heardwww

PeterH.
Diamandis,MD/XPRIZEFoundationXPRIZEFoundation,2009Pg1UsingIncentivePrizestoDriveCreativity,InnovationandBreakthroughsByPeterH.
Diamandis,MD,Chairman/CEO,XPRIZEFoundationwww.
xprize.
orgIncentivePrizeOverviewThispaperdiscussestheuseofincentiveprizestodrivecreativity,innovationsandbreakthroughs.
Incentiveprizesofferalargerewarduponcompletionofaspecificobjectivetask.
Traditionallytheyarelargecashpursesawardedtoindividualsorteamswhobuildanddemonstrateanewsystem(typicallytechnologybased)oraccomplishafirsttimefeat.
Itismybeliefthatsuchprospectiveprizesthatrewardinnovatorsforachievingaspecificmeasurablegoalhaveprofoundeconomicandpsychologicalleversforacceleratingandenablinginnovationinareasthatmightotherwisebestuckforanumberofreasons.
Whileprizesarenotapanaceafordrivinginnovation,theydoprovideanenormousamountofleverageandshouldbepartofeveryorganizationsinnovationtoolbox.
Unfortunately,prizesarebeingvastlyunderutilizedatthistime.
Mypersonalobjectiveistoencouragethenotionthat10%ofallphilanthropicgivingand10%ofallresearchgrantsshouldbeintheformofincentiveprizeswhichwillresultinadditionalcapitalandtalententeringintotheinnovationmarketplace.
Properlystructuredincentiveprizeshaveanumbercriticalattributesworthconsidering:(1)Efficiency:Youonlypaythewinner.
Theprizestandsuntilthegoalisachieved.
Inonefashionitisfixedcostscienceorengineering.
(2)LeverageofResources:Traditionallyawellstructuredprizecandrive10–40foldtheamountoftheprizepursespentcumulativelybytheteamstowin.
Prizescausenon-traditionalfundingsources(philanthropicfunds,egomoneyandcorporatesponsorship)toenterintoafield.
(3)IndustryCreation:Ratherthanbackasingleapproachtoaproblemwhichtraditionallyhappenswithventurecapitalfundingwhereyouneedto"pickthewinner"inadvance,anincentiveprizecansupportawidevarietyofapproaches/solutionstocomeintoexistencetoaddressachallenge,therebycreatinganentireindustry(4)ParadigmChange:Aproperlystructuredprizecanchangewhatpeoplebelieveispossible…whichisthefirststeptoanyinnovation…Youhavetobelieveitispossible.
AsAstronautByronLichtenberg,aclosefriendandearlyco-founderoftheXPRIZEFoundationoncesaid,"Withoutatargetyou'llmissiteverytime.
"Incentiveprizesofferinnovatorsanddoersatargettoshootforandapublicallycelebratedgoaltoachieve.
Thispaperinvestigatesthefundamentaldriversthatarenecessarytoinspireexceptionalcreativityinscienceandtechnologyandbuildsthecasethatincentiveprizeshavepowerfulandwiderangingpsychologicalandeconomicimpactonthisgoal.
Someofthebestknownincentiveprizes(expandeduponinAppendix1)are:LongitudePrize:Over100,000inpursemoneyofferedbytheBritishGovernment(BoardofLongitude).
WonprincipallybyJohnHarrisonforhischronometersbetween1737–1764.
PeterH.
Diamandis,MD/XPRIZEFoundationXPRIZEFoundation,2009Pg2OrteigPrize:$25,000offeredbyRaymondOrteigforthefirstnon-stopNewYork–Parisflight.
WonbyCharlesLindberghintheSpiritofSt.
Louisin1927.
KremerPrize:Offeredin1959byHenryKremer.
ThefirstKremerprizefor50,000waswonbyDr.
PaulMacCreadyin1977intheGossamerCondorforhumanpoweredflightaroundafigureeightflownbetweentwomarkersmileapart.
DARPAGrandChallenge:TheDARPAGrandChallenge($1M)andUrbanChallenge($2M)wasaprizecompetitionfordriverlesscarssponsoredbyDARPA.
TheGrandChallengewasthefirstlongdistancecompetitionfordriverlesscarsintheworld.
Overthecourseofthefirsttwoyearsmorethan195differentteamsregisteredtocompete.
AnsariXPRIZE:A$10millionpurseofferedbytheXPRIZEFoundationforthefirstteamtoflyaprivatelybuilt3-personspaceshipto100kmtwicewithintwoweeks.
TheprizewaswonbyBurtRutan'sSpaceShipOnefundedbyPaulAllen.
TheDriversofInnovationTrueinnovationsareoftenaradicaldeparturefromacceptedtheories,modesofbusinessandbeliefs.
Assuch,earlyon,theycanbeconsiderednonsensical,impossibleorworseyet,hereticalbeforetheyareultimatelyprovenandaccepted.
Forthisreason,trueinnovationrequiresawillingnesstotakesubstantialrisk.
Sowhatarethefundamentaldriversthatpushindividuals,groupsandorganizationstotakeriskandinnovatei.
