Challenge prizes are a very simple idea. You pick a problem that should be solved, crowdfund the Prize and offer a reward to the person who can find the best solution.
You’ll attract the interest of the people with the right knowledge and expertise and will reward those who build a solution to your challenge in Open Source.
You will also give them the opportunity to learn and develop new skills, the satisfaction of helping people and to contribute to a change in the world.
Here are some pointers on how to start designing your project challenge:
When does it make sense?
1. You have a clear understanding of your target, but not the method to get there.
2. You have a large enough crowd of innovators to tap into.
3. A small team is capable of solving the challenge.
4. You are flexible on the timeline, types of solutions, and who might win.
5. You are flexible on who owns the intellectual property at the end.
What conditions do you need to launch a Challenge Prize?
1. Simple, measurable and objective rules:
You should already have a first idea of this after the part where you defined your success. When creating a challenge, strive for rules that are straightforward, measurable, and objective, with a finish line that makes the winning of the prize obvious to everyone. In the case of the Orteig Prize, the rules were “fly nonstop between New York and Paris.” In the case of the Wendy Schmidt Oil Cleanup XCHALLENGE, the simple version of the rules could be expressed as “Improve the Oil Cleanup technology to at least double the best current Oil Recovery Rate”. Of course the detailed rules are more complex, but good prizes are easy to explain and understand.
2. Define the problem, not the solution:
Here you have to put yourself in the skin of someone who is going to participate in your challenge.
Imagine you want to participate, what problem do you have to solve? If there are many participants, what would make that you have solved it better than the other participants? Is it that you are the first to do something? Is it that you have achieved a certain cost or performance target? Or is it that you have achieved to meet some more qualitative measures?
This is what you have to define.
If you’ve identified an intriguing problem, and would like to determine criteria that would solve it, online research should be your first serious step. Friends and neighbors may sugar-coat their feedback to avoid awkwardness, but online communities will be much more honest and direct. Ask about the problem on specialized forums or message boards to see what the experts think (e.g. Bicycle StackExchange would be the go-to site for any bicycle-related product). You can also reach them through social media groups, Reddit, or by searching for “keyword” + forum and participating and adding value to the community.
Not only will you get confirmation that the problem and your criteria are valid, but you will also better understand the nuances and components of the problem itself, resulting in a more comprehensive, informed solution. Knowledge, after all, is power. What is the problem, need or opportunity?
You will want to find out if there are existing innovation efforts and activities in your area of interest. This way you won’t launch a prize in search of a solution that already exists, or into an already crowded research and development space. You also need to understand the barriers to progress in relation to your issue, so that you can check whether the incentives you have in mind would stand a chance of resolving these blockages.
The prize rules should define a problem to be solved, not a solution to be implemented. For example, the Wendy Schmidt Oil Cleanup XCHALLENGE did not care about the kind of technology involved. The only objective was to get to at least double the Oil Recovery Rate. This allowed to have dozens of uniquely different approaches.
3. Pick the appropriate structure:
First you need to decide how you will measure success.
There are traditionally three ways of determining success in a challenge:
- Being the first to do something (just as Charles Lindbergh was the first aviator to make a trans–Atlantic crossing, winning the Orteig Prize in 1927).
- Or meeting specific cost or performance targets (like the examples listed above), in which case you may need quantitative measures and to create a test environment in which you can assess performance. Here are some examples:
- CHALLENGE FROM WENDY SCHMIDT OIL CLEAN UP X–CHALLENGE: Demonstrate the ability to recover oil on the sea surface at the highest Oil Recovery Rate (ORR) of over 2,500 gallons per minute (GPM) with an Oil Recovery Efficiency (ORE) of more than 70 per cent.
- CHALLENGE FROM UNITED NATIONS DEVELOPMENT PROGRAMME: Find a sustainable and cost–effective solution (at a cost of no more than €5,000) for a standalone off–grid renewable energy supply that covers the daily needs of an average family in rural Bosnia and Herzegovina (producing an average of 2,25 kWh and 120 litres of water a day).
- CHALLENGE FROM METHUSELAH FOUNDATION: Break the world record for the oldest–ever mouse (awarded to the research team who are able to develop the science and technology that supports life extension).
- CHALLENGE FROM NASA: Create a robot that can autonomously navigate a natural terrain and collect specified
samples in two times phases.
- Sometimes you will want to make challenges based on much more qualitative measures, and judging winners could be a much more subjective affair.
Second, you’ll have to choose the way participants submit their solutions:
1. Past the post: The first team to complete the challenge and achieve to meet the criteria wins the cash prize.
2. Past the post with a deadline: Here the first team to solve the challenge inside of a given deadline earns the cash prize. If nobody manages to solve it before the deadline, no cash is delivered and backers get it back.
