Washington Post: The powerful role of incentive competitions to spur innovation

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In the 1920s, New York hotel owner Raymond Orteig offered a $25,000 prize to the first person to fly non-stop between New York and Paris. Several unsuccessful attempts were made before an American airmail pilot named Charles Lindbergh won the competition in 1927 with his plane, the Spirit of St. Louis.

Lindbergh’s achievement made him a national hero and a global celebrity, but it also sparked the interest and investment that led to the modern aviation industry.

In 1996, inspired by Lindbergh’s achievement, Peter H. Diamandis wanted to reach for the stars. He formed a new organization called the New Spirit of St. Louis and created a $10 million competition to reward the first privately financed team whose spacecraft would carry three people to 100 kilometers above the Earth’s surface twice within two weeks.

Renamed the Ansari XPRIZE, in recognition of the family who donated the purse, pursuit of the prize motivated 26 teams to spend more than $100 million on research and development. On Oct. 4, 2004, the Mojave Aerospace Ventures team won the competition, launching a new era in competition and yielding the $2 billion commercial space industry that exists today.

Unlike traditional venture-capital firms, which back one idea, specific competitions inspire multiple solutions — often leading to new industries. Such competitions do this by setting a specific target that several teams strive toward.

Unlike traditional philanthropic organizations, which focus on specific projects and determined outcomes, competitions’ large purses attract large amounts of operating capital, and teams wind up investing significantly more money than the prize offers, and consequently create responses with broader applicability.

Diamandis explains that such competitions, in setting an audacious but achievable target that experts vet, “offer credibility and ‘air cover’ for entrepreneurs, innovators, and inventors who want to pursue a path that would otherwise be considered too risky.” (Disclosure: Diamandis is also founder of Singularity University, where I am a distinguished fellow). Competitions inspire entrepreneurs and philanthropists to attempt the impossible.

I recently joined about 100 engineers, scientists, thought leaders, and celebrities in Los Angeles to design such a competition. This “Visioneering” conference, hosted by the XPRIZE Foundation, brought together people such as innovation guru Bill Gross, Qualcomm executive chairman Paul Jacobs, businesswoman and investor Lynn Tilton, Indian industrialist Ratan Tata, and entertainment industry leaders, Will.i.am and Patricia Arquette.

The purpose of the gathering was to brainstorm what new and radical innovations can be created in the next few years that will positively affect humanity.

These ideas — which could spawn new industries and challenge the conventional wisdom of what is “impossible” —- will form the basis of the next XPRIZE competitions.

My brainstorming team, which included Tilton and Tata, proposed a prize to create affordable housing for the billions of people who lack decent shelter. The challenge: develop the tools and technology to build, in less than 24 hours, a home for a family using locally sourced materials for $1,000, providing them with the dignity and shelter that all human beings deserve.

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It sounds like an impossible challenge, but so were transatlantic flight and building your own spacecraft.

In the end, our prize concept took second place. The wining idea was to develop radical, even controversial, alternative sources of energy. But some ideas that emerged from this event were so great that a few contestants said they would fund them personally.

There are other notable public competitions too. Richard Merkin, president and chief executive of Heritage Provider Network, for example, announced in 2011 the $3 million dollar Heritage Health Prize data-mining competition to decrease the $40 billion dollars spent in the U.S. on avoidable hospitalization costs. The challenge is to create an algorithm that predicts how many days a patient will spend in the hospital so that doctors can work with the patient to prevent that hospitalization in the first place. This prize in predictive modelling is larger than the Nobel Prize for Medicine and the Gates Health Prize, and offers six “milestone prizes” along the way. Merkin says that his goal is to “create an online global community of problem solvers dedicated to creating more cost effective, healthier outcomes.”

Useful competitions needn’t be grand, though. Corporations can use more-achievable challenges and smaller prizes internally to spur out-of-the-box thinking.

The power of the crowd can also be harnessed for social causes. A startup named HeroX, which the XPRIZE Foundation spun off, created a platform upon which to design and launch such competitions on the Internet. It’s modeled on popular crowdsourcing sites Kickstarter and Indiegogo. One of the first HeroX competitions is the ImagineX Challenge, a $10,000 prize for the best ideas to challenge their community.

The real genius in offering such prizes is that the possibilities truly are endless. We could have thousands of innovation prizes, addressing every challenge humanity faces — competitions that unleash the intellectual power and drive of entrepreneurs to create a better solution and a better world.


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