Curiosity:ThedesiretofindoutwhyTotakeonachallengeandfindtheanswerisaveryimportantlong-standingdriver,butunfortunatelyitisoneoftheweakest,especiallyascomparedtofearorgreed.
ii.
Fear/Defense:Nothingfocusesone'smindlikefear-thefearofharmatthehandsofanenemy,thefearoflosinginacompetition.
Extraordinaryfearenablesextraordinarylevelsofrisk-taking(e.
g.
"nothingtolose").
AnexcellentexampleistheincredibleriskstakenbytheApolloprograminresponsetoSovietsuccesseswithSputnikandGagarin.
iii.
WealthCreation/Greed:Thedesiretocreatewealth,tomultiplyone'sresourcesisafundamentaldriverinthecapitalistsociety.
BestexemplifiedbytheVentureCapitalindustrythatwillback10ideashopingforonegrand-slamwinner.
Onasmallerlevel,PaulMacCready'smotivationtocompetefortheKramerprizewasadesiretowinthefundstopayoffpersonaldebt.
iv.
Significance/Fame/Sport:Theneedforrecognitionofcolleagues;thedesireforfameandadorationfromthepublic,orthedesiretotransitionfrom"successtosignificance".
Thisisoneofthefundamentalhumandrivers.
Thereisabasicdesiretocompeteforsportandpride.
Wearegeneticallypredisposedtocompete,weenjoyit.
Whatcausesthewealthytospend$80million(onaverage)tocompetefortheAmerica'sCupIproposethatasimplifiedwaytomeasuretheratioof"curiosity"to"fear"to"greed"asadriverinoursocietycanobjectivelybemeasuredbytheratioofthegovernment"sciencebudgets"tothe"defensebudgets"tothe"corporateR&Dbudgets.
"PeterH.
Diamandis,MD/XPRIZEFoundationXPRIZEFoundation,2009Pg3Ontheflipside,whatarethedriversthatblockrisk-takingandinnovationi.
Fear:Afearoffailure,andthereforeadesiretoavoidcriticismandembarrassment.
ii.
ProtectionistAttitude:Ultimately,innovationisdisruptiveandcantoppleindustriesandinstitutions.
Largeorganizationssuchasgovernment,corporations,andreligiousorganizationsdesiretomaintainthecurrentbalanceofpowerinleadershipandinvestedinfrastructure.
Ultimatelyincentiveprizespromoteandfocusthepositivedriversofcreativityandinnovation,andbufferthenegativedrivers.
Properlystructured,prizescanenforcedriverssuchascuriosity,fame,significance,wealthcreationandprovidetheconstructthatencouragesacompetitivemindset.
OnMay18th,1996attheXPRIZEFoundationGaladinner,aeronauticsdesignerBurtRutansaid,"I'veneverinmylifebeensocreativeasIhavebeengoingafterthisgod-damnprize!
I'mnotgoingtotellyouwhatI'vecomeupwithbecauseIwanttowinthisthing!
"Prizesalsoofferan"offbalancesheet"mechanismtodealwithfearoffailure.
Anorganizationwishingtotryradicalapproacheswithouttherecriminationoffailurecanputupaprize.
Failuresofthecompetingteamsdon'tinuretothedetrimentofthefunder,becausetheybacktheentirecompetitionnotanyonespecificteamorapproach.
StateofMindYourattitudeinapproachingaproblemisperhapsyourmostimportantattributeinsolvingit.
Apositive,"thisissolvable"approachfundamentallyaffectsallthoseinvolved.
Therearethreebasic'statesofmind'thatanindividualhaswhenapproachingapossiblechallenge.
Eachstateofmindwillaffectanindividual'screativity,levelofrisktakingandtheirabilitytomarshaltheresourcestosolvetheproblem.
i.
Somethingisimpossible:Someonewhobelievessomethingisimpossibleispartiallycorrect…itisimpossibleforthem.
Inorderforsomeonetosolveaproblem,theyfirstneedtobebelievethatitissolvable.
Many"experts"inafieldbecomeconvincedofexistingdoctrinethatthenlimitstheirthinking(e.
g.
pre-CopernicanthinkingthattheEarthwasthecenteroftheUniverse).
Thedefinitionofanexpertcansometimesbe,anindividualwhotellyouwhysomethingcan'tbedone.
ii.
Beliefthatsomethingispossible:Anindividual(orgroup)whobelievesintheirheartthatsomethingispossible,butcannotyetproveit,cantakeonanalmostreligiouspassionresultingfromtheirfaithandtheirdesiretoprovethemselvesright.
Alsoagroupracingtoachieveameaningfulobjective,especiallyinaraceagainstanotherteamoragainsttheclockcancausethebestideasandindividualstosurfacetothetop.
TheearlydaysoftheApolloprogramhadthisstateofmind.
The400,000individualswhojoinedNASAonitsmissiontobeattheSovietUniontotheMoon,believedthatthegoalwaspossible,butknewtheoutcomewasfarfromcertain.
iii.
