…The X Prize modeled itself on the Orteig Prize, announced in 1919 by hotelier Raymond Orteig as a spur for innovation in aviation. The $25,000 award would go to whoever could fly from New York to Paris, or vice versa, nonstop. Eight years later, Charles Lindbergh claimed the purse with his solo dash across the Atlantic. Diamandis said the key element of the story is not Lindbergh’s triumph, but what came afterward: “Within 18 months of Lindbergh’s flight, the number of passengers rose from 6,000 in 1927 to 180,000 in 1929.”
Last September, the Obama administration released the Strategy for American Innovation, which called on agencies to use prizes and challenges. The obvious advantage of the prize approach is that the government pays only for results. The competitors invest their own money in research and development.
Prizes also diversify the pool of problem-solvers. Solutions to technical problems, for example, are often found by people in seemingly unrelated fields. A prime example involves the oil spilled by the Exxon Valdez in 1989, said Dwayne Spradlin, chief executive of InnoCentive, and another of the speakers at the Friday session. Spradlin said the Oil Spill Recovery Institute of Cordova, Alaska, had trouble cleaning up the oil at the bottom of Prince William Sound. When exposed to low temperatures, the oil would turn nearly solid. InnoCentive helped the institute put together a $20,000 contest for the best solution.
A construction engineer in the Midwest realized that the problem was analogous to the difficulty of keeping concrete from hardening prematurely when pouring a foundation. His winning solution used industrial vibrating equipment, placed on barges, which kept the oil in a liquid state.
“We don’t even call this outsourcing,” Spradlin said. “In this model it’s ‘diversity.’ You’re trying to get to as many potential solvers as possible.”
Contests and crowdsourcing aren’t foolproof, say the veterans of the game. If the rules aren’t carefully structured, someone can win a prize with an approach that has no practical value. The goal also has to be specific and realistic.
“You can’t just ask, ‘invent for me antigravity’ type of questions. Or cure cancer,” said Karim Lakhani, assistant professor of management at Harvard Business School, who has written extensively on open innovation. …