Seeing the Building Wave: Using Challenges to Spark Innovation in Government

By Joseph Semsar, Associate Consultant

Last week, I had the pleasure of listening in on a joint conference call between the National Association of State Chief Administrators (NASCA) and the National Association of State Procurement Officials (NASPO). The call marked the first time these national organizations — which both work to make state governments more efficient, and concurrently more effective — joined together to tackle the issues of our day. Mark Funkhouser with Governing magazine and David Thornburgh, the Executive Director of Fels, served as the featured presenters on the call. Both discussed the current use of innovation in state and local governments – a timely topic due to the recent state budget constraints and the slow recovery of our national economy.

Prior to the call, David Thornburgh and I collaborated to create an enriching presentation, as we were charged to identify a rising trend in improving state and local government. Through our reconnaissance effort, we identified the growing use of innovation challenges to spark creativity and solve governmental problems. I, like many of you, was at first clueless to the idea of innovation challenges. I had recently become a Game of Thrones junkie – staying up well past midnight for a solid week, glued to HBO Go’s 2 complete seasons, 10 episodes per – so my mind, when hearing challenge and competition, somehow meandered to the wicked Joffrey Baratheon and his blood bath fixation. I quickly discovered, thankfully, that innovation tournaments, challenges and competitions, involve no gore or vital fluids, but prizes, typically monetary rewards, to spark innovation. Though, I must admit, at first I didn’t see the novelty of organizations offering prize awards for innovation; I soon thereafter realized prize competitions were bifurcated into two categories: one type, many of us are familiar with, the other, not so much.

The first type, offers prizes for past achievements. The Council of State Governments, for example, offers Innovation Awards to bring greater visibility to exemplary state programs to facilitate the transfer of those successful experiences to other states. Thus, prizes are granted on the basis of past achievement. “Johnnie B. Good” got all A’s and B’s on his report card, YAY – here’s a Popsicle, you’ve made honor roll.

The other type of prize competitions, which David and I focused on, are forward-based challenges that look to the future to spark innovation, develop new products, improve existing processes, or develop entirely new ways of doing things. These types of challenges, which are tied to a prize, present a problem to a wide audience, then award the prize to whoever submits the most exceptional solution.

We will call the latter… innovation challenges. Innovation challenges differ from “rewarding past achievement prize competitions” in a few ways. Firstly, these types of challenges typically pursue a solution that is not already on the market – we’re talking about something different than procurement. Secondly, innovation challenges are used as competitions for missions that you can’t solve internally. Thirdly, innovation challenges try to reach a wide audience through expanding the participant pool, both internally and externally. And, lastly, innovation challenges sometimes allow problem solvers to come up with 60% to 80% of the solution and still win the grand prize. For an organization like NASA, 60% to 80% is quite a sturdy foundation to work from.

Christian Terwiesch and Karl T. Ulrich, two Operations Management professors from The Wharton School at Penn, provide us with more concrete examples of innovation challenges in their recently published Innovation Tournaments. Ulrich and Terqiesch use American Idol, the NCAA’s March Madness College Basketball Tournament, and the recent presidential primary elections, to help frame the way we think about the innovation tournament process. You start with a multitude of contestants, and these, after multiple rounds of competition, are then winnowed down to one exceptional, promising opportunity. This is done through the use of absolute hurdles first, and relative comparisons later on. In American Idol, for example, the staff initially screens a huge number of contestants against the absolute criterion of reasonable singing ability. Only later, after hundreds of thousands of candidates have been reduced to fewer than one hundred, do the judges and the audience apply relative comparisons.

According to a recent McKinsey study, prizes that look to the future are becoming more and more popular. Before 1991, 97 percent of prize money offered took the form of prizes for past achievements. Since then, 78 percent of new prize money has been offered for the future solution of problems.

