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Innovation News

Wall Street Journal Examines Prizes as Spur to Innovation

January 25, 2007
Excerpt/overview
Source: The Wall Street Journal
By David Wessel

'Prizes for Solutions to Problems Play Valuable Role in Innovation,' a January 25th Wall Street Journal 'Capital' column written by David Wessel, focuses on the progress of InnoCentive, a Rockefeller Foundation partner in its Innovation Initiative.

Wessel addresses various methods that spur innovation, highlighting InnoCentive's Web-based, prize-driven approach. He goes on to note The Rockefeller Foundation's relationship to InnoCentive and this private-public experiment with 'Prize philanthropy.'

InnoCentive, a company spun off six years ago by drug maker Eli Lilly, charges clients ("seekers") to broadcast scientific problems on a Web site where scientists ("solvers") are offered cash -- usually less than $100,000 -- for solutions; more than 50 challenges are now pending...The Rockefeller Foundation also is getting into the act to help solve science and technology problems faced by the poor.

"'Prize philanthropy' is useful for breaking a bottleneck where government bureaucracy and markets are stuck," says Thomas Vander Ark, who recently left conventional philanthropy at the Bill & Melinda Gates Foundation to run the X-Prize Foundation. While Gates and similar foundations "push" money on people to solve problems or meet social needs, he says, prizes "pull" people to problems.

Prizes prompt a lot of effort, far more than any sponsor could devote itself, but they generally pay only for success. That's "an important piece of shifting risk from inside the walls of the company and moving it out to the solver community," says Jill Panetta, InnoCentive's chief scientific officer. Competitors for the $10 million prize for the space vehicle spent 10 times that amount trying to win it.

The article cites a number of examples of prize-driven innovation that have been surprisingly successful and also examines some of the method's shortcomings.

After examining 166 problems posted by 26 research labs on the InnoCentive site over four years, Karim Lakhani, a Harvard Business School professor, found 240 people, on average, examined each problem, 10 offered answers and 29.5% of the problems were solved.

One surprise: The further the problem was from a solver's expertise, the more likely he or she was to solve it. It turns out that outsiders look through a completely different lens. Toxicologists were stumped by the significance of pathology observed in a study; within weeks after broadcasting it, a Ph.D. in crystallography offered a solution that hadn't occurred to them.

Prizes aren't a panacea. They won't replace corporate R&D labs or universities. Some problems -- a cure for cancer -- are just too big. Some require too much upfront investment. Some scientists are reluctant to admit defeat and surrender a problem...But prizes work in ways that conventional R&D doesn't, and finding ways to spur innovation is crucial...

Copyright 2007 Dow Jones & Company, Inc. All Rights Reserved

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