Open Innovation Field Opens Up

“I consider it just good fortune that one of the largest directed medical prizes ever offered was right in my area of research,” says Seward Rutkove, a neurologist at Beth Israel Deaconess Medical Center in Boston. He won $1 million in 2011 for developing a method to monitor muscle atrophy in amyotrophic lateral sclerosis (ALS).

The award came from Prize4Life, an ALS-oriented nonprofit that partnered with InnoCentive in 2006 to hold an online contest for an ALS biomarker. The goal was an easy-to-use tool that could accelerate clinical testing of ALS therapies.

The challenge was open to anyone who could provide a solution within two years, but the partners soon realized the enormity of the task. Their response, in 2007, was to award five $15,000 “thought”’ prizes to encourage promising ideas and push contestants to solve the problem.

Rutkove entered the contest the following year. He had been working for nearly a decade on electrical impedance myography (EIM), which measures the flow of a small electric current in muscles, and submitted clinical results. For this, in 2009 he received one of two “progress” awards totaling $100,000.

Because solvers still hadn’t met its full criteria, Prize4Life kept the challenge open well beyond its original deadline. Rutkove continued his work, applying it to animal studies and device development. About a year and a half later, with the submissions whittled down from 108 to a final 12, he won the big prize.

The contest is an example of open innovation, the practice of finding solutions by putting many minds to work, usually with the help of the Internet.

The field is less than 15 years old and still evolving. In technical disciplines such as medicine and chemistry, two main models have emerged: open contests such as the Prize4Life ALS challenge, and curated searches run by firms such as NineSigma. Both models rely on external networks of solvers and face competition from internal innovation networks that are starting to pop up at forward-thinking companies.

Frank T. Piller, a professor at Germany’s RWTH Aachen University who studies open innovation, is a believer in the practice. “We have statistical proof that, if used correctly, these services provide value,” he says.

The most effective ones, in Piller’s opinion, use an open approach rather than a curated one. “Contests that not only seek solvers, but do it through open calls and let the people who have the knowledge self-select, are really the mechanism that we see value in,” Piller says. The best and most efficient process reaches across countries and industries to access “not the usual suspects,” he says.

For example, nearly 3,000 solvers from 20 countries signed up for the Prize4Life challenge. More than two-thirds of active solvers came from outside traditional ALS research. Rutkove wasn’t even looking for a prize challenge—he only learned about it after someone saw a poster he was presenting and suggested he enter.

Companies that connect clients and solvers first emerged around 2000 during the Internet boom. A second wave sprang up between 2006 and 2009 as early success stories emerged. In a 2013 survey, Piller counted more than 180 such firms. Idea or solution contests dominated their services, followed by technology and market searches. Most have online platforms and also provide software support and consulting.

InnoCentive, founded in 2001 by Eli Lilly & Co., was one of the early ones. “We cut our teeth in chemistry and then moved into biology to support life sciences clients,” says Alpheus Bingham, InnoCentive’s founder and a current board member. Over time, the firm has broadened its range of investors, clients, and challenges. “By diversifying the challenges, we have attracted a more diverse solver population, so you’ll find chemists among the minority now,” he says.

But chemistry is still important. InnoCentive introduced novel molecule and materials challenges about three years ago. In these, seekers that want to extend compound libraries can post a basic scaffold. Solvers indicate what functionalities they can attach and, within 90 days, may be asked to deliver samples in return for a transfer fee and nonexclusive R&D license.

Novel molecule requests make up one of 17 pavilions, or areas on the InnoCentive website where solvers can view topical challenges. Other pavilions are dedicated to specific clients, such as AstraZeneca and the National Aeronautics & Space Administration, or fields, such as cleantech and global health. Between 2001 and mid-2013, InnoCentive posted more than 1,600 challenges valued at more than $40 million. More than 1,500 awards have been made from 40,000 submissions.

“Our most common way of recruiting solvers is through challenges. They see something they want to work on, and they sign up,” Bingham says. Because ­InnoCentive relies on solvers to identify themselves, “it’s increasingly important that we have exposure because we try to get as many minds as possible exposed to a challenge.” At InnoCentive and most other open innovation sites, solvers don’t pay to participate but often must sign disclosure and other agreements.

On average, open innovation firms have solver communities of 20,000 members, according to Piller. Firms specializing in technical contests, such as InnoCentive, and technology scouting, such as NineSigma, can exceed 100,000. Usually 200 to 300 solvers will participate in a given contest or search. Individuals are drawn to monetary awards, whereas companies often respond to technology searches in the hope of partnership or licensing deals.

Cleveland-based NineSigma works with medium-sized and large companies to connect them to prospects within its solver network and technology database. Unlike the solvers responding to posted challenges, NineSigma’s customers get companies and researchers pre-identified by NineSigma, explains Eloise Young, a program manager at the 14-year-old firm.

