Open innovation: NineSigma uncovers solutions to the tough engineering problems

As a research & development executive in Procter & Gamble’s fabric care unit, Paul Stiros grew weary trying to create a product that would prevent cotton clothing from wrinkling while being worn. He found a solution by turning to NineSigma, a company that links manufacturers facing product development dilemmas with third parties bearing solutions.

04/23/2008


As a research Procter & Gamble 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

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—roughlyarming 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

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.


Paul Stiros became CEO of open innovation company NineSigma after finding success as a client.

Stiros says this situation perfectly illustrates the value of NineSigma’s Open Innovation model, because P&G not only found a solution to its problem, but it found it in a place it might never have thought to look without NineSigma’s assistance.
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 associationsat 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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