The encyclopedia · Strategy & Leadership · Strategic decision · 2001–2007
Eli Lilly spun out InnoCentive to broadcast hard R&D problems to outsiders
Post a stuck research problem with a cash prize and distant fields crack a third of the ones labs failed internally.
InnoCentive (Eli Lilly)
the move
In June 2001 Eli Lilly announced its first separate e-business venture: InnoCentive, a company that would post scientific problems with cash incentives and open them to researchers worldwide. Lilly framed it as a return to the Internet's roots, an open approach to scientific collaboration and the pharmaceutical industry's first structured effort of its kind.
The mechanism is broadcast search. Companies that cannot solve a problem internally write it up as a challenge; InnoCentive manages the marketplace and the intellectual-property boundaries; and a global community of independent scientists competes for the reward, motivated by prizes rather than employment.
The Harvard working paper that studied InnoCentive's early years tracked 166 problems from 26 firms, disclosed to more than 80,000 independent scientists in over 150 countries. About a third of the problems, ones large R&D firms had failed to solve internally, were solved, and the solutions disproportionately came from people working at or outside their own fields.
why it works
- Publishing the problem taps knowledge the firm does not have
- Cash prizes attract solvers without hiring them
- Distance from the field breaks local assumptions
- Firms pay only for success, so risk shifts to the crowd
what transfers
When your own experts are stuck, the constraint may be distance, not difficulty: publish the problem precisely and let unrelated fields try; their ignorance of local assumptions is the asset.
what came after
The working paper made broadcast search a documented business tool, and prize-based open innovation spread from pharma into chemistry, engineering and consumer goods. InnoCentive became the reference case in the academic literature on open innovation, and posting hard problems to a crowd became a standard complement to internal R&D.
references
- The Value of Openness in Scientific Problem Solving (Working Paper 07-050)
- e.Lilly Announces Plans to Launch New Startup
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