Regular readers will be familiar with The 1M/1M Deal Radar’s coverage of crowdsourcing through companies such as crowdSPRING, UserVoice, and the 1M/1M partner CrowdEngineering. Today’s post looks at a different kind of idea management: innovation management. Pleasanton, California–based Spigit makes social business collaboration and innovation management software. This software is designed to tap into the collective intelligence of an organization and transform it into actionable, predictive information. By incorporating incentives, idea graduation, idea trading and real-time analytics, Spigit helps companies to harness the social capital within their organization.
For 18 years, Spigit cofounder and CEO Paul Pluschkell served as a senior executive at global media and telecommunication firms, such as Reuters, and held positions as the CEO of high-tech financial markets firms. Before starting Spigit, Pluschkell was looking at what the next wave of information was going to be and the value the company he formed could bring. The question he wanted to answer was: How do we bring real-time data and real-time info together to make real-time decisions?
Pluschkell saw massive opportunities in social networking and wanted to create an effective way to take advantage of all of the conversations that were happening simultaneously. When he thought of Spigit, he envisioned a valve of control flow, and when that valve is opened, an unlimited amount of information and data is released. Companies should be able control the amount of information in the way that they structure the site.
The innovation management market space is still in its infancy. Spigit says that it has seen studies that estimate the market opportunity from $2 billion to $9 billion annually. The market is just now being tapped. Market penetration is very low, and Spigit says that many of the current solutions are self-developed, underfunded, or consulting deployed solutions. Spigit feels that within in this market, it can continue to grow at a 200%-300% annual organic growth rate for the next three to five years. Anything beyond that would be purely speculative, says Pluschkell.
Traditionally, Spigit has been successful at targeting the Fortune 1500 companies; however, its penetration strategy is still developing. SpigitEngage for SharePoint enables the company to partner with the extensive Microsoft customer network and deliver an enterprise-wide application on SharePoint. Spigit says that many companies are seeking an innovation platform to best optimize their SharePoint deployment, which it sees as a huge customer opportunity among Fortune 1500 firms since SharePoint penetration in this group is very high.
Many customers do not have an enterprise strategy in social media because they do not have an effective tool to interact with their customers, and Spigit’s goal is to provide this in markets where companies have high interaction (e.g., Facebook fanpage “Likes”) with their customers, including retail, government, travel and leisure, insurance and services, among others. For these customers, the company offers SpigitEngage for Facebook, which provides an application that is designed to enable companies to use their current Facebook strategy to facilitate customer feedback and improve loyalty significantly.
Education and government are also greenfield spaces. Spigit is involved in an innovation initiative rollout to the employees of New York City and sees this as a springboard for all levels of government and education. Spigit can use SpigitGov, SpigitEngage for SharePoint, and SpigitEngage for Facebook as tools to interact with their constituents; currently a largely untapped market as well.
Spigit’s tools include game mechanics, reputation scoring, incentives, and rewards. For example, the solution includes “Repurank,” which generates a user reputation score based on the participation that a user has in the broader community. The purpose of the reputation scoring is to provide elements of pride and participation, as well as accountability for the actions each individual takes within the site.
The reputation score takes into account metrics such as an individual’s user connections, votes, and posts (including ideas), responses on an individual’s posts and the reputation of the responder. The goal is to have the best ideas rise to the top through a mixture of crowdsourcing, collaboration, and game mechanics. The user reputation piece is key to keeping people motivated. By working to increase their user reputation (and their visibility within the community), individuals stay engaged in the innovation process.
Spigit’s greatest competition lies within the organization: creating a manual processes or a physical suggestion box in which ideas are captured and implemented. These methods don’t scale and are hard to track and execute on.
External competition lies in the innovation consulting firms such as Deloitte, Booz Allen, and Accenture. There are various levels of competition and there are many players that claim to work in innovation management. But, says Spigit, if you do a simple Google search on “innovation management,” companies that have more than 20 employees and serve real enterprise clients at any scale, are few and far between. Taking a deeper dive, there are even fewer companies with $30 million invested, developing innovative products, with 50 active customers a month joining their network. Spigit’s competition then becomes larger players such as Microsoft’s SharePoint and Jive with consultants; however, the company believes that because it is platform agnostic and and in fact develops on their platforms, it will continue to be the market leader on all platforms.
Spigit has received $20 million in funding over two rounds from Warburg Pincus in 2009 and 2011, and approximately $6 million in funding from other investors, including PICO Holdings in 2008. As stated above, Spigit is focused on optimizing cash and has taken the strategy of developing a model and becoming cash flow positive before accepting additional funding.
Company bookings have grown about 200% to 300% a year over the past few years, and Spigit has more than five million licensed users. Spigit expects FY 2011 bookings to be between $35 million and $40 million, growing to more than $75 million in FY 2012 estimates.
Spigit says it is focused on operational excellence in the upcoming years, driving toward the possibility of an IPO, but a stated date of an IPO has not been discussed at this time. The company has begun to put the steps in place to do an offering if the market conditions are right, including but not limited to: 1) developing strong internal processes; 2) developing a world-class product portfolio; 3) developing direct, indirect, and international markets; and 4) putting the right management team in place so that the company is ready when the market is ready.
This segment is a part in the series : 1Mby1M Deal Radar 2011