Ambros Hügin was sitting at home one evening in his apartment in Geneva, just surfing the Web. He had quit his job as a researcher at the city's university hospital and was enjoying his new freedom. After a few mouse clicks, he chanced upon a virtual laboratory of sorts, filled with thousands of inventors. Soon after, the 50 year old landed a research contract to develop a new method for testing anti-inflammatory drugs.

He brooded over the task at hand and ran a few experiments. And then Hügin solved the problem. He submitted his idea and before long, the $10,000 fee appeared in his bank account. To this day, he has no idea who paid him.

What turned out to be easy cash for the self-employed inventor stems from a carefully designed business idea developed by a US-based company called Innocentive -- the name is a fusion of the words innovation and incentive. The business principle behind the company's idea exchange is quite simple. A company has a problem it wants to solve, but its own R&D department is unable to develop a solution on its own. So the company describes the problem it wants solved -- using a few sentences, formulas or graphics -- posts it on Innocentive's Web site  and names a sum it's willing to pay for the invention -- anywhere from $10,000 to $100,000.

Open Innovation is growing quickly

Some 80,000 inventors have already tried their hand at solving the various problems posted on Innocentive. The rules are straightforward: Whoever produces the best solution gets the money, while everyone else gets nothing. The Web site charges the companies a fee to post their questions. In return, they remain anonymous, in order to protect company secrets.

Innocentive's site, which is essentially a marketplace for inventors, has expanded considerably since pharmaceutical giant Eli Lilly started it in 2001. Now even some of Lilly's competitors use the site, including BASF, Novartis, Nestlé and Procter & Gamble, which has increased the share of product ideas accepted from outside inventors from 20 to 35 percent over the last three years. "In the past, R&D departments worked more or less on their own, while today the so-called Open Innovation concept is becoming increasingly widespread," says Frank Piller, a researcher at Massachusetts Institute of Technology in Boston who has set up a team of scientists dedicated exclusively to this issue. Companies are thus able to cost-effectively "outsource" highly specialized tasks to a large pool of inventors around the world when they lack the in-house expertise.

"The people who use a particular product are often the best experts, simply as a result of daily use," notes Cornelius Herstatt, of the Technical University of Hamburg-Harburg. Indeed, Ethicon, a company that manufactures medical devices, systematically collects the suggestions for improvement sent in by surgeons via the Internet, so that it can incorporate them into its products. The Open Innovation concept is quickly gaining new supporters ranging from German carmaker BMW to Japanese retail chain Muji to Austrian model train maker Roco.

Bette Nesmith Graham is an early example of the power of amateur inventors. Back in the Fifties, she worked as a secretary but was a very poor typist. To fix her errors, she came up with a brilliant idea: a correction fluid that later came to be known as whiteout. When she sold her invention to the Gillette Corporation in 1979, the woman who started out as a mediocre secretary ended up a multimillionaire. The concept works in almost any industry but, says Piller, "Open Innovation is most widespread in the sporting goods industry, where more than half of the ideas for new equipment come from especially engaged customers," citing skateboards, mountain bikes and folding scooters as examples.

Difficult to give up intellectual property

Open Innovation is especially valuable in extremely fast-paced industries, as Threadless can attest. The Chicago-based company prints T-shirts that are guaranteed sellers. Its designs are based on ideas people submit to its Web site.  Only the designs that win the most votes actually make it onto the company's T-shirts. The winners receive a $1,000 reward and a tiny shot at fame. The competition gives young designers the opportunity to make a name for themselves, while helping Threadless to cut down on flops -- as well as employees.

As a sort of Ebay of Ideas, Open Innovation adheres to the laws of globalization. Noticeably large numbers of Russians and Indians participate in Innocentive's competitions, for example. For them, the prize money can often mean an entire year's salary. But this new form of R&D cost-cutting has its problems, too, as Piller has discovered: "Some full-time researchers, apparently worried about losing their own jobs, are intentionally flooding online innovation marketplaces with unsolvable problems, in order to frustrate their competitors on the Internet." Furthermore, the rigid contract policies are also the source of disgruntlement. Says freelance researcher Hügin: "It's difficult to get accustomed to the idea of giving up all intellectual property rights to an anonymous company, as is often the case."