Open innovation: NineSigma uncovers solutions to the tough engineering problems
Sidney Hill, Jr., executive editor -- Manufacturing Business Technology, 4/23/2008 7:17:00 AM
As a research & development executive in the fabric care unit of Procter & Gamble (P&G), Paul Stiros grew weary trying to create a product that would prevent cotton clothing from wrinkling while being worn. Finally, “almost of out desperation,” he says, he turned to NineSigma, a start-up company that promised to link manufacturers facing product development dilemmas with third parties bearing solutions.
Not only did Stiros find his anti-wrinkle agent, but a few years later he found a new job as NineSigma’s president and CEO. “I knew this was a concept that would catch on quickly,” he says of NineSigma’s business model, which the company calls Open Innovation. “It addressed a real need, and it was providing real solutions.”
NineSigma was launched in 2000 by Dr. Mehran Mehregany, who holds the position of Goodrich Professor on Engineering Innovation at Case Western Reserve University in Cleveland. Dr. Mehregany got the idea to form the company after being asked numerous times by government agencies—specifically the national laboratories—to lend his expertise in solving technical problems.
“He saw that government agencies had a well-defined process for accessing knowledge and information outside of the national laboratories,” Stiros explains, “while private industry had no such process.”
To date, Stiros says NineSigma has worked with more than 1,000 companies seeking solutions to engineering or technical problems. One of those companies was Stiros’ former employer, P&G, which this time was looking to solve a problem related to the packaging of a brand of laundry detergent it was selling in Europe.
The detergent was packaged in pouches made of a water soluble film, and the pouches were placed in cardboard boxes. A small number of these pouches—roughly one of every 1,000, by Stiros’s estimate—developed small leaks that caused oil spots to form on the cardboard boxes. Customers selecting this brand of detergent naturally opted for the non-oily boxes. After a while, only oil-stained boxes were left on store shelves, and this started harming product sales.
At P&G’s request, NineSigma launched a search for a company that could solve this problem. It sent a request-for-proposal (RFP) to several likely candidates, and the solution came from a small company in the U.K. that made agricultural concentrates—insecticides, pesticides, herbicides, and the like.
It turned out that this company was using the same water-soluble film to package some its products, and had learned that the leaking problem could be alleviated in the packaging process.
“It related to the amount of time you put pressure on the seals and some other factors,” Stiros recalls. Once NineSigma connected P&G with the small agricultural products firm, the two made a deal to address P&G’s issue.
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| Paul Stiros became CEO of open innovation company NineSigma after finding success as a client. |
Searching for companies that can solve a problem—solution providers in NineSigma vernacular—is the second of three steps that NineSigma takes in dealing with its clients, which it calls innovation seekers.
The first step is working with the client to define their need as a general scientific problem. Stiros says this allows for developing RFPs that can be understood and responded to by people in a number of industries. Thus you get an agricultural products manufacturer solving a consumer goods problem.
In step two, NineSigma starts by combing its database of more than 800,000 solution providers for potential candidates to solve the problem. In addition, Stiros says, “We have relationships with a number of professional and technical associations that redistribute our RFPs to their members, and that brings another 750,000 entities into the process. We also find that the people we send RFPs to are redistributing them to people they think might be able to solve a problem. In fact, 40 percent of the responses to our RFPs come from entities that we did not contact initially.”
Once the NineSigma client identifies the best potential candidate for solving its problem, NineSigma introduces the two parties and facilitates communication until a contract is signed.
Stiros says the entire process is conducted in such a way that neither party has to fear having intellectual property compromised. “The proposals submitted by solution providers don’t contain the actual solution,” he says. “They only contain the company’s capabilities for addressing the problem. Our client then holds conversations with the solution provider to determine if they can indeed solve the problem. Then they sign confidentiality agreements, and ultimately enter into contract to have work performed.”
NineSigma is compensated by the solution seeker, in the form of what Stiros describes as a “small discovery fee” that covers the three steps involved in finding a solution provider. If a solution is found, NineSigma collects a “success fee.”
Stiros says NineSigma doesn’t accept fees from solution providers because it wants to avoid any appearance of having a conflict of interest. “A lot of companies claim to represent inventors, but their success rates are quite low,” he says. “We don’t want to be associated with that industry. We also set our discovery fee low so that our success is dependent on our clients finding solutions to their problems.”
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