Knowledgethatsomethingispossible,butneedsdemonstration:Thisisthesituationforaninnovatorthathasseensomeconvincingexpressionofaconceptandactuallywantstoinventit,orhasseenatechnologyprototypeandwantstoreinventand/orimproveonhowitisimplemented,orisconvincedthatthecurveofimprovementofatechnologyispredictiveofwhatistocomeanddesirestofindthenextbreakthroughrequiredtoimplementtheimprovement.
Figure-1below(Source:RayKurzweil)issuchanexample.
PeoplehaveheardofMoore'slawthattheprice/performanceofacomputerwilldoubleevery18months.
Whatpeoplefailtounderstandisthatthiscurvehasbeenmarchingonforthepast100+yearsatafairlyconsistentpaceduringtimesofdepression,recessionandwar.
AlsothatwearenowinthefifthparadigmofMooresLaw(Relays,vacuumtubes,transistors,integratedcircuits,etc.
).
Thetechnologiestocontinuethiscurveintothesixthandseventhparadigmstillneedtobeinvented,butthisprovidesastrongincentivetoinventorstobelievethatthisispossible.
Figure-1Incentiveprizeshaveafundamentaleffectontheinnovator'sstateofmindhelpingmovepeoplefrom"somethingisimpossible"to"beliefthatitispossible".
Proposingaspecificgoalinanappropriatefashion,"abovethelineofsupercredibility"(Figure-1)cancausepeopletobegindreaming,wondering,plottingtofindasolution,andforcapitaltobeginfocusingontheproblemathand.
TheconceptillustratedinFigure-2isthenotionthat"how"youannounceanaudaciousideaisascriticaltoitssuccessastheideaitself.
Anaudaciousideathatisannouncedtothepublic"belowthelineofcredibility"(1)(asubjectivemeasure)isimmediatelydoomedtofailure.
Thememeisnottransmitted,andeveryonewhohearsitdiscountsitimmediately.
Anaudaciousideaborn"abovethelineofcredibility"willeitherdie(2a)orlive(2b)dependingonearlyactionstakenbytheparticipantsofthechallengeandtheresponsegivenbythepublicandthemedia.
Anaudaciousidea"bornabovethelineofsupercredibility"(3)isasuccessfromthebeginning.
Inthemindsofthemedia,thepublic,andtheprospectiveinnovators,thechallengeisseenasworthwhileandachievable.
Theideahasamuchhigherlikelihoodtoattractthecreativethinkersandcapitalrequiredforthechallenge.
Asanexampleofbeingbornabovethelineofsuper-credibility,onMay18th,1996,theAnsariXPRIZEforspaceflightwasannouncedwithtremendousacceptance.
Onthatday,despitetherebeingnomoneyinthepurseandnoteamscompeting,theprizewasannouncedundertheArchinSt.
Louiswithtwentyastronautsonstage(includingco-FounderByronLichtenbergandApolloAstronautBuzzAldrin),theNASAAdministrator,theAssociateAdministratorforspaceflightoftheFAA,theLindberghFamilyandseniormembersoftheSt.
Louiscommunity.
PeterH.
Diamandis,MD/XPRIZEFoundationXPRIZEFoundation,2009Pg4Themediaresponsewasglobalandpositivedrivingbelievethatthepursewasfundable,thegoallaudableandtheresultsachievable.
Figure-2TargetingofInnovationOncethedriversareplacetoencourageinnovation,thenextquestionishowdocreativeindividualschoosewheretofocustheircreativeenergyWhatprovidesthetargetinginformationfortheinnovatorIwouldproposetherearefourmajormechanisms;eachoftheseisresonantwithdifferentdrivers:Curiosity:First,thereispersonalcuriosity,intuitionandfreethought.
PerhapsthisisbestexemplifiedbythenatureofAlbertEinstein'sworkonspecialrelativity…daydreamingandaskingthequestion"whatif".
InstitutionalDirection:Guidancefromone'smentororfundinginstitution.
EmergentConditions:TheNazithreatofWorld-WarIIleadingtotheAtomicBombandtheSovietlaunchofSputnikleadingtotheApollo11Moonlanding.
(Note:boththeAtomicBombdevelopmentandthefirstMoonlandingwerethemselveseffectivelycompetitions/races).
GrandChallenges:Apubliclyrecognizedtargetofimportance,reinforcedbyasignificantcashpurse,canprovidetremendoustargetinginspiration.
PeterH.
Diamandis,MD/XPRIZEFoundationXPRIZEFoundation,2009Pg5PeterH.
Diamandis,MD/XPRIZEFoundationXPRIZEFoundation,2009Pg6TeamComposition&AttitudesWhatarethedynamicsandenvironmentthatpromotesuccessfulcreativethinkingTeamMake-up:Thefollowingsixattributesoftheteammake-uppromotethemaximumcreativethinking.
1.
Smallgroups:Wherealltheplayersknowandrespecteachother,wherecommunicationsanddistributionofknowledgeisrapidandcompleteandanorganizationalbureaucracyisnotneededandthereforedoesnotputuproadblocks.
