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Innovation contests should reward products not ideas

Following up from my recent post about the rise of contests, I’ve been thinking about what is the key differentiator between good contests and bad. My hypothesis is that the best contests produce products, not ideas. To test this theory, I think of the contests that I admire – Netflix, NASA Lunar Lander, Department of Energy L Prize – versus all the contests that I find less compelling – Awesome Foundation and to a lesser extent, Apps for Democracy – and realize that the former produced real products that were created in response to a real problem. The latter seem to be more about a call for “innovation” and to create a response to an undefined problem set simply because new tools are there to do so.

David Kaiser, a professor at MIT disagrees and believes that the product based-approach is a shortcoming of the competitions, because they reward groups and companies that are already entrenched and well-funded. “If there is some important and unmet challenge, it suggests we need a broader and more far-flung set of ideas,’’ Kaiser said. “If the idea base has been blindered, we aren’t going to solve that by thinking the same way and putting cash at the end.’ To inspire innovation, he thinks government agencies should award cash prizes that support unique and “oddball’’ ideas, to encourage the “kid with the dream in her garage who doesn’t have a venture capitalist knocking on her door.’’

My firm is adopting this approach and is currently in a flurry over inspiring "innovation" and generating new ideas. A lot of this comes from a good place; as a very hierarchical organization, they are seeking ways to engage staff who may possess fresh perspectives and like Kaiser, they are seeking to hear from less well-established individuals. Last year, they held a "Call for Ideas" and as the winner, I received a nice cash prize and an opportunity to brief senior leaders. All great. But after the awards ceremony, what happened with my brilliant idea? Nothing. Similarly, this year the firm held an "Ideas Festival" where 10 winning ideas were showcased. The ultimate question is whether these ideas will be translated into lasting approaches. Since part of the festival was actually for participants to run though the exercise, "we've given you the solution; now you come up with the problem" my guess is no. I think these activities would be a lot more effective if the firm identified a major problem that it was grappling with and invited new solutions. Then the innovation is about meeting a real challenge, not proving who is the most innovative. Talking about ideas in the abstract can be a real bore. This is one reason why I'm skeptical of prediction market vendors' "idea markets" offerings. I believe an informed crowd can provide a wealth of knowledge to predict defined benchmarks, but betting on or awarding ideas alone is an arbitrary exercise. This may relate to the tendency of much of the entrepreneur community to disdain “idea people” and respect execution instead.

Of course, the other side of this argument is that the prize model that rewards final products rather than ideas punishes second and third place winners who invested heavily in time and money and walk away with nothing. That shortfall of the approach was going to be partially addressed by the new Netflix contest that planned to reward participants along the way at defined intervals in addition to the final winner. Unfortunately, that prize was scrapped due to privacy concerns, but it was an early example of continuing to iterate on the contest model that rewards entrants for what they produce rather than what they dream up.

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