3. Bake-off: A bake-off competition takes place on a certain date, where teams compete head-to-head, and the best performance in the competition is awarded the purse bake-off with a minimum performance
4. Bake-off with a minimum performance threshold: This was the Wendy Schmidt Oil Cleanup XCHALLENGE structure. Teams delivered their hardware to the same location and competed head-to-head. The best performing team, above a minimum performance (2,500 gallons per minute of oil cleaned up), won the competition.
5. Collaborative: The challenge is launched to solve and create a number of tasks and modules. The first person or team to successfully deliver a task earns the prize attached to this task after approval of the community.
4. Address a failure from the market:
- People believe a problem is not solvable
- There is a stigma preventing people from attempting to solve a problem
- Entrenched players prevent fair competition or transformation of the industry
- Capital is not flowing into an important problem area
- Regulatory structures prevent innovation
5. The proper balance of ambitious and realistic:
The prize needs to be ambitious enough that it is inspirational for you and your community, but not so difficult that it can’t be achieved.
6. Purse size:
There is no science to determining the value of a cash prize, but it should be proportional to the complexity of the challenge. Estimate how much it would take in capital costs and people resources to solve this problem and the level of complexity and timescales. A good rule of thumb is that the prize should be equal to, or bigger than the investment you might expect a person or team would make, plus a bonus.
Here are some ranges you can use:
1k €–50k €/Low level of complexity: SMALL SOLUTIONS:
The prize aims to invite others to contribute to a project that is not excessively complex. The project is simple enough and has a roadmap but no contributors. This price aims to invite and reward others for collaborating on different modules of the solution.
50k €–250k €/Medium level of complexity: BIGGER, HIGHER, FASTER SOLUTIONS
The Prize aims to stimulate innovation and make improvements in existing markets. The market is well–served but there is scope to create bigger, higher and faster solutions by involving new innovators in problem–solving.
250k€–1 million €/ Medium-High level of complexity: ACCELERATED NEW SOLUTIONS
The prize aims to find innovation with the potential to disrupt or advance the market. The market is not completely established or is poorly served. The right motivators and technical support can encourage innovators to find solutions.
1 million € +/High level of complexity: DRAMATIC LEAPS
The prize aims to extend market boundaries and create new markets. The market does not exist, or current innovations are costly and there is limited supply and demand.
Teams are typically willing to invest more than the amount of the purse if the competition has a back-end business model that allows them to recoup their investment. In the case of higher-end prizes, the large prize purse (for example, $10 million) is used to break through the media clutter, raise the visibility of a problem, and attract nontraditional players.
Find the non-financial motivation
Money is by no means the only thing that motivates people to participate in prizes. Helping other people and having the opportunity to meet an ambitious goal in front of an expectant public or group of peers is also very powerful.
The other two big motivators are:
People can be compelled by a moral purpose and the chance to make a meaningful difference in the world. People want a chance to prove themselves to the world. Or will the challenge help them develop a new skill set and allow for professional development by giving them visibility?
A Challenge Prize can give people a target to solve a frustration they have with the status quo. With the Wendy Schmidt Oil Cleanup competition, the competing teams were frustrated with the state of the technology and wanted to make it better.
From the launch of a challenge to the award of the prize and beyond, you can create lots of opportunities for promotion and recognition. Don’t overlook how attractive it can be to participate in a challenge linked to an ambitious and challenging mission.
Recognize that the benefits of Challenge Prize are mutual. Find a way to align your communities passions, energy and commitment with the bigger aims of your prize. The motivation that drives people to solve a problem should never be just the money.
7. Persistent media exposure over time for prize competition:
The best-designed challenges have a competition structure that produces ongoing media. This consistent attention attracts funders, builds community, and helps produce the desired change in mindset. If the validation of the challenge can be done in two or more stages, this helps teams get far more exposure than would have been the case if the competition simply required one stage. The best prize designs keep the conversation alive from start to finish.
In a ‘pure’ and traditional challenge prize without stages, organizers set a challenge, offer a reward and step back while fully–formed solutions are put forward. But this is not the only way to run a prize.
Challenges with no stages are a good idea if the skills required for the creation of solutions are technical and highly specialized solutions. Or if innovators are likely to understand the context of the challenge already (for example, an engineering challenge to build a solar powered car). Or if they are not required to understand the context (such as an algorithm problem, where competitors need only to ‘crack the code’).
Many prize organizers run challenges in stages, building points into the program where the progress and efforts of innovators can be rewarded en route to a longer–term goal.
Stages are relevant if innovators are required to develop new knowledge and capacities, such as community groups that might need to prototype and set up a new service, mentoring and coaching, planning or networking opportunities.
