The Internationalization of Corporate R&D

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THE INTERNATIONALIZATION OF CORPORATE R&DInnoCentive had fewer than 30 people on its staff in 2005. According to DarrenCarroll, Chief Executive Officer at InnoCentive, the company has the potential to growduring the next five years to around 200 people (The Wall Street Transcript 2005).Today, the company has about 40 customers (all U.S. and European multinationalFortune 500 companies). Among them are Boeing, DuPont and Procter & Gamble. Thecurrent business model limits expansion as there are a limited number of potential customersthat would be able to pay the cost for using the service. InnoCentive says it isnot limited to any scientific discipline or industrial sector, but rather to what types ofproblems and challenges the customers post. More Asian companies are expressinginterest in the business model.InnoCentive is currently searching for external investors to finance its expansion intothe mechanical- and electrical-engineering sectors (The Wall Street Transcript 2005).InnoCentive envisions becoming the “e-Bay of the R&D world” (Hussein).7.3.2 NineSigmaNineSigma was created in 2000 by a university professor in Cleveland, Ohio. Thecompany currently has a staff of 17 and expects to grow by more than 30 percent in thenear future. The founder realized that companies, in contrast to government agencies,did not have good processes for producing requests for proposals (RFPs). The businessidea of NineSigma is to work closely with customer companies and write “requests forsolution proposals” that can be distributed globally. These RFPs are later sent per e-mail to between 5,000 and 20,000 selected problem solvers in North America, Europe,Asia and Australia. The problem solvers come back with a bid of a few pages, whichcould include a specific solution, which is reviewed by the company itself to see if itmatches their criteria of cost, approach, time, etc. The idea is to identify researchersand engineers that can solve the problem on a contract basis.Most problem solvers come from the U.S., Europe and Asia. NineSigma’s network ofproblem solvers is created by active networking, recommendations from othersolvers, scouting of articles, websites, etc. NineSigma has invited one million problemsolvers from universities, companies and various research organizations to jointhe network (Stupay).When the company was founded, its business was mostly research-related. More andmore work is now done in the development area, for example, packaging and materialissues. NineSigma has about two hundred projects per year within various industrysectors. According to Paul Stupay, Vice President of Business Development at Nine-Sigma, some industries are more mature than others when it comes to using an openinnovationmodel. Because the pharmaceutical and chemical industries are more mature,NineSigma does a greater proportion of its business within these two industries.174
THE INTERNATIONALIZATION OF CORPORATE R&DAll problems are written in English and the RFP process averages approximately2.5 months. Confidentiality is important and agreements regarding intellectual propertyrights (IPR), licensing etc. are negotiated exclusively between NineSigma’s clients andthe selected problem solvers (Brez). The IPR arrangements are not pre-determined butwill be negotiated by the two parties. About 60 percent of the problems are advertisedanonymously and the solvers do not know which company is searching for a solution.NineSigma charges a fixed rate as well as a transaction fee. About 45 percent of theadvertised problems are solved (Stupay).NineSigma has about 60 companies as customers. The customers are mainly largecompanies, often market leaders within their industries. Among their customers arecompanies that spend the most money on R&D. NineSigma has a wider customer basethan InnoCentive, but the companies have several common customers. P&G, Unilever,Kraft and Dupont Chemicals are some examples of NineSigma customers. Since 2003,P&G has been an important customer and, in fact, NineSigma’s CEO was recentlyrecruited from P&G. NineSigma has no Swedish customers but does have a number ofSwedish problem solvers in its network, including individuals from the Royal Instituteof Technology.7.4 Marketplace for Problem SolversThe U.S., Japan and Europe each face the challenges presented by the decreasingnumber of students pursuing advanced degrees in math and science, and theincreasing number of researchers and engineers approaching retirement. This isexpected to become a large problem in the coming 20 years (Freeman 2005). Thisinsight generated a business idea at P&G that resulted in a new marketplace forproblem solvers. The company YourEncore offers customers in the U.S. a pool ofexperienced retirees to solve problems on short-term assignments.7.4.1 YourEncoreYourEncore was initiated by P&G. P&G had an original concept of using retiredhigh- level scientists as resources for innovation and issued a request for proposalfor an organization to develop and commercialize the concept. The winningproposal came from a company in Indianapolis, Indiana in 2003. YourEncore hasestablished a network of 800 retired scientific researchers, product developers andengineers who are recruited for short-term assignments at member companies.YourEncore’s customers are companies like P&G, National Starch, Boeing, 3Mand Eli Lilly.The business idea of YourEncore is to offer companies quick access to skilledpeople who represent no liability or management responsibility. The companyhandles the hiring process and makes a short list of potential retirees, which the175
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ITPS, Swedish Institute For Growth
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The Swedish Institute for Growth Po
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