Aaron Strout:                             

We are fortunate to have a well-known guest today, Alph Bingham.  He is a board member, founder and former CEO of InnoCentive, which is really a pioneer in the collaborative community, crowd-sourcing space.  So, welcome Alph.  We really appreciate you joining us today.

Alph Bingham:                         

Thanks Aaron.  Really glad to be here.

Aaron Strout:                             

So, Alph, let's just jump right in, and one of the things I like to do with a guest is have them give a little bit of background.  So, I think I've read a little bit of it.  It's fascinating.  Talk to us about how you came to where you are today as the board member and how you founded InnoCentive, which really is a fascinating story. 

Alph Bingham:                         

Well, the fairly short version is that I joined Eli Lilly out of graduate school as a bench chemist and spent almost 30 years with them.  The last few years I held two or three assignments that I think are germane to InnoCentive, one is I was Vice president of R&D strategy.  I was also a VP of a business incubation unit called eLilly there.  And I was Vice President of sourcing innovation, which consisted of corporate business development, research acquisitions.  It was the opposite of alliance management.  It was really the outward-looking organization bringing technology in from the outside.

As part of that business incubator we launched several companies.  We built an equity fund that allowed us to invest and hold board seats, take a front row seat at some of the transformation that was going on.  But it was part of a brainstorming session.  The other patent holder, if you will, because it was a business process patent for InnoCentive on this, is Aaron Schacht.  Then the real work of launching InnoCentive fell to a member of the eLilly incubation team by the name of Darren Carroll, who was the CEO when we first launched and created InnoCentive.  So, it's really sort of the co-founding efforts: Aaron and I conceptually, Darren bringing the final business model and organization together to create it.  That's how InnoCentive came into being.

Aaron Strout:                             

So, following up on that question, I'm still amazed.  You are featured heavily in our We Are Smarter book, InnoCentive is.  Now, it was created back in 2001, if I'm not mistaken, out of eLilly – the division of Eli Lilly.  Now, this concept of crowdsourcing really almost didn’t exist back then, and I know that was an active time in the whole internet space, but how were you able to get traction around this?  I know you sort of talked about having this sort of incubation lab, but you came up with the idea.  How did you guys get that sold to management to say, "You know what guys?  This crowdsourcing concept is going to work"?

Alph Bingham:                         

Well, the term crowdsourcing was even pre-infancy.  I don't know for sure, but I'm pretty sure that it was coined by Jeff Howe, a Wired article, back in mid-2006, and it's a term that's gotten some legs since then.  Of course, the notion of open innovation predated some of that.  There'd been good work by people like Hank Chesbrough at Berkley really organizing these notions, Gene Slowinski at Rutgers.  There were some others who were publishing in that area.

I would say if I really ask what the thought origins were and I think back to the conversations with Aaron, the brainstorming sessions that were actually led by a member of our IT function at Lilly, Murray Bodick, but the brainstorming that we did and bounced around at that time we were looking at some precursors like the open source software movement, which, as you know, didn’t have a strong monetization model behind it and definitely had some different attitudes then we built our company around intellectual property. 

Those are the kinds of things that were out in the environment in the day in 2001 when this was constructed.  At the time, getting traction from management was a considerable amount of internal marketing.  There wasn't a lot to point to.  There weren't a lot of precedents.  There certainly were no precedents in the space that we eventually launched into.

But we had some commitments from leadership all the way up to the Chairman's office.  Sidney Taurel was the chairman at the time, to really seriously explore the way the internet transformed the fundamentals of business, and he was committed to backing some of the concepts that we developed.

Aaron Strout:                             

Well, it's amazing that you guys were able to do that, so thank you for the clarification on crowdsourcing.  Interestingly enough, we actually did a webinar last week on crowdsourcing, and I was fortunate enough to have Jeff as one of the guest speakers.  You're right; the term itself was created in 2006 as a result of his Wired Magazine article.  In fact, I just found out – and I hope I'm not breaking news here – that Jeff is actually working on a book on crowdsourcing.  So, my guess is you guys may find your way into that if they haven't reached out to you guys already.

Talk a little bit about how your model has evolved, because it's changed dramatically I think from when you first launched where you're much more internally focused to the point where you were spun off I believe a year or so ago.  What made you – or how did that decision come about to become a separate entity from Eli Lilly?

Alph Bingham:                         

You're right.  The business has undergone several transformations, several stages of evolution.  One of those that is significant is the one that occurred at the end of 2005.  Prior to that we were a wholly owned subsidiary of Eli Lilly and managed internally in the sense that we did have external customers.  So, even as we were an entirely Lilly-owned entity, we had customers like Dow and Procter & Gamble and others.  So, we were reaching out. 

But the decision to spin it out was probably prompted by the fact that having attracted these other customers and it still being a business that was incubated and was in startup mode and everything else Lilly said, "Why not share some of the creation burden or the risk associated with a new business and everything else with the marketplace as a whole since it's obviously evolving to serve more than just internal R&D needs?"  That was some of the rationale that went into the spinning out process that occurred in December of '05. 

Aaron Strout:                             

Now, you mentioned the fact that you work with some big companies, and Procter & Gamble I think is a good example.  They are mentioned in our book as well.  How do you convince some of these old world companies to take the leap of faith and start using your sense of matchmaking, your digital matchmaking or external community to do their innovation?  Is that difficult to do?  I would think it would be.  What's the one big point that you make to get them over that hurdle?

