Open innovation: NineSigma uncovers solutions to the tough engineering problems

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. He turned to NineSigma, a start-up that promised to link manufacturers facing product development dilemmas with t...
By Sidney Hill, executive editor August 1, 2008

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. He turned to NineSigma , a start-up 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 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.

To date, Stiros says NineSigma has helped more than 1,000 companies find solutions to engineering or technical problems. One of those companies was Stiros’ former employer, Procter & Gamble (P&G), which had a packaging problem with 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 number of these pouches 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.

NineSigma’s search led to a solution from a small company in the U.K. that makes insecticides, pesticides, and herbicides. It turned out 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. Once NineSigma connected P&G with this supplier, the two made a deal to address P&G’s issue.

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. This involves developing requests-for-proposals (RFP) that can be responded to by people in a number of industries—e.g., you get an agricultural products manufacturer solving a consumer goods problem.

In step two, NineSigma combs its database of more than 800,000 solution providers for potential candidates to solve the problem. Says Stiros, “We have relationships with 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 who receive our RFPs are redistributing them to people they think might be able to solve a problem.”

Once the NineSigma client identifies the best 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 only contain the company’s capabilities for addressing the problem,” says Stiros.

NineSigma is compensated by the solution seeker with what Stiros describes as a “small discovery fee” that covers the three steps for 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,” says Stiros. “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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