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Why Innovators Should be Paying Attention to Prizes

Innovators—including government innovators—should be paying attention to prizes because they work, because they add another tool to their innovation tool belt, and because they are already being used by a typical late adopter—the government.

I’ve been a student of prizes and competitions in government for several years now—there is always something to learn: a new success story, an understanding of new enabling legislation, a new prize structure you’ve never seen before, etc. It’s a fascinating field because every prize is different: if you’ve seen one prize… you’ve only seen one prize.

So why do prizes, in fact, matter? Why should the next generation of leaders be thinking about them? Bottom line: they work. (Check out the Prezi I created for a recent lecture I gave at MIT on this topic for more details on the assertions and examples below)

Before I dive into some examples of how they’ve been proven to work though, it’s important to set context: I’m not only referring to app contests and video competitions, which can be great introductions to Agencies about the process for conducting a prize, but more importantly prizes that are specifically designed to solve root cause issues that have been pervasive in their sector for some time.

Often government is a very late adopter of new tools, technologies or approaches, but that’s not the case when it comes to prizes. Prizes are resulting in real value and tangible technology innovations. And there’s not just one example—the list of success stories is growing every day. For example, prizes have brought real solutions to bear for many sticky problems, including:

  • Transportation Energy Efficiency: This October, NASA awarded the first place prize of $1,350,000 in the Green Flight Challenge sponsored by Google to Pipistrel-USA.com of State College, PA, and second place prize of $120,000 to eGenius of Ramona, CA. The winning teams, which were both electric powered, shattered the fuel efficiency requirement by achieving about twice the required 200 passenger miles per gallon.
  • Energy Efficiency: The firstL Prize (a prize sponsored by the Department of Energy) category targets the 60-watt bulb because it is one of the most widely used types of light bulbs by consumers, representing roughly half of the domestic incandescent light bulb market. As the first entrant in the 60-watt category to successfully meet the full competition requirements in Fall 2011, Philips Lighting will receive a $10 million cash prize as well as L Prize partner promotions and incentives.
  • International Development: The Gates Foundation and USAID have partnered for the Haiti Mobile Money Initiative (HMMI), a $10 million incentive fund to jumpstart financial services by mobile phone in Haiti and expedite the delivery of cash assistance to victims of the country’s devastating earthquake by humanitarian agencies. This initiative lays the foundation for advanced banking services that could help millions of Haitians lift themselves out of extreme poverty. In January of this year, Haitian mobile operator Digicel won a $2.5 million award for being the first to launch a mobile money service in Haiti, Tcho Tcho Mobile, that meets the competition’s stringent criteria. The second operator to launch a mobile money service within 12 months will receive $1.5 million. Another $6 million will be awarded as the first 5 million transactions take place, divided accordingly among those that contributed to the total number of transactions.

The fact that prizes have been shown to incentivize the creation of new and innovative solutions, when designed and executed properly, means that innovators should be paying attention to them.

We have to keep in mind that each prize is unique because of incentives, solvers, structural designs, and sequencing required to solve the problem at hand are each unique. And because there’s no formula to do them correctly they are very hard to teach (though folks like McKinsey, Jaison Morgan, the General Services Administration, Tom Kalil, Peter Diamandis, Karim Lakhani and others have published great information about what makes them tick). The truth is, there are many flavors of prizes that each have their own unique benefits and drawbacks. An understanding of different prize types is a huge resource to add to your innovation tool belt. Actually, I think it’s an innovator’s responsibility to understand them.

A large case for the value of prizes can be made but I can’t neglect to mention that there are also naysayers. Prizes are one tool in a rather large tool belt to stimulate innovation. Grants, contracts, loans, concessions, public private partnerships, and a host of other tactics can also be applied as appropriate. Given this context, questions about prizes as a legitimate government procurement mechanism have been raised and others feel like prizes can be seen as a “waste of taxpayer dollars” when the government is footing the bill. Personally, I think a debate on this issue is very healthy.

So what do you think? Has enough of a business case been made to get more innovators thinking about using prizes? Or are there areas of study and concrete examples that still need to be explored? What would help you make the best case for adding prizes to your “innovator toolkit”?

As always, if you have any questions feel free to reach out to me at @jenngustetic.

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Profile Photo Chris Poirier

I think so: after all we do have Challenge.gov now. (one stop shopping for all government “crowd sourced” contests, etc.) Love it..

I was also thinking the other night: Think of the cost savings (yeah, I said savings), if you can get things to be innovated via contests and prize money. I’m willing to bet there is a massive ROI. A lot of apps, etc would be developed by college students, freelancers, etc simply for the prize and name association. (instead of thousands of dollars in contracting, etc.) Also, would foster open source development over proprietary, etc.

GOOD STUFF!

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Profile Photo Chris Poirier

After thought: I think it also works because the younger generations (and some older) love the idea of “winning” something. It’s the same reason we have apps that allow us to “check in”, “win a badge”, “obtain an achievement”. Little goals inspire people and when you start obtaining these things, it drives certain types of people towards wanting to keep “winning”. It’s a self driven process.