Smallgroupsalsohavethepropensitytotakehigherlevelsofriskbecausetheyhavelesstolose,andinawinningscenariohavemoretogainsinceeachindividualmemberstandstogetsignificantrecognition,notbeinglostinalargeorganization.
2.
IsolatedEnvironment:Isolatingasmallteamawayfromlargerpre-existingorganizationswasusedinawiderangeofsuccessfuldevelopmentsfromtheIBMPCtotheAppleiPod.
Asanisolatedpopulationtheyarefreetoevolvenewpracticesandapproacheswithoutcriticism.
3.
Newteams:Newteamsofindividualswhoarebroughttogetherforaspecificobjectivethatarenotsaddledwithpre-existingbiasesthatneedtobeprotected.
Asanexample,theNASAof1961wasavibrantsingle-mission-orientedorganizationwithaclearlyarticulatedgoal,"gettothemoonbeforetheendofthedecade"(and,ohbytheway…alsobeattheSovietsthere).
NASAtodayissuffocatinginthepoliticalbaggageofitsjob-centricFieldCentersandthebloatedrisk-adversecontractors.
4.
Diversityofbackground:Oneofthemostcriticalelementsforcreativeteamdynamicisdiversityofbackgroundandthought.
"Stovepipementality"or"groupthink"willoftencauselikemindedindividualstodiscountpotentiallyfertileapproachesbecausepeersallshareacommonbiasorblindspot.
Inaddition,traditionallyabreakthroughcomesfromnonsensical,crazyororthogonalthinkingandisbestsurfacedfrombrilliantindividualsfromadifferentfield.
Finally,manybreakthroughsandnewapproachescomeattheboundariesbetweenfields…Thisinterdisciplinaryapproachisacriticalsourceofinsights(e.
g.
whereinformationtheoryintersectsbiology).
5.
Charismaticleadership:Existenceofastrongandcharismaticleaderwhoispromotingtheattitude"yeswecan"suchastheworkofWernerVonBraunintheApolloprogramcanmakeallthedifferenceinkeepingagroupengaged.
Sometimesitisnotthefirst,secondorthirdattemptbutthe100thapproachthatleadstosuccess.
Assuch,keepingateammotivated(orafundingsourceengaged),witharefusaltogiveup,isfundamentaltosuccess.
6.
Youth:Oneofthemostcriticalmixesinateammake-upistheadditionofyouthwhoareunconstrainedintheirthinking.
Insomecircumstances,ageandexperiencecanbeasignificantdetriment.
In1961whenNASAwasgiventheimpossibletaskofputtinganAmericanonthesurfaceoftheMoon,theaverageageoftheengineerswhodevelopedthepropulsionsystems,thenavigationandguidance,thedockingandthestructureswasintheirmid-latetwenties.
Threedecadeslater,theaverageageoftheengineerswhocreatedthedot-comrevolutionwasonceagaininthemid-twenties.
It'scriticalthatinnovatorsdon'tknowwhatcan'tbedone.
PeterH.
Diamandis,MD/XPRIZEFoundationXPRIZEFoundation,2009Pg7TeamAttitudes:Thefollowingfourteamattitudespromotethemaximumcreativethinking.
1.
Learntoquestionandnotdefend:ThiswasthemottoofBurtRutan'steamatScaledComposites.
Assoonaspeoplebegintodefendtheirthinking,theybegintobackthemselvesintoacornerandshutouttheoptionofdiscovery.
2.
Non-judgmentalattitudethatdoesn'tpunishfailure,butinsteadcelebratessuccess:Itiscriticalthatindividualswhofailnotbepunished,butinsteadareallowedtoexpresswhatwaslearnedfromthefailedexperimentandgiventhesupporttotryagain.
Inthesamemanner,successatanylevelmustbecelebratedinastrongfashionwithintheentireteam.
3.
Allowingforcrazy"nonsensical"ideas:Perhapsmostdifficult,ishowtoallowteamstotryoutcrazyideasinaDarwinianapproachthatallowsthosewhicharevaluabletorisetothetop.
4.
Persistence:Buildingaculturethatrefusedtogiveuponagoodideaiscritical.
Thenotionthatthereis"persistenceofvision"…or"persistencetothepointofsuccess"isbestdemonstratedbyEdisonandhislightbulbfilamentexperiments.
AccesstoCapital&ResourcesOneofthemostdifficultingredientsforcreativityandinnovationisaccesstocapital.
Frequentlytheleadingthinkerorinnovatorofthegroupisforcedtospend80%oftheirtimeraisingcapitaltocoversalariesandaccesstoresourcesratherthanthinkingand/orleading.
Worseyet,thoseideaswhichhavethehighestprobabilityofproducingtruebreakthroughsarethemostnovelandthereforethemostdifficulttoproveandthereforefund.
Incentiveprizesprovideanenvironmentwhichattractsanew"flavor"ofmoneythathasdifferentobjectives.
AgaintheAnsariXPRIZEoffersanexcellentexample.
Beforeannouncingthe$10Mpurse,anyteamwishingtofundaprivatesub-orbitalspaceshipwouldneedtoapproachanangelinvestororventurefundforcapital.
