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Prize and Challenge Architecture

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The basics of designing prize and challenge competitions. Please note, this is a content filled draft of research, not a finalized product.

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Prize and Challenge Architecture

  1. 1. Prizes and Challenges Architecture:Maximizing Community Engagement Jess Jacobs, Innovation Fellow Sameer Ponshke, Intern DRAFT July 2010
  2. 2. Definitions• Prize: A monetary or non-monetary reward used to incentivize innovative solutions for existing problems.• Challenge: a problem or gap in performance which can be solved via the novel application of existing or the creation of new solutions.• Crowdsourcing: harnessing the power of a community through technology to collect, evolve, and rank ideas and contributions to reveal the strongest solutions
  3. 3. Why should Gov’t facilitate P&C?• Encourages stakeholder buy-in: – Stakeholders (partly) define the problem – No RFP = speculative goals• Lets the the little guy compete: – Fewer reporting/application requirements allow small organizations/people to compete• Low Risk, High Reward: – Challengers bear upfront costs and liability – Only Pay for results• Economic Stimulation: incentivizes private sector to invest – Allows for improving or repurposing existing commercial or open source platforms
  4. 4. When to Use Prizes and Challenges Source: “Using Prizes to Spur Innovation,” McKinsey Quarterly, 2009
  5. 5. Challenge Community• The most important determinant of the success or failure of open innovation is the community of solvers.• Ideal community features: – Large mobilized pool of willing submitters – Multidisciplinary range of skills and interests – healthy expectation of winning – has a vested interest in the solution, not just the prize
  6. 6. Prize Design• Likewise the type of prize offered is largely dependent upon the target community’s motivations: – For example: complex, well defined, problems targeted at academics usually are best served with large monetary prizes and overall recognition of one individual as opposed to continued recognition due to the large investment these groups make in attempting to solve the challenge• The type of prize offered is largely dependent upon the solution sought: – Solutions requiring continual innovation processes, such as the creation of open source technologies, correspond to small prizes which support leveraging incremental efforts of many individuals
  7. 7. Prize Types• Intrinsic: Internal satisfaction. Fostered by emphasizing the social or technological advances gained by solving.• Monetary: – Large Prizes: “Grand Prizes” – Small Prizes: Prizes in the $5000 range encourages competitors to collaborate, as the larger payout will come from industry investment in problem solutions to, not the act of solving the problem• Recognition (Non-Monetary): Recognition by peers and administrative bodies can be conveyed by publicly acknowledging solutions or progress toward solutions.
  8. 8. Prize Types (Summary) Award Type Underlying Motivation to achieve solution •Altruism •Care for Community, Attachment to the Group •Enjoyment & Recreation •Ideology Intrinsic •Interest in Objective & Knowledge •Need, Software Technical Reasons •Sense of Efficacy •Firm & Peer Recognition Recognition •Friendships, Relationships, Social Support •Reciprocity Non-Monetary •Reputation •Small (<5000k): Collaboration Monetary •Big Prizes: $$$$
  9. 9. Prize Types: Intrinsic• Utilize intrinsic motivators through wording/context – Specifically effective in motivating solutions related to social justice: agriculture, vaccines for diseases of the poor, energy and climate change, learning technologies• But be careful! Word orchestration may foil innovative solutions.
  10. 10. Prize Types: Monetary• A combination of monetary and non-monetary awards is usually appropriate in online communities• Monetary: – Satisfier/Disatisficer - if it is not enough people lose interest – 62% of awarders believe that monetary rewards are effective in stimulating involvement – Prizes tied directly to successful ideas are more effective than raffling an award to community participants• Non-Monetary: – Recognition is only a satisfier – everyone likes to be loved – 57% of awarders believe that non-monetary incentives are effective. – Rank based on the quality not quantity – Recognition of ideas is key to spurring further community involvement