In 2012, NineSigma launched a social media forum, NineSights, that allows clients and existing solvers, as well as new registrants, to interact directly through requests, galleries, and expert panels. For example, Pfizer has a gallery through which it seeks partnerships with Asian academic researchers and biotech firms. Conversely, companies can post available technologies on the forum.

On NineSights, NineSigma also runs open-call Grand Challenges centered on large technical or societal issues. For example, now under way is a multiyear, multiround $32 million contest from Climate Change & Emissions Management Corp., a Canadian nonprofit that is looking for a technology that can convert greenhouse gases into ­usable products.

Not all challenges require a “reduction to practice,” such as a sample or prototype. Instead, some look for theoretical answers or are requests for potential collaborators. So-called ideation contests may simply reward the best idea proposed rather than one meeting preset criteria.

In 2010, InnoCentive launched its Prodigy challenges, which are iterative exercises that allow solvers to rework and resubmit solutions based on feedback and scoring. One such challenge ended in December 2013 when the U.S. Defense Threat Reduction Agency awarded $1 million in the DTRA Algorithm challenge. Nearly 3,000 solvers signed up, and more than 100 submitted work.

The winning team—two scientists from Germany and one from Singapore—created an algorithm that can characterize potential biothreats in a sample of raw DNA sequence data in tens of minutes. Some participants complained that the contest’s rules and scoring were unclear. A DTRA team plans to publish a paper that will shed light on the creation, execution, and results of the complex challenge.

Government agencies such as DTRA and philanthropic organizations such as Prize4Life have become important open innovation customers. Not only are these groups interested in running large prize-based challenges, but the events often motivate solvers because they address a social good or national interest.

In 2010, U.S. agencies were given the authority to conduct prize competitions. They are posted on third-party sites, as DTRA’s was, and on Challenge.gov, which is supported by ChallengePost, another open innovation firm.

Governments and philanthropic groups are very mission-based, transparent about their goals, and often not interested in owning intellectual property, notes Anil K. Rathi, chief executive officer of Pasadena, Calif.-based Skild. Rathi founded Skild in 2002 to provide challenge design services and run large-scale competitions.

Skild has run several contests for the National Science Foundation. In December 2013, an NSF challenge targeting agricultural problems in the developing world brought in 800 responses. Thirteen winners took home $10,000 each, supplied by the Bill & Melinda Gates Foundation, Rathi says. Skild also supports materials-related challenges from LAUNCH, a partnership between NASA, Nike, the U.S. Agency for International Development, and the U.S. Department of State that targets sustainability issues.

The reward doesn’t always have to be a huge jackpot, Rathi notes, but can be as simple as having one’s work exposed to the right people. “Innovative and creative people are all over the world and just need an opportunity to shine and showcase their work.”

Witnessing a growing number of open innovation successes, some client firms and organizations now want to leverage their own networks of employees, collaborators, suppliers, and customers. Last October, Skild launched OpenSkild, a self-service platform for contest creation and management. Similarly, InnoCentive offers Innocentive@Work, a software system that companies and organizations can use for managing private crowdsourcing.

But NineSigma’s Young argues that intermediaries such as her firm play an important role when it comes to formulating questions for posting. “One of the most useful things that we bring to the table is the ability to take the outside, objective viewpoint,” she says. “We try to help clients with a different way of looking at a problem and reduce it down to its technical core.”

The growth in NineSigma’s business shows there is still a need for intermediaries. In 2012, the firm worked with more than 200 clients, of which nearly 40% were new. “Open innovation is becoming more mainstream,” Young says. Previously, only early adopters thought about testing the waters, but now more companies are developing programs, she adds.

Piller agrees that the open innovation field has matured. In the process industries, most companies have an open innovation director, he says. These companies are now better at evaluating which problems will fit best with the approach and are familiar with the range of open innovation companies and their business models.

And companies are paying for that expertise. In Piller’s survey, open innovation providers estimated that industry revenues were $3.7 billion in 2013 and would reach $7.6 billion by 2015. But he points out that about 20% of intermediaries he studied in 2010 no longer exist or have been acquired. “We expect an even stronger wave of acquisitions and mergers for the coming years,” he adds.

Open innovation may be growing, but the experience of Rutkove, the $1 million prizewinner, shows that the concept isn’t a cure-all for science’s difficult problems. Although the Prize4Life contest raised visibility and funding for ALS research, Rutkove has yet to bring his EIM technology into broad medical use.

During the course of the contest, Rutkove and a Massachusetts Institute of Technology colleague founded Convergence Medical Devices to commercialize the technology. Since then, the company has found that “it is very challenging to introduce de novo technologies to physicians,” Rutkove acknowledges, and has put applying for Food & Drug Administration approval on hold.

Although drug companies have shown interest in using EIM in clinical trials and it is finding use in other neuromuscular diseases, Rutkove’s firm, now called Skulpt, has shifted focus to the fitness market, where its device can be used to monitor muscle development and body fat.

A doctor first, Rutkove says he began his work on EIM to help people, not make a quick buck, either in business or through contests. “I really love the mysteries of science and trying to solve these problems more than applying for prizes,” he says.