Innocentive is a for-profit Massachusetts-based firm which supports clients – corporations, government and nonprofits – in crowdsourcing solutions to complex business challenges by connecting with the company’s expert network. Innocentive maintains a “Solver” network of over 375,000 experts from nearly 200 countries and can tap into additional experts through its strategic partnerships.
Client organizations come to Innocentive with complex business, scientific or technical problems. Innocentive supports them in articulating those problems into specific questions or tasks and structuring them as ‘Challenges’ for its network of problem solvers. Solvers in the network then compete to provide the most innovative solution to that challenge. Monetary prizes are typically offered by the issuers of the challenge in exchange for the best solution.
Value Creation & Capture
Innocentive creates value by providing companies with access to a far broader network of experts than they could hire in-house, thereby accelerating and improving the innovation and problem solving process. For most challenge types, clients only pay for solutions that meet their needs. In addition, Innocentive claims to help its clients foster a more innovative research culture and smooth the IP transfer process, which Innocentive can manage on behalf of its clients for a pre-specified fee. Beyond serving as a crowdsourcing platform, Innocentive also creates value by supporting its clients with PhD- educated Challenge Experts and program managers throughout the process of formulating, running and completing challenges. The organization’s expertise spans disciplines including Business and Entrepreneurship, Chemistry, Computer/Information Technology, Engineering and Design, Food and Agriculture, Life Sciences, Math and Statistics, and Physical Sciences.
InnoCentive captures value through client fees, including: a fee for the InnoCentive starter package, which includes consulting and training services; fees for posting and evaluating the results of a Challenge; and fees paid for a successful Challenge, which includes fees to the Solvers as well as fees to InnoCentive for any IP transfer processing required; and fees for additional administrative costs. According to a 2009 Forrester report co-led by Innocentive, the average client achieves a financial ROI of 74% on its investment, with an average payoff period of ~3 months. (https://www.innocentive.com/files/node/casestudy/total-economic-impacttm-innocentive-challenges-sca-case-study.pdf)
Broadly, Innocentive’s approach to facilitating innovation is compelling. Organizations that do not maintain in-house R&D staff or who have difficulty in hiring full-time talent with the capacity to drive innovation will find the model particularly useful. Of course, outsourcing innovation also frees up internal team time to work on core, on-going business needs while “solvers” focus on innovating set challenges.
Yet, while Innocentive offers an interesting model, there are a few major business challenges. First, everything hinges on the quality and abilities of Innocentive Solvers. If they are not capable of developing compelling solutions, Innocentive would create no value for its clients. For the model to work, top-notch experts must find it worth there time to compete for prizes amid an uncertain gain; one might argue that high-quality experts would be focused on activities with a higher and more certain payoff.
In addition to the challenges of identifying experts of a high quality, one might argue that truly transformational innovation requires collaboration across disciplines, not just within them. The Innocentive platform does not seem to emphasize fostering collaboration between or among experts who might not otherwise work together. If Innocentive also created a strong platform for high quality experts to connect with each other in addressing client challenges, the model could have even more potential for significant innovation.
Finally, although client businesses certainly gain from a broader set of expertise and ideas, the innovation potential of outsourcing could be limited by the lack of specific company understanding by experts conducting the innovation. Innocentive’s model relies on clients to thoughtfully and specifically articulate their capabilities and needs for experts to craft solutions that are applicable.