Using Prizes as Innovation Engines

As promised in an earlier blog post on this topic, the IBM Center now has a report, “Managing Innovation Prizes in Government,” by Luciano Kay, with the School of Public Policy at the Georgia Institute of Technology.

Now that a number of barriers and questions raised earlier about the use of prizes and contests in government have been pretty much put to rest by clarifying OMB guidance and new statutory authority for agency heads to use, and that the White House is actively promoting their use. . . . how do you do it?

Kay examined three earlier successful prize contests sponsored both inside and outside government that focused on technology-related innovations. 

• The Ansari X Prize (privately funded and organized by the X Prize Foundation to launch a private sector space ship that could be re-launched within two weeks)
• The Northrup Grumman Lunar Lander Challenge (funded by NASA)
• The Grand and Urban Challenges of the Defense Advanced Research Projects Agency (to create autonomous ground-based robotic vehicles)

Based on these case studies and other literature, he identifies best practices in designing, implementing, and evaluating prize programs.

He says, “. . . a proper design requires:

• Defining an exciting prize challenge
• Setting a prize reward that considers commercial opportunities and other non-monetary benefits of participation for prize entrants
• Crafting simple and transparent prize rules
• Defining a scheme to finance the program that considers alternative funding sources

For the implementation of the program, sponsors should:

• Collaborate and seek co-sponsors or allies
• Use strategic opportunities to announce the prize and make it visible
• Respond to the feedback from entrants
• Select winners objectively

The evaluation of the program should consider dif­ferent metrics of effectiveness and efficiency, and not lose sight of the fact that prizes may have differ­ent impacts during the competition and in the longer-term.”

Kay concludes “successful programs have been based on meticulous work in all stages and posed challenges the were exciting for both entrepreneurs and the general public.”