In a world constantly seeking new solutions to old problems, prizes to spark open innovation have proven to be a powerful motivator, as highlighted in Jaison Morgan's TEDx talk. Jaison Morgan, CEO of Carrot, has been hailed as “the world’s expert” in designing incentive-based competitions for breakthroughs. In his insightful TEDx talk, Morgan delves into the history and future of using rewards to spur innovation, collaboration, and societal progress. This post highlights the key points from his talk, exploring how incentives have shaped our world and what they mean for the future of open innovation.
In the distant past, the path to innovation was fraught with obstacles. Long before the establishment of patents and trademarks, the innovation landscape was largely controlled by trade guilds and secret societies. These groups safeguarded knowledge and techniques, making it difficult for new ideas to gain traction. Inventors and investors alike faced significant barriers, as the flow of information and breakthrough ideas were restricted to those within these closed networks.
While this system did lead to some impressive technological advances, it was also limited in its ability to adapt to rapidly changing circumstances. Crises, such as war, famine, and disease, created an urgent need for quick and innovative solutions, yet closed and/or secret societies often struggled to meet those demands. As Morgan points out, the true challenge was not a lack of resources or motivation, but rather a lack of fresh perspectives and ideas. This highlighted a new imperative for more open and collaborative approaches to innovation.
Around the mid-1500s, a significant shift occurred in the approach to problem-solving. Leaders began to recognize the potential of offering cash rewards as a means to integrate external ideas into the innovation process. This marked the beginning of a system that would eventually revolutionize the landscape of invention and discovery. Notably, Henry Chesbrough, a faculty director at the Haas School of Business, has been instrumental in promoting the concept of open innovation today. Recent trends, including the use of online social networks have opened the aperture of problem solving, allowing sponsors to embrace a wider range of talent, including some who represent disciplines outside of the target area of discovery, to propose new ways and new methodologies to unlock entrenched problems.
One of the earliest examples of this new approach was seen in Scotland during the 1600s, where the government began issuing premiums, cash rewards for solutions to specific problems. This opened the door to a broader range of participants, fostering a more inclusive and diverse innovation environment. It didn't matter who you knew or where you were born, if you could solve the problem, you could win fame and fortune. A particularly notable figure from this period was William Douglas, who invented a faster-loading cannon and a musket capable of firing multiple rounds. These innovations not only showcased technological prowess but also sparked widespread interest in prizes across Europe.
Perhaps the most famous early example of a prize-driven innovation is the Longitude Prize of 1714. The British government offered a substantial reward of £20,000 to anyone who could solve the problem of determining longitude at sea, a challenge that had stymied sailors and scientists for centuries. John Harrison, an English clockmaker, ultimately won the prize with his invention of a highly accurate marine chronometer. Harrison’s pocket watch could keep time with unprecedented precision on naval vessels, enabling sailors to calculate their longitude and navigate the seas with greater confidence. The solution was an unexpected breakthrough from an unknown inventor, representing an atypical field of expertise. Today, institutions like the Harvard School of Business continue to explore and promote how to use incentives to engage new mindshare and to uncover innovative solutions to complex problems.
The success of the Longitude Prize had far-reaching consequences. It not only opened up the world to exploration but also demonstrated the power of financial incentives to drive significant advancements in technology. The model of offering prizes for innovation began to spread, influencing how governments and organizations approached problem-solving. Today, the use of prizes and incentives is growing at a rapid rate, according to a report published by McKinsey and Company.
The period from the mid-1700s to the mid-1800s is often referred to as the “prize era” due to the widespread use of incentive-based competitions. During the Industrial Revolution, technological advancements became a central part of daily life. One remarkable example from this period was the work of Nicholas Appert, a Parisian candy maker. Appert developed a method for preserving food by sealing it in airtight containers and heating it, a process that would later become known as canning. This innovation addressed a critical need for food preservation during times of scarcity and demonstrated how prizes could drive practical solutions to real-world problems. This period marked a new imperative for collaborative and competitive approaches to innovation.