Anysophisticatedinvestorwouldimmediatelysay"no"giventheinherentrisks,specifically:noprovenmarket,regulatoryrisks(thelawstoallowprivatehumanspaceflightdidnotexist),technologyriskandriskofveryvisiblepublicfailure.
Assuch,fewinvestmentfundsflowedtowardsthistechnologydevelopmentarena,andthosewhodidinvestlostsignificantamounts.
Itwasspacecommunityexpressedthisthoughtwiththefollowingjoke:"whatisthebestwaytobecomeamillionaireinthespacebusinessStartasabillionaire!
"AftertheAnsariXPRIZEwasannounced,teamsfounditmucheasiertoraisethecapitalandsupport.
Ratherthanseekinvestmentfunds,thesesameteamswereabletoviablypursuetoalternativesourcesofcapital:sponsorshipandprivatebenefactormoney.
Sponsorshipfundingwhichtypicallyisinthe$20billion-$30billionperyearintheU.
S.
islookingforhighlyvisible,uniqueopportunities.
Asthesportingworkcontinuestobecluttered,incentiveprizesofferauniquealternative.
AsSergeyBrin,co-FounderandPresidentofGooglesaidinavideoaddressattheannouncementoftheGoogleLunarXPRIZE,"IknewweneverwantedtodosomethingsoconventionalatGoogle,Ithoughtifwewereevertosponsorsomethingitshouldbesomethingambitious.
HavingseenthesuccessoftheAnsariXPRIZE,thefactofhavingmanydifferententrepreneursallcompetingtoaccomplishagoalisfirstmoreexciting,secondmorelikelytoactuallyachievethegoalandthirdprobablylessexpensiveoverall.
"PeterH.
Diamandis,MD/XPRIZEFoundationXPRIZEFoundation,2009Pg8PrivateBenefactormoney,whichissometimescalled"egomoney"isthesamepotoffundsthatanindividualusestoputtheirnameonthesideofabuilding,ortopersonallyfundanAmerica'sCupteam.
Itismoneythatgivesthempersonalgratificationorhelpsbuildafamilylegacy.
Alargeaudaciousprizecanhelpwealthyindividualstransitionfrom"SuccesstoSignificance.
Theselevelsoffundingcanruninthetenstohundredsofmillionsofdollars.
Theproperlyconstructedprizecanenticeandattractfundstobackateam.
AsPaulAllen,thevisionbackerofSpaceShipOnesaidattheAnsariXPRIZEpost-flightpressconferenceinOctober2004,"AfewyearsagoIwasjustbrowsingtheinternetandIcameacrossthisthingontheXPRIZEandIthoughtthisiskindofinteresting,whoarethecrazyguystryingtodothiskindofthing…"DesigningIncentivePrizesXPRIZEshavebeendesignedtooffersignificanteconomicandpsychologicalleversforacceleratingandenablinginnovationinareasthatmightotherwisebestuckforanumberofreasons.
Followingarethemostimportantguidingprinciplesinthedesignoftheseincentiveprizes:1.
Simple,ClearandObjectiveRules:WhencreatinganXPRIZEwestrivetocreatesimple,clearandobjectiverulesthatcanbeeasilyunderstoodbythepublic.
Anobjectiveandclearfinishlinemakesthewinningoftheprizeobvioustotheobservingpublic.
InthecaseoftheOrteigPrizetheruleswere"flynon-stopbetweenNewYorkandParis.
"InthecaseoftheAnsariXPRIZEthesimplerulescouldbeexpressedas"Flythesame3-personspaceship,twiceto100kilometersaltitude,twiceintwoweeks.
"2.
DefiningtheProblemandNottheSolution:Theprizerulesshoulddefineaproblemtobesolved,notaspecificsolutiontobeimplemented.
Forexample,theAnsariXPRIZEdidnotspeakaboutthetypeofpropulsionorthemechanismoflaunchoreventhelocationofthelaunch,onlytheobjectiveofgetting3peopleto100kmtwiceintwoweeks.
Assuchthecompetitionsawthedesignofoveradozenuniquelydifferentapproaches.
3.
AddressingMarketFailures:XPRIZEsareneededtojumpstartastuckindustryanddemonstrateamarketaswellasdrivedistributiontogetcriticalmass.
Prizesshouldaddressproblemswhereamarketfailurepreventssolutionsduetoablockagesuchas:IndustryorothersocietalconstraintsthatpreventchangePeoplebelieveaproblemisnotsolvableIndustry,institutionalandpublicmisperceptionorperceptionsCapitalisnotavailabletoanimportantproblem4.
TheProperBalanceofAudacityandAchievability:Theprizeneedstobeaudaciousenoughthatitisinspirationalandheroicinitspursuit,butnotsodifficultthatitcan'tbeachieved.
WhilemanythoughtthattheAnsariXPRIZEshouldbefocusedonorbitalhumanflight,thisis50-foldharderfromanenergystandpointthansub-orbitalflight.
Hadthisbeentheobjective,theAnsariXPRIZEmightneverhavebeenwon.
