The X Prize has been one of the most well known exponents of open innovation, with their various challenges gaining significant exposure as well as significant advances in science and technology.

A recent paper has set out to explore the challenge based format used by the X Prize in more detail.

It highlights how innovation challenges have traditionally taken a modular approach to innovation, whereby individual challenges are set up as modules that can be bolted in and out of organizations as required.

In other words, very little integration was required with the sponsoring organization for the challenge to be useful.

The paper uses three X Prize challenges to highlight how breakthrough innovations can be achieved using the challenge format.  The X Prize itself operates two forms of challenge:

• X Prize events are most well known and operate on a first past the post system whereby the first to achieve a particular target wins the $10 million prize.
• X Challenge events differ in that they look for the solution of a well-defined technical problem for which there is no known solution.

The paper identifies some of the challenges the X Prize Foundation have faced in the operation of their competitions.

• Financing – Since the foundation itself has no budget, each challenge has to have a sponsor in order to provide a prize fund for entrants.  Despite early successes with the format, this has not proved easy.
• Competition design – Establishing the rules of the competition has also been challenging, with one particular challenge requiring around a year on appropriate formulation of rules.
• Promotion – Suffice to say, the success of the challenge rests on the quality of participants.
• Trust – This has become easier as the brand name has become established, but with entrants often investing substantially in their projects, they need to feel comfortable doing so.

It goes on to identify various lessons that the organization has learned that may be relevant for other challenge based innovation organizations.

Lessons from The X Prize

• Diversity of funding – Having a diverse range of funding sources has been crucial, and the organization has learned to look in unusual places for backing.  This includes from philanthropists as well as established organizations.
• Intellectual property – The X Prize broke with tradition with their handling of IP in that they allowed each entrant to maintain the rights over their own IP.  They believe this helps to retain the motivation of teams.
• Structure – The best competitions have been operated in stages so that certain entrants are eliminated at each stage.  This allows those that progress to receive more support.
• Collaboration – A downside to the challenge approach is that it doesn’t promote collaboration between teams.  This is a topic explored in depth by a recent paper from Karim Lakhani, which looked at the way information distribution impacted collaboration and motivation.  Check the link above to read more about the paper.
• Motivation – Analysis of entrants to X Prize competitions found that motivation typically revolved around receipt of media attention, showing off ones problem solving ability, testing oneself, and of course the prize money.  Again, this is a topic I’ve touched on many times on this blog.  You can find a summary of the various papers on this here.

It’s an interesting paper if you’re interested in running this kind of competition based approach to innovation.  One note of caution is given towards the end when the authors highlight how difficult it has been to commercialize the winning entries in the challenges, despite them being notable for their ingenuity.

Such approaches shouldn’t, therefore, be taken as a panacea to your innovation problems but as another potential tool in your armory.