Alph Bingham:                         

Well, it was very difficult to do in 2001.  It's easier in 2007, but there are still hurdles there.  Make no mistake about it.  It's a different way of thinking, and it's a different role that's played in this innovation process by the internal staff than one they've historically played.  At some of the early adopter companies the key to that was a visionary in their management structure.  For example, a Dan Kiddle at Dow who was our third customer, and Procter & Gamble, as you mentioned, was our second, and that was Larry Houston, who was really inventing a lot of the connect and develop strategy which I'm sure you've read about in several places and which figures in the book.

Aaron Strout:                             

Yep.

Alph Bingham:                         

So, I would say visionary was the key in those early days, but increasingly, we're able to reach right into the organizations themselves.  They're becoming more familiar with crowdsourcing, the way the system works.  They're definitely starting to look at open innovation, build outreach groups.  A lot of the companies that are our customers have dedicated innovation centers in that they've got groups that are looking for new ways to innovate.

Aaron Strout:                             

So, to that end, one of the things that we like to do as part of our innovation process and part of the overall We Are Smarter project is we're always in the hunt for ways that companies can be more innovative.  One of the things that I try to do in these podcasts is ask very smart people like yourself that have been there, done that, any thoughts on best practices for a company that is just getting started with their community endeavors or their social media endeavors?  It sounds like you've had to have some of those conversations with folks like Dell and Procter & Gamble.

Alph Bingham:                         

Well, there are a lot of best practices, one I kind of made reference to already, which is that there's a change in the role of the internal R&D staff.  They probably have a self-imposed as well as organizationally-imposed identity, which is them as problem solver.  In this case, the problem solving is actually taken to the external world, and they become question askers and challenge formulators and solution finders.  That's a different role, and sometimes part of effective implementation is to talk through that and make sure that the rewards and the recognition systems can align themselves with that and not only with the more traditional roles that the scientists, engineers and technologists play in these companies.

That'd be the sort of thing I'd be advising a large client on, perhaps somebody who was moving into community space either as a large company or as a small intermediary, not necessarily a competitor of ours.  I might not be giving them any advice at all, but somebody who might be in a similar spirit looking to build community resources that are going to do real work on their behalf is trust.  It’s probably a more important currency than cash when it comes to building the community, retaining the community and getting the community to make commitments and follow through on those commitments.  It was an open question in 2001.  Why would anybody go at risk to solve a problem that belonged to someone else?  Then we weren't sure we knew the answer to those questions, and we weren't sure we knew how to find out the answer to those questions other than launching it and doing it.

Aaron Strout:                             

Well, we as the collective community and social media space do applaud you guys and thank you for paving the way because, certainly, like you said, you are way, way ahead of your time in 2001, and it's good to see you guys have succeeded in spades and really brought a lot of innovation to the space through the use of external audiences or crowdsourcing, as we now call it.  One follow-up question –

Alph Bingham:                         

Let me interrupt and just tell you thanks.  I appreciate that.  I also recognize that we're going to look back on this a decade or two from now and realize what baby steps we were all taking.  I think this thing is just at the very beginning.

Aaron Strout:                             

That's absolutely true.  Just as a sidebar, I talked to a number of people who say in a way this is like search marketing.  Although I think this is probably a thousand times bigger when it really blooms, but you remember five or seven years ago when people were just starting to poke around with search engine marketing and paid keyword search and things like that and no one really knew much about it, and now it's a multibillion-dollar industry, and I think really community and this outsourcing-crowdsourcing collaboration is going to be a trillion-dollar industry. It's just going to be huge over the next 10, 20, 30 years. 

So, the final question is – and I was actually going to ask you about who you read for blogs, but you gave me a little bit of insight up front in our pre-call conversation.  You said you recently started blogging.  I'd love to know what goes through your head.  What are you finding, what are you learning as you're blogging, and I imagine you're a fairly busy guy.  How do you find time to actually blog for InnoCentive?

Alph Bingham:                         

Well, you know, you make time.  You rarely find time.  So, some of it is just discipline.  We're so early on this it's just the very beginning, and I hope I can answer that question with much more insight in five or six months.  Between the practices that we've seen I don't think it's a lack of material.  At least I don't see any lack of material for the next 20 or 30 because I think about the insights that we've gained as we've gone through this learning process, the way in which the internet really does have the ability to fundamentally transform innovation, the notions of collective intelligence that we've discussed with Tom Malone at MIT and others.  Yet so few places where this is written down. 

So, in some ways I view it not as an assignment but as an opportunity to codify, and I find that when I go to the effort of putting something in writing nothing does more to sharpen my own thought process on the topic than that.  So, that's the experiment we very, very recently embarked on.

Aaron Strout:                             

Well, it's helpful to know, and I've been at it now for about a year and a half myself, and I absolutely agree with you.  You have to make time for it, and it does have a way of sort of codifying and happening ideas in your mind.  So, best of luck with that.  I look forward to reading some of your blogs, and maybe we'll revisit this in five or six months and we can check in on your progress.

Alph Bingham:                         

And I look forward to learning from you on your experiences as well.

Aaron Strout:                             

Well, I appreciate that.  So, to that end, thank you, everyone, for listening in today.  Thank you, Alph, for taking the time to join us.  This was fascinating, and we really appreciate you spending some time to be able to talk about the journey that you've had within InnoCentive, starting off with Eli Lilly and the lessons you've learned.  Things like this are really quite valuable to our audience, so really appreciate you taking the time.

Alph Bingham:                         

Great.  Thanks, Aaron.

Aaron Strout:                             

We appreciate you listening in to this series of the WeShow podcasts.  To find other podcasts like this you can check out WeAreSmarter.org, Mzinga.com and also iTunes under "We Are Smarter."  Thanks so much for joining us.  We look forward to seeing you next week.