Prizes during this era were not limited to scientific and technological advancements. They also played a role in popularizing new inventions and concepts. For instance, car rallies sponsored by newspapers in the late 19th century were designed to showcase the safety and reliability of automobiles. These events captured the public’s imagination and helped pave the way for the widespread adoption of cars. Similarly, high-profile competitions such as Charles Lindbergh’s solo flight across the Atlantic in 1927 highlighted the possibilities of commercial aviation and spurred further innovations in the field. Similarly, prize programs events today can engage local communities in sharing and promoting innovative ideas.
As the 20th century progressed, the use of prizes as a tool for innovation began to decline. The philanthropic landscape shifted towards grant-based funding models, where organizations provided financial support for specific people and projects, limiting the scope of those who could compete. This approach required a different mindset, with a focus on long-term planning and patronage rather than immediate competition. While grants offered stability, they lacked the competitive edge that had driven so many breakthroughs in the past. Federal grants and philanthropic funding became a significant source of support for many innovative projects during this period.
However, the 1980s and 1990s saw a resurgence of interest in prize-based incentives, particularly within the emerging field of venture philanthropy. Entrepreneurs and philanthropists who had achieved success in the business world recognized the potential of prizes to harness competition and drive innovative solutions. By focusing on performance-based funding, they sought to balance internal innovation with external collaboration. This renewed interest in prizes marked the beginning of a new era in incentive-driven problem-solving. Academics, like Karim Lakhani, a faculty director at the Harvard Laboratory for Innovation Science, have played a key role in this studying this resurgence.
One of the key lessons from the history of prizes is that simply increasing the value of a cash reward or bounty does not necessarily guarantee higher participation. Many high-stakes competitions have failed to attract the necessary level of interest. This highlights the need for a more nuanced understanding of what motivates people to participate in these challenges. For many, the value of the award must match or correlate to the implied cost of the solution. Only by considering the real burden of problem solving can a sponsor appropriately calibrate the necessary incentives to drive success. Internal ideas and motivations play a crucial role in driving participation and innovation.
Through surveys and interviews with competitors, it has become clear that the most effective solvers value transparency, fairness, and feedback. They want to know that their work will be evaluated by experts in the field and that they will receive constructive feedback to help them improve their ideas. Additionally, participants appreciate feeling like part of a community, even in the most fiercely competitive environments. These insights are crucial for designing successful prize competitions in the future. These discoveries highlight a new imperative for designing competitions that prioritize transparency and constructive feedback. To success, prizes must consider how to ensure value to everyone, even those who may participate and not win. Only by focusing on that value proposition can sponsors attract the widest range of solvers.
As we look to the future of innovation, Morgan suggests that organizations should consider allocating a portion of their budget — perhaps as little as 10% — to prize-based initiatives versus more traditional forms of funding or patronage. This approach can enhance the innovation process by fostering collaboration and competition. In an era where efficiency and performance are paramount, the historical model of prizes offers a valuable framework for driving progress. By combining the best elements of grant-based funding with the competitive spirit of prizes, organizations can create a more dynamic and responsive innovation ecosystem. This hybrid approach requires a flexible business model that can adapt to both competitive and collaborative funding strategies.
The future of prize-based innovation lies in its ability to bring together diverse perspectives and ideas. By encouraging collaboration and open competition, prizes can help solve complex problems and drive breakthroughs in a wide range of fields. As we move forward, it is essential to honor the lessons of the past while embracing new opportunities for innovation. Morgan's TEDx talk exemplifies the history and spirit of competition and collaboration through the sharing and assessment of innovative ideas.
Prizes offer a powerful framework for the enduring power of open innovation and change. By understanding the history of these incentives, we can better appreciate their potential to solve today’s challenges. As we look to the future, we must continue to innovate and collaborate, using the tools and mindsets that have driven progress for centuries. The journey of innovation is far from over, and with the right approach we can create a world where ideas flourish and breakthroughs become the norm. as Deloitte has recognized, the use of prizes are now encroaching on more traditional methods of government procurement and other forms of contracting and purchase arrangements, proving that the use of new tools and methods can serve a larger function - public sector procurement makes up 12% of global GDP, and experts agree that more open, transparent, and fair, procurement practices would benefit all. As prizes continue to play a crucial role in promoting and sharing innovative ideas globally, the field is rapidly expanding and proving that together we can solve the world's biggest challenges.
