Using Contests to Drive Radical Innovation

Last week, the X PRIZE Foundation announced a $1.4 million contest for new technologies to clean up ocean oil spills. The competition was spurred, in part, by the Deepwater Horizon disaster, which has become one of the largest oil spills in history.

The educational foundation relies on carefully designed contests to drive breakthrough innovation. It builds on the success of the Ansari X PRIZE, a competition modeled after early 20th century aviation prizes and one that spurred the development of commercial space flight. (Founder Peter Diamandis spoke at PopTech in 2005. His talk can be found here.) The prize model rests on the assumption that carefully-designed contests can promote paradigm-shifting innovation, namely in exploration (space and ocean), energy and the environment, life sciences, and education and global development. Three competitions currently underway focus on dramatically improving vehicle fuel efficiency, finding cheaper and faster ways to sequence the human genome, and building lunar landers that are able to transmit images and data back to the Earth.

As part of its Ecomaterials Innovation Lab, PopTech is exploring how competitions might spur the development of greener materials. PopTech recently caught up with Erika Wagner, Executive Director of the X PRIZE Lab @ MIT, a partnership between the university and the X PRIZE Foundation, to talk about the relationship between competitions and innovation.

The X PRIZE focuses on “prize philanthropy.” What is that and why is it important?
We offer prizes for achievements. This focuses the field on a very specific objective based on what we believe will catalyze the industry.

If you look at the amount of money that VCs have sunk into really hot fields, a $10 million prize would be a drop in the bucket. We’re looking for market failure. In the case of space flight, it was because you had a government monopoly. So some might say it was a failure of imagination. In the auto industry, you’ve got the oligopoly of the big automakers. In the genomics space, there were a lot of small labs that were pushing boundaries, but they were not necessarily working toward the rapid deployment of personalized medicine.

“We look for problems where a $10 million award will be disruptive to an industry, and even society.”

The Ansari X PRIZE demonstrated that a $10 million purse could generate $100 million in research and development and a follow-on market of well over $1 billion. As soon as you offer a prize, it says to the world that somebody believes that this challenge is worthy of real investment.

It’s also why prizes tend to attract outsiders. The GM Volt and the Nissan Leaf are not competing in the [Progressive Automotive] X PRIZE. There’s nothing in it for them to win, and everything in it for them to lose going up against the small players. It’s really an opportunity for every other inventor that has a transformative idea but has trouble getting heard in the marketplace. It’s mavericks like Burt Rutan [who won the Ansari X PRIZE in 2004] and West Philly high school kids. They have been running a high-efficiency auto program, out of their shop class basically. They were one of the top 21 teams in our Auto X PRIZE.

What kind of problem makes for a good X PRIZE?

We’ve got over 120 ideas! The process of choosing is a kind of crowdsourcing. We have a group of advisors that we ask, what are the problems that your fields are not addressing? A lot of the problems that are not being well managed right now are complex systems-level challenges. The market doesn’t do well with systems-level challenges.

We choose problems where, over a few years, a team of 20 or 30 enterprising innovators could really make an impact. We look for problems where a $10 million award will be disruptive to an industry, and even society.

As we’ve been talking, I’ve been wondering about the role of the public.

Prizes are good at forcing innovators to think about the metrics by which the public will accept a new technology. There is a phrase known as “crossing the chasm,” which refers to the gap between early adopters of a technology and market acceptance. Most ideas die making that leap. That’s essentially the problem that the Auto X PRIZE addresses. Many universities have developed high-efficiency vehicle prototypes; the problem has been how to push it into the marketplace.

“Prizes are good at forcing innovators to think about the metrics by which the public will accept a new technology.”

Another tricky part about prizes is how to make them publicly compelling. The Ansari X PRIZE was easy. There was a rocket with a person in it blasting up into space. Genomic sequencing is about as visually interesting as watching paint dry. So our genomics prize is centered on a PR campaign where the 100 human genomes being sequenced are 100 individuals: donors, big public names, and members of patient advocacy communities. Telling people’s stories, that’s where the magic of a prize comes to life.

Where does the X PRIZE Lab at MIT fit in?

The X PRIZE Lab works with students to develop new X PRIZE concepts, a number of which are under further development at the Foundation today. We’re also teaching students not how to find the right answers, but to ask the right questions. It’s a process that we undervalue in STEM [science, technology, engineering, and mathematics] education. We’re not asking the students to solve all of the world’s energy problems, but discover which questions will spur the best minds in the world.

The recent PopTech Ecomaterials Lab considered, among other things, the role that a privately funded competition might play in driving greener material processes.How would you go about determining whether a prize might work in this arena?

The fundamental question is what is the proof of concept that changes the conversation? Is it a fully recyclable shoe? A zero carbon footprint T-shirt?

Is it a problem of basic science, where the fundamental understanding hasn’t caught up yet? If that’s the case, traditional research might be the best approach. But sometimes the problem is in application of knowledge and a prize can really push innovation.

Looking for market failures, although we don’t yet put a price on most environmental externalities, like carbon emissions and industrial pollution, global policies seem to be heading in that direction, which gives early innovators a chance to capture massive amounts of downstream capital.

Nike was one of the sponsors of the Lab. Tell me more about the relationship between industry and breakthrough research inspired by competition.

A lot of companies are starting to offer prizes as a way of outsourcing innovation. Progressive is sponsoring the auto X PRIZE. It’s a way to be seen to be innovative in industry. It’s also a way to push the industry to be more responsive and move in a particular direction. Google is sponsoring the Lunar X Prize. While Google is not going to build a rocket, they have tremendous financial interest in the data that could be collected by a lunar expedition.

Government is even getting involved. In March, the White House issued a statement that federal offices should consider prizes as a way to promote innovation. The question is, when are prizes more efficient and more effective than contracts and grants? When you offer a contract, you have to really know what you want and who can deliver on that. When that road is fuzzy, and there are a lot of different ways to get there, it’s often better to bet on the field rather than on a particular solution. Prizes can also attract a great diversity of participants, so if there are challenges that would benefit from the application of new creative minds, those are great targets.

Thank you for all of your time. Good luck.

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