Normally the first stage is for competitors to articulate an idea, the second stage to develop it and the third stage to implement it. The final prize is given based on results measured during the Prize implementation period, as well as an expert judgment about their potential future
For a Challenge Prize, you should plan the Opening of the Prize, the date the submissions are due, and the date when to declare winners.
For a Collaborative Crowdsourcing or Project Crowdfunding Campaign, you have to plan when the campaign starts. You also have to plan the dates you wish to reach different milestones (idea research, conception, evaluation, integration, refinement, etc…).
8. A mediatic and exciting finish:
Competitions with photogenic finishes—that is, a finish that is visually compelling or easy to share on the media — will help attract attention, which, in turn, drives teams to spend more effort in their attempts to win. Such a finish also drives media impressions, which helps educate the public about the change created.
9. Multiple purses and bonuses:
Using multiple purses (e.g., second and third place) and “bonus” purses can increase the number of teams competing and the variety of approaches pursued. Secondary purses can keep teams engaged even if there is a strong front-runner, and keep teams competing after first place has been awarded. It can also lengthen the time of the competition, thereby increasing its ability to achieve paradigm change.
10. Launching above the line of super-credibility:
If you are going to ask others to make something that hasn’t been created yet, you’re going to need to have a very solid reputation. You want to turn the public’s perception of the challenge from “Can it be done?” to “When will it happen and who will win?”.
For this you will need to find partners and sponsors who already have this reputation and who are ready to endorse your project. This will help you initial launch be very visible and super-credible.
The launch should drive maximum media exposure, both publicizing the prize and its sponsors and ensuring that the competition is taken seriously from the start (we’ll develop on how to get media exposure on a later lesson).
At the launch date, it is important to have the participation of gold-plated endorsers (who share their reputational equity) and a number of teams ready to compete.
11.Prize timelines and deadlines.
The prize timeline is a function of the competition’s degree of difficulty. Smaller challenges might be awarded in six months to a year, while larger-end $10 million Prizes are designed to be won in a three- to eight-year time frame.
12. Global participation open to all
The best incentive competitions are global in nature. In seeking the broadest range of qualified teams—independent of age, education, and experience—you maximize the opportunity for breakthrough results. In other words, don’t try to anticipate where solutions will come from. In the case of the Longitude Prize, the British Admiralty was so certain that determining longitude would come from looking at the stars, they filled the committee charged with picking the winner with astronomers. As a result, John Harrison, a watchmaker, was denied the purse for nearly a decade.
13. Incorporation of a back-end business model into the prize design.
The ideal competition is designed so that there is a back-end business opportunity for teams to exploit once the prize is won. When a team wins, the resulting publicity should allow the team to attract capital investment, deployment of the technology, market acceptance, and a new industry that produces a long-term solution to the market failure initially targeted by the competition.
14. Writing the final set of rules.
The rules are an incentive competition’s DNA—they will determine the competition’s success or failure and its validity over time. Rules that are made invalid by changing technology or political/social conditions are problematic. Rules that are naive or easily broken can lead to negative or empty results.
One example of this is the case of Nobel laureate Richard Feynman’s prize. Feynman offered two $1,000 prizes, one for the first person to build a working motor within a one-millimeter cube and the second for the first person to write the information from a book page on a surface 1/25,000 smaller in linear scale.
The rules for his first prize were not robustly designed. While Feynman was looking to promote nanotechnology, what he received instead was a working motor built by an enterprising graduate student using meticulous craftsman skills and conventional tools (jeweler’s tweezers and a microscope).
Feynman paid the prize but didn’t achieve his goal. That said, in 1985, Tom Newman, a Stanford graduate student, successfully captured the second Feynman prize by reducing the first paragraph of A Tale of Two Cities by 1/25,000
Reflecting on your design sketch
Capture your initial thoughts about prize design using the Challenge Prize Design Fun Sheet that you can download below.
Having arrived at some answers to the questions above, here are some question for you to finish:
- Are you satisfied with every aspect of the campaign? Do you need to undertake some additional research and engagement to develop or check aspects of the design?
- How feasible is your challenge prize? Do you have the time, expertise and a community large enough to run a Challenge prize like this? What additional expertise and resources might you need to enlist to run the challenge prize? What kind of strategic and delivery partners might you need to approach?
Planning is important for all programs, but especially for Challenge prizes where all your key players need a clear and precise understanding of the rules of engagement. This includes participants, judges and assessors, any support providers and your communications specialists.
Ok, time to download the Worksheet below and start designing your challenge, you can check out the templates we have prepared in the link below.
Design your challenge Worksheet (go to the “File” tab and hit “Make a copy…”)
You can use these Challenge Design Templates to frame your challenge
You can check out the Longitude Prize Rules for inspiration