Werecognizedthatwedidn'tneedtogotoorbitinordertostimulatethetypeofparadigmchangewedesiredtoaffect.
5.
PurseSize:WedefineXPRIZEsaspursesthatare$10millionormoreinsize.
The$10millionfigureisusedtobreakthroughthemediaclutter,raisethevisibilityofaproblemandattractnon-traditionalplayers.
ThesizeofthepurseisafunctionofmanythingsincludingPeterH.
Diamandis,MD/XPRIZEFoundationXPRIZEFoundation,2009Pg9anunderstandingoftheincentiveneeded,thevalueoftheback-endmarketplace,theminimumamountneededtoattemptthefeat(i.
e.
degreeofdifficulty,apursemightbesizedtobetheminimumexpectedthatateammightspend),theperceivedimportanceoftheproblem,andthesponsors'desireforbranding(e.
g.
the"biggestever").
TeamsaretypicallywillingtoinvestmorethantheamountofthepursewhentheproperlydesignedXPRIZEhasaback-endbusinessmodelthatallowsteamsandtheirbackerstocaptureareturnoninvestment.
WhilethelargestXPRIZEatthismomentis$30million(GoogleLunar),inthefuturewemayseeprizesrisetoa$100millionormore.
6.
PersistentMediaExposureoverTimeforPrizeCompetition:AproperlydesignedXPRIZEwillhaveacompetitionstructurethatallowsteamstohaverepeatedexposureinthemedia.
Thepersistenceofexposuretothepublichelpsdrivetheparadigmchange.
InthecaseoftheAnsariXPRIZE,thecompetitionrequiredtwoflightsovertwoweekswhichprolongedallmediaexposurecomparedtoifithadbeenjustforoneday.
7.
Captivating,TelegenicandClearlyMeasureableDemonstrations:XPRIZEsmustengagethegeneralpublicinafashionwhichgiveseveryonetheopportunitytorootfortheirfavoriteteamandcelebratethevictory.
XPRIZEsshouldbedesignedtogeneratepopularinterestthroughouttheprizelifecycle,frominitialcompetitorenrollment,tothestartofthecompetition,tothemanytelegenicattemptsatthepurse(bothsuccessfulandunsuccessful)andfollowingthecompletionofacompetition.
Thewinningoftheprizeshouldbeobjectiveandclearlymeasureabletoensurethatthereisnoquestionordebate.
Inaddition,itisimportantpeopleclearlyunderstandwhytheprizeisbeingconducted,namely,whatistheradicalbenefittohumanitybeingcreatedwhentheprizeissuccessfullywon.
8.
MultiplePursesandBonuses:Usingasecondplacepurseand"Bonus"pursescanincreasethenumberofteamscompetingandthevarietyofapproachesthattheypursue.
Secondplacepurseskeepteamscompetingafter1stplaceisawarded.
Itcankeepteamsengagedifthereisastrongfrontrunner.
Itcanalsolengthentheamountoftimethatthecompetitionisinthepublicmind,therebyincreasingitsabilitytoachievethedesiredparadigmchange.
9.
LaunchingAbovetheLineof"SuperCredibility":TheinitialannouncementofanXPRIZEshouldbedoneinaveryvisiblefashionwiththemaximumamountofmediaexposure.
Theprizelaunchshouldpublicizetheprize,itssponsorsandthechallengetotheworld'spress.
Thisistoensurethatthecompetitionistakenseriouslyfromthestart.
Properlydone,theprizelaunchchangestheperceptionofthepublicfrom,"Canitbedone"to,"Whenwillithappenandwhowillwin"Atthelaunchevent,itisimportanttohavetheparticipationofgold-platedendorsers(whosharetheirreputationalequity)andevenanumberofteamsreadytocompete.
10.
GlobalParticipation/OpentoAll:XPRIZEsareglobalinnature,allowingteamsfromaroundtheworldtoregistertocompete.
Weseekthebroadestrangeofqualifiedteams.
Anyteamfromanynationisabletoregister,andtheresultsfromthecompetitionaretobenefitallofhumanity.
XPRIZEsareopentoallparticipantsindependentofage,education,andexperience.
11.
Targetinga3–8YearPrizeTimeframe:The"DegreeofDifficulty"ofXPRIZEsaredesignedsothattheyarenominallywonina3to8yeartimeperiod.
Ifaprizeiswoninlessthan3years,itwasprobablytooeasy;ifittakeslongerthan8yearstowin,mostpeoplewilllosetheirinterest.
PeterH.
Diamandis,MD/XPRIZEFoundationXPRIZEFoundation,2009Pg1012.
UsingDeadlinestoDriveIntelligentRisk-taking:XPRIZEsmayutilizeaposteddeadline,orasteppeddownreductioninprizepursetodriveteamstomakeattemptsearlierinthecompetition.
Suchdeadlinescanalwaysbeextendedbytheprizepursebenefactor.
13.
OwnershipofIntellectualProperty&MediaRights:InatypicalXPRIZE,theteamsretainIPandtheXPFretainsmediarights.