Trust me. Look at smart phones, apps, video games, websites etc. Don’t believe me? How many people reading this right now actually plays/played farmville, or cityville, or maifa wars, or whatever (peggle, bejeweled, pick your poison)…now how many thought it was dumb, but tried it anyway..then an hour later were trying to figure out what just happened.. Everything is driven by “earn this”.

It works and why wouldn’t it?

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Profile Photo Steve Ressler

I am a fan of prizes but I also think there’s some key pieces that make the above successful.

-1) You need a compelling prize – sometimes thats a lot of money. Sometimes the agency or mission is sooo cool that they have fun prizes (like meet the President). But I see a lot of contests where the prizes are lame so get little response

2) Marketing to get enough folks interested – You need a core group of contestants to make a contest worth it. Sometimes that’s easy as once again, the contest/mission is sooo cool everyone floods to it. But more often than not, the contest needs some strong push and targeted push to right folks.

Any thoughts? I just think of it for myself – I was thinking of doing a contest to design the next Govloop t-shirt. But my gut was wondering – what’s a compelling enough prizes to get contestants, do we already have enough great t-shirt designers on the site to get good applications or does it need a big push. And my gut told me – to do it right, can’t do a half-ass contest. Need to think it through and push it.

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Profile Photo Chris Poirier

@GovLoop: I follow your point, but I think getting outside the “prize box” on this one could pay off.
As I mentioned in my previous post, sometimes it’s the simple fact that people “won an awesome contest” that drives people to try and become involved. Sure, as you state, big money or big money-like prizes will always draw a crowd “win a new car” works..can’t deny it, but it is kinda old hat. So, as you ask, “how do we get out of that ‘lame’ box and really drive people.”

Well, what do people want? Simple enough, right? 1) Money/material item 2) Credit/Recognition. To be honest, I think some people are out there that would take only option number 2. Some want nothing more than option 1, and then even others that like both. So, I ask: Who are you targeting? I think answering this questions will lead you on how to structure your contest. Look at other crowd sourced type adventures and you’ll see this combination.

In the case of GovLoop I think you have a community that would rush to the cause for nothing more than the recognition and the ability to have their awesome design used as branding. So, structure a contest that really hypes up the opportunity to really help drive the GovLoop brand and the community as a whole. (The cheerleader role if you will.) If you can sweeten the pot with some gift cards, special access to events (conferences, meet and greets with industry pros, what have you.). I really think what makes this community unique is that people are here to make things better, this can be a way to drive the community and the “voice” of said community.

That said, maybe adding a second element to the “design” contest could drive an awesome contest: Make it an active engagement/membership drive. Have a “two round contest” where the first is for design ideas and then have the GovLoop community vote for a week for the top 5 (or pick some number) designs. Then round two begins: Have the top 5 then compete for two weeks (again..or whatever sounds good to you.) by going out and using their design to drive membership, followership, etc. Whichever design can help drive the cause and/or engage the most new GovLoopers wins the GovLoop awesomeness challenge, their shirt design as “official” (for whatever period), and so forth. I bet you’d fire up a lot of this community to get out there design, engage people, and win one for the awesome people of GovLoop.

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Profile Photo Jenn Gustetic

Great points guys!

@Steve–I might slightly disagree with you here (gasp!). Prizes don’t need huge prize purses to be successful. In fact, in many prizes the purse is secondary to the benefits you get just by participating. In “network prizes” the goal is the build the capacity of the participants through providing them mentors and other resources in order to solve the grander problem. The resources offered through participation can be enough to incentivize the right group to participate. That’s why UNDERSTANDING THE INCENTIVES OF YOUR TARGETED SOLVERS is so important in prize design. A big purse won’t motivate everyone and what will largely depends on the prize’s goals and the nature of the people you’re trying to get to participate.

I will also point to EPA’s Apps for the Environment contest where there was NO cash prize but the community engagement/network elements were so prioritized that the popularity of this app contest surged above other government app contests that did have cash prizes (disclaimer: this apps contest is Phase One Consulting Group’s client and we worked to support the community engagement around that contest). So it wasn’t just marketing and the coolness of environmental data that drove people in, but also the resources that participants received through participating (like data set focused webinars with EPA data experts).

Per the tshirt contest, have you thought of crowdsourcing a design through 99 designs if the goal is just for some cool new art at a low cost? OR is the goal to get the community jazzed around the govloop brand? The tactics/prize you’d use to further that goal might look different from a tshirt contest.

@Chris– Thanks for your insights on this post! I totally agree with the thought process you went through to advise Steve on a govloop set of challenges to jazz up the community.

You are SO right as well that ROI is critically important. But it’s SUPER HARD to measure. X prize has some idea of the ROI from their Ansari X prize contest but it’s taken years of watching the space industry that emerged from the prize to know what that is. They do know that prize purses can often be leveraged by up to 100 times for big technology point solution prizes. However, where I’m struggling is whether MORE investment than the prize purse itself to solve a problem is really a true return? For example, I’d like to think about if any of that injection of capital is actually a WASTED expense for the folks that didn’t win and weren’t able to create a spinoff company. How does that play into overall ROI? It’s a really interesting question…

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