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Outsourcing: Matthew Heim, President of NineSigma (Part 1)

Posted on Friday, Sep 30th 2011

Do you have a problem you can’t solve and can’t find anyone anywhere in your organization who can solve it? There’s no app for that, but there is a company that can put you in touch with a host of people with the knowledge and experience needed to help you. No matter what industry you’re in, NineSigma can connect you with the right people to answer questions and spark innovation. Founded in 2000, NineSigma is a global company based in Cleveland, Ohio, with additional headquarters in Leuven, Belgium, Tokyo, and Melbourne. The company also has a presence in South America and Africa.

Sramana Mitra: Hi, Matthew. Would you give us some context about NineSigma, what stage you are at?

Matthew Heim: Sure. NineSigma is the first open innovation service provider. We were providing services in this space long before the term “open innovation” was coined, and we have been in existence for 11 years. What we do is help to connect our client organizations with innovations, with people, with [other] organizations, with universities and university departments that have solutions to their problems. The solutions are typically technical in nature. They involve some type of science or technology, and, as I mentioned before, these can be entrepreneurs; they can be university professors; they can be medium or large corporations, research laboratories, or nonprofits. As well as the companies that we represent, the seeker organizations are also typically large corporations, but we see a lot more mid-market companies participating in open innovation, government agencies, and nonprofits that are conducting research.

SM: Would you give me an example of how, let’s say, Stanford University would work with you?

MH: OK. Let’s say Stanford University was a solution provider. We have a very broad global network of solution providers that responds to requests that we post. Our requests can be in the form of an RFP (request for proposal); it can be a direct contact from NineSigma to that organization. Let’s say Stanford or SRI, or let’s say it could be a professor at Stanford who has a particular capability or possesses a certain IP that could be licensed to the seeking company. What we would do is make the connection. When we develop an RFP and post an RFP that goes to the outside world to what we call the global innovation community, Stanford University would, for example, be one of those solution providers that would respond to the RFP. They would – it’s all nonconfidential – they would respond indicating what their capabilities are and how they could solve the problem. We’ll normally receive anywhere from 20 to above 100 responses or proposals back that are describing different ways that they can solve the problem, and then we help our clients shortlist. We help our clients sift through and vet the various solutions to help them to final decisions, and then we help with the negotiations and so forth.

So, let’s say in this case Stanford University was a solution provider. If it was selected, which it has been in the past. Stanford was a solution provider in a number of cases, I believe, and we would help them through the negotiations, and then our clients who would be the seekers, would ultimately engage with Stanford in a licensing agreement or a purchase or a supply agreement, depending on the nature and the stage of the technology.

SM: What is the business model of all of this? Who gets what, and what do you get?

MH: The solution seeker posts a reward in the RFP. It’s very public what he’s willing to pay for the solution that he’s seeking, and then the solution providers will look at this RFP and decide whether or not they feel its in their  interest to respond. If they do, then they have a clear understanding of what the reward is. So, they will respond and go through the negotiations. If it’s not exactly what the seeker company is looking for, there may be some negotiations involved in that. Or the solution provider may say no, this is a unique opportunity for your organization, and I want more, and they would go through a negotiation phase. The solution seeker pays us. NineSigma receives no compensation from the solution provider. It’s all from the solution seeker. It’s a paid service.

SM: Are you being retained somehow by the solution seeker, or is it the percentage of the RFP value?

MH: There are different payment methods that our clients use. Some will pay on a per project basis. They will pay us a flat fee. Some people who have not worked with NineSigma before, like to try the risk reward route. What they will do is pay, what we call a discovery fee. On the back end, if we connect them with a solution provider with whom they go to a deal, NineSigma will receive a percentage of the deal. Sometimes companies work with us over a long period, and they say, well, it’s just easier for us to have a fixed fee for budgeting purposes. Another model that we use with organizations that use us all the time is a subscription-based service. They have NineSigma on a retainer.

This segment is part 1 in the series : Outsourcing: Matthew Heim, President of NineSigma
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