  11. 11. Examples Challenge Prize Challenge Motivation Example Type Types Focus attention on, set standards in, influence Intrinsic Nobel Prizes – rewards excellence perceptions of a particular field or issue Recognition and influence thinking in specific Exemplar areas Monetary Highlight a range of best practices, ideas, or Intrinsic PICNIC Green Challenge- opportunities within a field Recognition promotes ideas that do and do not Exposition win Monetary Celebrate and strengthen a particular community Recognition El Pomar Foundation - recognize Intrinsic and build networks of top- Network performing nonprofits Educate and change the behavior of participants Intrinsic FIRST Robotitcs’ technology- thought the prize process Recognition offers mentorship programs to Participation build the skills of young students Make money! Monetary Ansari X PRIZE – stimulated the Recognition private-spaceflight business Emulate market incentives by driving costs down through a $10 Million dollar prize Market Stimulation / through competition and exposing latent demand. Inducement Prizes When utilized by the government there may be a commitment to purchase a given quantity of items which meet specific performance measures. Solve a challenging, well-defined problem that Monetary Threadless.com – offering a requires innovation weekly competition for the best Point Solution shirt designAdopted From: “Using Prizes to Spur Innovation,” McKinsey Quarterly, 2009
  12. 12. In Conclusion• Appropriate prizes are a factor of the target community’s population and the type of solution sought.• Attract scalable technologies• Engage solvers with a vested interest in the solution• Minimize risk (challenger and solver) – Duplication of research efforts – Information Asymmetry• Maximize rewards and sustainable solutions – Intrinsic, Monetary, Recognition/Non-Monetary – Encourage collaboration and competition
  13. 13. “Winning a fair and open competition confers on the victors and their ideas a legitimacy that no amount of argument, endorsement, data, or regulation can achieve...American drivers will not be cajoled or lectured into buying more efficient vehicles - but they will drive a winner!” - Glen Mercer Brookings Institute Report
  14. 14. Examples of P/C Programs
  15. 15. Netflix Challenge - 2006• Reduce Cinematch recognition errors by 10% and receive a million dollar prize• Within a year the rate had been reduced by 8%- this incremental reduction was rewarded with a $50k “progress reward”• Mobilized 2,500 teams with 27,000 members from 161 countries• Key Takeaway: – Progress rewards can encourage continued research – Prizes and Challenges often generate research worth far more than the prize amount
  16. 16. Ansari X Prize - 1996• The success of this challenge is largely responsible for the “renaissance” of P&C platforms in recent years• Objective: $10 million was offered to the team that could, without government support, successfully send a pilot and two passengers to a suborbital altitude of at least 100 kilometers and then repeat the flight within two weeks• The Ansari X Prize was so heavily contested that it stimulated at least $100 million in private sector investment• Key Takeaway: Wealthy individuals are willing to invest in teams and projects simply to be associated with the “potentially historic nature of the prize”
  17. 17. Veterans Affairs Innovations Initiative - 2009• Did internal pilots before opening the contest to the public – Claims Processing: received 3,000 ideas and yielded 10 winners from employees and co-located veterans service organizations – Health Records Improvement: One Month competition with 44,000 users, 6,500 ideas, 9,700 comments, and 552,000 votes and 26 winners.• Internal Key Takeaway: Internal competition across departments is an appropriate and effective way to spur innovation within an agency
  18. 18. Royal Agriculture Society of England (RASE) -1838 • Held shows every year to display the annual winner of the challenge, The shows were instrumental in engaging public interest; after the first award was won, competition entries increased exponentially • Key Takeaways: By holding public displays of innovation in various locations around the country, RASE was able to establish: – Enthused public innovation – Spillovers of technological knowledge between individuals and large manufacturers – Diffusion of best practice techniques between and amongst rural and urban areas
  19. 19. The Bad -- CONS to the “good” slide• Careful Prize and Challenge Architecture can help mitigate the following disadvantages: – Duplication of research efforts – Information Asymmetry • leads to inappropriate prize type selection – Uncertainty if challenge has a scalable solution • Delays the pace of innovation – No Upfront Funding: • Creates a high barrier to entry and an uneven playing field • Does not necessarily contribute to growth in employment • Innovation time is limited as government payments are constrained to Federal Fiscal Years

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