HoweverprizescanvaryandinsomecasestheymayrequirethattheIPismadeavailabletothepublic,orinsomecasesthataportionoftheIPisownedby,orlicensedtotheprizesponsor.
14.
DesignedwithaBackendBusinessModel:TheidealXPRIZEisdesignedsothatthereisabackendbusinessopportunityfortheteamstoexploit,andenterintorevenuebusinessoncetheprizeiswon.
Itwasforthisreason,forexample,thattheAnsariXPRIZErequireda3-personspaceshipratherthanaone-personship.
Theback-endbusinessmodelmakesiteasierforteamstoraisefundingfortheirteams.
Itisalsothecasethatthepublicityresultingfromthewinningoftheprizewilldrivecapitalinvestment,innovationdeploymentandmarketacceptance.
BenefitsofanIncentivePrizeUltimately,theseareadozenkeybenefitsthatderivefromanXPRIZECompetitionworthnotingforcompetingteamsandprizebenefactors.
1.
AttractingNewCapitaltoaProblem:XPRIZEsdrivenon-traditionalfinancialresourcestowardfundinginnovation.
Thesefundsincludeaportionofthe$20billionsponsorshipmarketthattypicallyfundssporting,artsandentertainmentplatforms,andeventsandaportionofthe$300billiondollarphilanthropicmarket.
2.
AttractingandMotivatingDoers:XPRIZEsattractandmotivatenon-traditionalplayerstoattackaproblemaswellastheworld'sbestandbrightestmindstoworkharder,fasterorinentirelynewways.
ItistheobjectiveofanXPRIZEtoturntheseteamsandtheirleadersintoheroesbyshiningthemediaspotlightonthemandtheirstories.
Prizesgiveindividuals"permissiontoturntheirdreamsintoreality"aswellashelpthemraisefurthercapitalinvestmentbecauseoftheincreasedvisibility.
3.
Crowd-sourcingGenius:ProperlystructuredXPRIZEsattractgeniusfromaroundtheworldindependentofage,raceandgender.
Theyallowbrilliantindividualswhodonotnecessarilyfunctionwellintraditional"programs".
Highvisibilityincentiveprizescapturepeople'simaginationanddiscretionarycycles.
4.
IncreasingPublicAwareness/RaisingtheVisibilityofaProblem:PublicityaroundanXPRIZEeducatesthepublicandfocusesthemontheimportanceoftheproblem.
Thispublicitymotivatesteamstoworkharderandincreasesleverageoftheprizepurse.
Thisglobalmediaattentionmotivatesinnovatorsseekingtotackleachallengeofsignificancetohumanity.
5.
OvercomingExistingConstraints:XPRIZEsreconfigurewhatispossiblebytranscendingpath-dependentlimitationssuchassocietalconstraints,legal/regulatoryhurdlesandpolicyregimes.
Prizesovercomeresignationandcynicismbecausetheydrivetheeliminationoftheexcusethat"everyone"believesthattheproblemisnotsolvable.
PeterH.
Diamandis,MD/XPRIZEFoundationXPRIZEFoundation,2009Pg116.
ChangingtheParadigm:AprincipalfocusofanXPRIZEistochallengeandthen"changetheparadigm"ofwhatthepublicbelievesisnowpossible.
Thistakesplacebyhavingtheprizewoninadramaticfashion,withextendedmediaexposurethatallowsthemessagetobreakthroughtheclutter.
Inidealcircumstances,prizescanalsodrivebehavioralchanges.
7.
LaunchinganIndustry,withLastingBenefitandImpact:AnXPRIZEshouldbedesignedsothatafterthepurseisawarded,itisnottheend,butthebeginningofanewindustry.
Innovationaloneisnotsufficient.
Todrivetruebreakthroughsandbenefitstohumanity,theseinnovationsneedtobemarketableanddeployed.
Ultimatelythegoalistosolvetheproblemandcreatecommercialcompaniesthroughanentrepreneurialprocess.
8.
ProvidingFinancialLeverage:AnXPRIZEmustgenerateoutsideinvestmentincompetitorsatanorderofmagnitudegreaterthanthepursesize.
Aprizeneedstomotivatedonors,sponsorsandinvestors,suchthatteamsreceivegreateraccesstofunding.
Prizesworkbecausetheygeneratemuchgreaterinterestandinvestmentthanthenetvalueofthepurseoffered.
Innovatorsandinvestorsaretypicallywillingtoinvestmorethantheamountofthepursefortworeasons.
First,manyaretypicallyoptimists,andinitiallybelievethattheycansolveitforlessthanthepurseamount,andthenincrementallyrationalizelargerinvestmentsovertime;andsecond,theproperlydesignedXPRIZEhasaback-endbusinessmodelthatallowsteamstocaptureareturnoninvestment.
9.
InnovationandReal-worldDeployment:XPRIZEsideallycreatebothtechnologicalinnovationaswellassuccessful"realworld"deployment.
AproperlyconstructedXPRIZEeitherdemonstratesacapabilityinsuchafashionthatmarketdemandandcapitalstepintofinancethecontinueddevelopmentanddeployment(e.
g.
