Prize-Based Innovation from the Solver's Perspective - and Why it Matters

Posted by abingham on May 21, 2009 3:08:09 PM

InnoCentive Founder Alph Bingham will be speaking at X-Prize's i2i Conference in New York next month, along with InnoCentive CEO Dwayne Spradlin.  Alph was invited to guest author a blog post for the conference,  on the topic of his presentation - incentivized competition.  Below is the text of his post.

The use of prize incentives to motivate problem solving is well established. While some debate continues vis-a-vis effectiveness, especially in contrast to more traditional modes of research and discovery, most of that analysis has been from the 'receiving' end of the spectrum, that is, by the proposed 'users' of the innovation. Less so has 'effectiveness' been addressed from the inventor's or contributor's perspective.

Perhaps it seems all too obvious. The solvers of such puzzles as the Longitude Problem or a Millennium Problem must surely be motivated to work in exchange for the substantial cash reward; it's no more complicated than any employment contract. Of course, people do things for lots of reasons. I think, over time, that prize systems have evolved to meet specific NON-CASH interests of the solvers and it would be interesting to see how two systems have developed, characterized by InnoCentive on the one hand and the X-Prize on the other.

To generalize, the X-Prizes have large cash awards (multiple millions of dollars) and the InnoCentive prizes (referred to as ‘awards' or 'bounties') are considerably more modest... in a typical range of tens of thousands of dollars. At first blush it would seem that the X-Prize would dominate if problems were tackled solely on a return basis. In reality, I think this is probably not the case. While the X-Prizes are substantially larger in amount, the challenges to which they are attached are complex and expensive to execute against. It would not be surprising to imagine that more than 10 million dollars was consumed (even by just the winner) in the work that led to the awarding of the Ansari X-Prize for space travel. More akin to a Nobel prize, the X-Prize has a very well publicized existence: when the prize is offered, as work progresses, and when the final awarding takes place. This public footprint serves not only to motivate for reputation and notoriety but it likely helps 'SHAPE' the research agendas of individuals and institutions as they derive benefit from the publicity associated with working on a public, important problem.

In contrast, the smaller InnoCentive bounties are not individually publicized, the 'Seekers' do not receive an advertising benefit and the cash amounts, while important and substantial, are not likely to be 'front page stuff.' Of course, even in these more modest circumstances reputation and notoriety play a role. Folks like to succeed where others have tried and fallen short. There is healthy competition among chemistry professors just as we might find among actors, politicians, executives or athletes.

InnoCentive-type awards are intended to elicit a response via a different set of motivations and produce a different outcome than large public awards. While a 25 million dollar Earth Prize might shape a research agenda, a $40,000 InnoCentive award likely will not. What it WILL do is appropriately broadcast a challenge of a scale more adaptable to the resources of numerous individuals and small team efforts. Thus, the diversity of approaches to the problem is magnified many fold, and the likelihood of finding a solution - especially a very novel solution - goes up with this massively parallel attack on solution space.

In an InnoCentive-type model, larger problems are not ignored, but they are broken down into this "bite-size" scale and solutions may then be re-aggregated to larger applications. One advantage solvers see is that the greater number of problems, available at any moment, allows solvers who deliberately set out to tackle a bounty-based challenge (i.e., retirees not ready to hang up their minds or students looking for a flexible opportunity) to scan the choices available, and "swing only at the pitches they think they can hit."

Prior to launching InnoCentive, the concept was reviewed with several researchers to determine whether they would even have any interest in participating. A Stanford professor replied, "...I'd never set out to work only on a problem I saw posted -- but, I'm always looking for new ways to synthesize dehydroamino acids, and I'd be happy to put 'your' compound in 'my' table." (i.e., in a scientific publication). Ultimately it was about challenges that aligned with his interest and existing motivations. (Of course, he indicated that he would cash the check and that the bounty amounts needed to be fair in exchange for the information sought.)

Finally, there is one last thing that needs to be said for incentive prize systems that I feel has been overlooked in many of the effectiveness commentaries. It is true that innovation is often "for mankind." But we can never forget that it is also "BY mankind."

A few years ago I followed Tom Friedman on a speaking platform shortly after the publication of "The World is Flat." As he walked through the notions of Globalization 1.0 to 3.0, I realized that systems like InnoCentive were specifically addressing this 3.0 phenomenon. (As a brief reminder: 1.0 was the globalization of nations, 2.0 was the globalization of corporations and 3.0 was the globalization of individuals.)

Friedman pointed out that a billion people had just shown up to the global party and wondered about their new position and roles. I would have to say that the vast majority of the challenges posted on InnoCentive are problems that would otherwise be unknown to the many fine minds around the globe. Brilliant thinkers in Argentina, India, Poland, Russia, Mexico and Bulgaria wouldn't have contributed because they'd have never been given the opportunity to do so. In the past, those problems would be assigned to isolated research groups either internal to a business or to carefully selected partners. Getting on the 'partner' list is no mean feat and most of the awarded solvers in InnoCentive's history (OVER 470 prizes awarded!), would never have seen the problem, let alone solved it!

Topics: Innovation Insights, Solvers

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