The Office of Management and Budget, in 2009, issued the Open Government Directive, which tasked the Deputy Director for Management with issuing guidance for the increased use of challenges and prizes to develop new tools and approaches to improve open government. This Directive, which grew from the President’s Strategy for American Innovation, has dramatically increased the use of innovation challenges through online platforms, such as, administered by the U.S. General Services Administration (GSA) in partnership with ChallengePost, allows for governmental departments to create and manage challenges that are open to the public (Wired Article Featuring

To better understand, Hadi Khan (Fels Alumnus – 2012) and I took on a recent AmeriCorps video competition, which challenged AmeriCorps alumni to create a 60 second video detailing their AmeriCorps experience, to ultimately make a case for the power of AmeriCorps. We’ve submitted our video, Americorps: Forever Changed, and will now wait on pins and needles ($4000 is a substantial amount of money for a graduate student) for the announcement of the winning video. Though many of the challenges on are window dressing federal department challenges, there are some challenges that are targeted at the leaders of niche fields with distinctive skill sets. Most recognize the Department of Education’s Race to the Top Challenge, which provided competitive grants to encourage and reward States that were creating the conditions for education innovation. Additionally, a simple scan online generates hundreds, if not thousands, of other existing innovation challenges, such as NASA’s Centennial Challenges, NYC Big Apps 3.0, Mayor Bloomberg’s Challenge, and of course the Fels Institute of Government’s Public Policy Challenge.

Though innovation challenges seem to be proliferating, the use of these types of competitions is anything but new. In fact, in 1714, the British government offered a prize of $20,000 for anyone who could find a way to accurately determine a ship’s longitude. John Harrison, a Yorkshire carpenter and clockmaker, won the prize after decades of work by inventing a clock that worked at sea. Harrison’s solution revolutionized the maritime world. Most recognize the name Charles Lindbergh. However, most do not realize that Lindbergh in 1919 was encouraged to be the first to fly non-stop between New York and Paris by Raymond Orteig’s monetary prize of $25,000. Canned goods, margarine, the commercial hydraulic turbine, fire extinguishers and thousands of other products were invented in response to prize challenges.

Ultimately, David Thornburgh used the conference call last week to alert state chief administrators and procurement officials of the building wave of innovation challenges. Our broad scan of this growing trend proved that state governments were lagging behind federal and local governments in leveraging innovation challenges. It occurred to me while listening in on the call last week that if Starbucks (My Starbucks Idea) and Penn Medicine (Your Big Idea) can mobilize tens of thousands of people to help them improve their services, why can’t state governments channel the creativity and knowledge of the public for more efficient and effective government.

For more information on innovation challenges, please feel free to download the Innovation Challenge White Paper (pdf). Finally, for good measure, check out the Center for Disease Control’s healthy swimming video contest winner, which is a hilarious, satirized spoof on cops – Thanks to Tammi Marcoullier with the GSA for passing this one along!

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Ruthann Grace

You are right reward challenges are not new. In fact, they have been used in the private sector as a part of doing business. I have just moved over from the private sector and agree such ‘challenges’ have a place in the publich sector. That being said, there are risks and as well as rewards of these types of challenges and to implement you have to be be mindful of both.

A wise manager once told me, ‘be careful of what you incent because people want to win, they want to please and they will give you what you ask for’. I have seen reward competitions that are not measured well or are too narrow in scope and are counter productive to other business objectives. I have seen reward competitions that reward to broadly and become meaningless. I have seen reward competitions that are too easily manipulated and therefore end up demotivating.

Reward challenges can be beneficial if carefully constructed and monitored for effectiveness and motivation. They can create positive energy, productivity and pride. They need dynamic, consistently involved leaders to drive them. They need support from the mid level leadership. They need to value the front line employees ideas and suggestions. They need to incorporate non monetary recognition and reward as well as monetary reward (actually the non monetary reward is a bigger driver of innovation, performance and behavior). They are an excellent tool, among many tools, to drive engagement.

I agree reward challenges are something that all entities, public and private, can use to bolster innovation and engagement. We just need to move into them carefully so that we get from them what was intended.

Carol Davison

Awards are great motivators if they are what a person is looking for. That could be to rub elbows with the senior executives, money, the best training, etc. However we need to be careful to realize that employees may start working to win awards, as opposed to serving customers, and that normally only one person wins an award which means one gets rewarded and motivated and all the others are demotivated.

Chris Cairns

I love it when academics come along and create a fancy umbrella term for things that have been happening for decades — “Innovation Tournaments.” Anyway, absolutely great article. I never heard of Such a great way to crowdsource solutions to problems.