The Chief Marketing Officer (CMO) Council is putting its support behind White House, GSA and Office of Science and Technology Policy (OSTP) initiatives to team with the private sector on formative intellectual capital programs. Aimed at inspiring open innovation and grassroots 'inventioneering,' these initiatives center on contests and challenges that offer significant incentives linked to recognition, compensation and commercialization.

The Administration’s enlightened approach includes Challenge.gov, a one-stop shop where entrepreneurs, innovators, and citizen solvers can compete for prestige and prizes by submitting novel solutions to important national problems. By posting challenges on this site, government agencies have spurred innovation in cancer prevention, personal health records, cyber-security, sustainable aviation, and intelligent transportation. In January 2011, President Obama signed the America COMPETES legislation, which gives all federal agencies the authority to sponsor prizes of up to $50 million. Agencies are specifically authorized to partner with the private sector and non-profits to sponsor and manage prizes.

PRIZES: A POWERFUL TOOL FOR SOLVING IMPORTANT PROBLEMS

By: Thomas Kalil

In recent years, there has been a renaissance in incentive prizes, which reward and recognize teams for realizing remarkable goals, achievements, or research breakthroughs. Sponsoring brands and companies have become particularly adept and adroit in using this crowd-sourced innovation approach to acquire intellectual capital, demonstrate social responsibility, and grow their businesses.

The Ansari X Prize , for example, provided a purse of $10 million for the first team to fly a reusable, privately built spaceship to an altitude of 100 kilometers twice in one week. Progressive Insurance and the Department of Energy supported the $10 million Automotive X Prize , which was awarded to three teams that built super-fuel-efficient cars that were also safe, affordable, and desirable. The Heritage Provider Network is collaborating with a start-up called Kaggle to offer a $3 million prize to improve healthcare . Using historical patient data, contestants will develop algorithms to predict and prevent unnecessary hospitalizations. The Juvenile Diabetes Research Foundation is harnessing InnoCentive’s platform for open innovation to discover a form of insulin that would work only when a patient with diabetes needs it.

As the Wall Street Journal recently concluded, “these prizes have proliferated because they actually work.” Under the right circumstances, a well-designed prize or challenge can allow the sponsor of a prize to:

• Establish a bold and important goal without having to choose the path or team that is most likely to succeed

• Pay only for results

• Attract new entrants, such as small entrepreneurial firms and independent inventors

• Stimulate private-sector investment that, in many instances, turns out to be larger than the size of the purse

• Capture the public’s imagination and change its perception of what is possible

For these reasons, President Obama has directed agencies to increase their use of prizes and challenges as part of his National Innovation Strategy .This approach recognizes that in a world of widely dispersed expertise, prizes and challenges are invaluable tools for solving tough problems. As Sun Microsystems co-founder Bill Joy once famously observed, "No matter who you are, most of the smartest people work for someone else." In September 2010, the White House and the General Services Administration launched Challenge.gov , a one-stop shop where entrepreneurs, innovators, and citizen solvers can compete for prestige and prizes by submitting novel solutions to important national problems. By posting challenges on this site, agencies have spurred innovation in cancer prevention, personal health records, cyber-security, sustainable aviation, and intelligent transportation.

In January 2011, President Obama signed the America COMPETES legislation, which gives all federal agencies the authority to sponsor prizes of up to $50 million. Agencies are specifically authorized to partner with private-sector and non-profit organizations to sponsor and manage prizes.

The White House Office of Science and Technology Policy (OSTP) is very interested in working with leading companies, philanthropists, and non-profits to make the most of this powerful new tool for problem-solving and promoting innovation.

I believe there are several next steps that could build on the progress that has been made to date and increase the number of collaborations between the public and private sectors.

First, the growing number of companies that have been experimenting with prizes, challenges, and other forms of open information could share experiences and identify promising practices. For example, GE has been sponsoring challenges through Ecomagination in areas such as the smart grid and home energy use. Google is supporting the $30 million Lunar X Prize for the first privately funded team to safely land a robot on the surface of the moon, have that robot travel 500 meters over the lunar surface, and send video images and data back to Earth. PayPal is using TopCoder to encourage developers to conceive, design, and build applications that take advantage of its global payments platform. A "community of practice" interested in improving the ability of the private sector to use prizes could build on previous work, such as a seminal study by McKinsey , rapidly growing academic literature from experts such as Harvard’s Karim Lakhani , and the expertise of firms and non-profit organizations that have been involved in designing and managing prizes. This community of practice could also help document the many benefits of prizes, including positive publicity, employee morale, and the identification of innovations that are critical to a firm’s existing or emerging business.

Second, some companies may be interested in sponsoring prizes that address the grand challenges of the 21st century, such as developing clean sources of energy that are cheaper than coal, creating educational software that is as effective as a personal tutor and as engaging as the best video game, and lowering healthcare costs while enabling Americans to lead longer, healthier lives. In some cases, federal agencies may be interested in partnering with the private sector to help support and launch these prizes and to take advantage of the most promising innovations identified by the competitions. I believe there is a compelling case for increased use of prizes and challenges by both the public and private sectors, as well as many opportunities for high-impact collaborations among government, industry, and philanthropists. If you are interested in exploring this issue further, please send us a note at prizes@ostp.gov .

Thomas Kalil is currently serving as the Deputy Director for Policy for the White House Office of Science and Technology Policy and is the Senior Advisor for Science, Technology, and Innovation for the National Economic Council. Prior to joining the White House, he was a trade specialist at the Washington offices of Dewey Ballantine, where he represented the Semiconductor Industry Association on U.S.-Japan trade issues and technology policy. He also served as the principal staffer to Gordon Moore in his capacity as Chair of the SIA Technology Committee. He is the author of articles and op-eds on S&T policy, the use of prizes as a tool for stimulating innovation, nanotechnology, nuclear strategy, newborn health, vaccines, the impact of mobile communications in developing countries, U.S.-Japan trade negotiations, U.S.-Japan cooperation in science and technology, the National Information Infrastructure, distributed learning, and electronic commerce.