systematically when thinking about activities. For example the design of a new logo: should we do it in-house, outsource it to a specific design agency, or crowdsource it in the form of a challenge like spreadshirt? The content on a new website: are we going to do it in-house, outsource it to freelancers, or crowdsource it like YouTube does for video content? Below, the model is applied to the case of corporate R&D.

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