- Social Media
- Active Citizenship
- Good Giving
- Corporate Responsibility
- Be Fearless
More Bang for the Buck
In his opening remarks, Jeff Zients, the nation's first Chief Performance Officer, pointed to the transformative power of prizes and challenges:
The productivity boom has transformed private sector performance over the past decade but the federal government has missed out on this transformation and lags far behind in terms of efficiency and service quality. The American taxpayer deserves more bang for their buck.
He and his team seek dramatic improvements in efficiency and productivity, and place openness and transparency at the center of this effort. "Openness," he said, "accelerates innovation, by allowing us to engage the best minds to find the best solutions."
Zients’ office prepared a memo giving guidance to heads of executive departments and agencies on how (and whether) to use prizes and challenges to further the administration’s Open Government goals. The memo outlines a number of benefits that can arise from using prizes and challenges (see below).
Benefits to using prizes and challenges
- Can establish an important goal without having to choose the approach or the team that is most likely to succeed
- Allows sponsors to pay only for results
- Can highlight excellence in a particular domain of human endeavor to motivate, inspire, and guide others
- Can increase the number and diversity of the individuals, organizations, and teams that are addressing a particular problem or challenge of national or international significance
- Can improve the skills of the participants in the competition
- Can stimulate private sector investment that is many times greater than the cash value of the prize
- Can attract more interest and attention to a defined program, activity, or issue of concern
- Can capture the public imagination and change the public’s perception of what is possible
Many of these themes played out over the course of the conference:
Engaging the Best Minds
The ability of prizes and challenges to generate transformative innovation by engaging the best minds was sounded in different ways by different speakers and participants throughout the day. Peter Diamandis, chairman and CEO of the X Prize Foundation, pointed in his keynote talk not only to the achievements of the winning entry in the Ansari X Prize, SpaceShipOne, but also to the fact that "we created an ecosystem of teams," all of whom were focused on being the first commercial manned flight into space. "The prize made people come out of the woodwork." Meanwhile, panelist Rob Armstrong, vice president for global external research and development at Eli Lilly - an early mover in the recent renaissance of prizes and awards - pointed out: "Research beyond our walls is what we are trying to tap into."
Indeed, prizes are often n by an unlikely individual. Lindbergh was a long shot, dismissed by better-funded contemporaries. John Harrison, winner of the Longitude Prize, was a clockmaker, not a navigator.
Nicholas Appert, winner of the French food preservation prize, was a confectioner. This illustrates a point made in another context by Harvard Business School professor Karim Lakhani, who made a separate study of 166 recent prize competitions: "Problems that have a high degree of technical uncertainty benefit the most from diversity [of entrants]. Winners are often technically and socially marginal."
Establishing a Goal, Not a Process
A key benefit to this approach, especially (but not only) for large institutions, is that it allows organizations to describe the problem that they are wrestling with, without specifying how it should be solved. (If they knew how best to solve it, it would not be a problem.) With the right incentives, large numbers of people can be set to work solving the problem, using a wide range of approaches.
Rob McEwen of Goldcorp, Inc. described his experiment with issuing an open-source challenge. His company owned what many had thought was a tapped-out gold mine. In-house research had suggested that more gold was present, but no one knew where. Frustrated with the pace of exploration, McEwen issued the Goldcorp Challenge in 2000: Goldcorp placed all of its data online and announced a total of $575,000 in prizes in exchange for knowledge of where the next 6 million ounces of gold would be found. This unleashed not just geologists and mineral experts, but computer programmers, applied mathematics experts, systems engineers, and others. The success of this approach was dramatic. In all, contestants identified 110 possible sites, half of which were unknown to Goldcorp geologists. McEwen told conference participants:
Our costs went down 80%, and our production went up 900%.
Paying Only for Success, Leveraging Multiple Investments
A prize or challenge pays only for success. This fact has powerful effects. In the first place, it places limits on the cost to a sponsoring organization and can distribute the risk of failure to contest participants. Individual contestants make their own decisions on whether it is worth it to them to compete, balancing risk of failure with the possibility of success. In the case of Goldcorp, geologists had already failed to find the gold their tests suggested was present. “We had [already had] two wrong answers,” said McEwen. Time was getting tight. There was no longer room to risk more exploration.
Not only does this approach spread the risk around, but it creates a multiplier effect when it comes to investment. One challenge can leverage investment far beyond its dollar amount. Each individual team pours its resources into winning – and this adds up. “For a $10 million prize,” said X-Prize Foundation’s Diamandis, “teams spent $100 million to try to win it.” He went on to say, “If a prize is designed correctly, you will get 10-40 times the investment” beyond what it is worth.