VirginGalactic)orrewardarealworlddeploymentthroughadvancedmarketcommitments.
10.
AttractingCross-disciplinarySolutions:Truebreakthroughsoftencomefromoutsidethenormalfieldofexperts(e.
g.
whenaphysicistlooksatabiologicalproblem).
XPRIZEsshouldraiseaproblemtoalevelofvisibilitythatattractsmultidisciplinaryinnovatorsthatwouldotherwisebeunlikelytotackletheproblemsthattheprizeisdesignedtoaddress.
Prizesdriveinterdisciplinarycollaborationamongstunlikelypartners.
11.
DrivingRegulatoryReform:AproperlydesignedXPRIZEwillhelptoclarifytheregulatoryissuesrelevanttothecompetition.
Sufficientpublicitysurroundingtheprizecoupledwithalargenumberofteamscanprovidesufficientpressuretoallowregulationstobecreatedand/ormodifiedallowingforthecompetitiontobewon.
12.
Inspiration,HopeandIntelligentRisk-taking:XPRIZEsareaboutcreatinginspirationandhopeinafieldwhichhasbeenstuckforanumberofreasons.
Theseprizesencouragenon-traditionalteamstotakeintelligentlevelsofriskthatcanallowforbreakthroughsinasectorthatisotherwisestuckordominatedbyrisk-adverseincumbents.
PeterH.
Diamandis,MD/XPRIZEFoundationXPRIZEFoundation,2009Pg12APPENDIX-1(NotesfromWikipedia)TheLongitudePrize:TheLongitudePrizewasarewardofferedbytheBritishgovernmentthroughanActofParliamentin1714forasimpleandpracticalmethodfortheprecisedeterminationofaship'slongitude.
TheprizewasadministeredbytheBoardofLongitude.
Themeasurementoflongitudewasaproblemthatcameintosharpfocusaspeoplebeganmakingtransoceanicvoyages.
Determininglatitudewasrelativelyeasyinthatitcouldbefoundfromthealtitudeofthesunatnoonwiththeaidofatablegivingthesun'sdeclinationfortheday.
Forlongitude,earlyoceannavigatorshadtorelyondeadreckoning.
Thiswasinaccurateonlongvoyagesoutofsightoflandandthesevoyagessometimesendedintragedy.
ManypersonsbenefitedfromtheawardsofferedbytheBoard.
Intotal,over100,000wasgivenintheformofencouragementsandawards.
SignificantamongtheseareJohnHarrisonwhowon14,315inseveralpayments.
4,315wasawardedduringhisworkonhischronometersfrom1737to1764withtheremaining10,000providedin1765.
TheOrteigPrize:TheOrteigPrizewasa$25,000rewardofferedonMay19,1919,byNewYorkhotelownerRaymondOrteigtothefirstalliedaviator(s)toflynon-stopfromNewYorkCitytoParisorvice-versa.
Severalfamousaviatorsmadeunsuccessfulattemptsattransatlanticflightsbeforerelatively-unknownCharlesLindberghwontheprizein1927inhisaircraftSpiritofSt.
Louis.
Hisflightwasfollowedbythe"Lindberghboom",aspublicinterestinairtravelbloomedandaviationstocksskyrocketed.
Althoughadvancingpublicinterestandaviationtechnology,thePrizeoccasionedexpensesmanytimesthevalueoftheprizeandcost6mentheirlivesinthreeseparatecrashes.
Anotherthreemenwereinjuredinafourthcrash.
Duringthespringandsummerof1927,40pilotswouldattemptvariouslong-distanceover-oceanflights,leadingto21deaths.
InAugust1927alone,theOrteigPrize-inspired$25,000DoleAirRacetoflyfromSanFranciscotoHawaiiwouldcosttenlivesbeforeitwasover.
TheKremerprizes:TheKremerprizeswereaseriesofmonetaryawards,establishedin1959byHenryKremer,thatweregiventopioneersofhuman-poweredflight.
ThefirstKremerprizeof50,000waswononAugust23,1977byDr.
PaulMacCreadywhenhisGossamerCondorwasthefirsthuman-poweredaircrafttoflyafigureeightaroundtwomarkersonehalfmileapart.
ThesecondKremerprizeof100,000waswononJune12,1979,againbyPaulMacCready,whenBryanAllenflewMacCready'sGossamerAlbatrossfromEnglandtoFrance.
AKremerprizeof20,000forspeedwaswonin1983byadesignteamoftheMassachusettsInstituteofTechnologyforflyingtheirMITMonarchBcraftonatriangular1.
5km(0.
93mi)courseinunderthreeminutes(foranaveragespeedof32km/h(20mph)).
DARPAGrandChallenge/UrbanChallenge:TheDARPAGrandChallengeisaprizecompetitionfordriverlesscars,sponsoredbytheDefenseAdvancedResearchProjectsAgency(DARPA),themostprominentresearchorganizationoftheUnitedStatesDepartmentofDefense.
CongresshasauthorizedDARPAtoawardcashprizestofurtherDARPA'smissiontosponsorrevolutionary,high-payoffresearchthatbridgesthegapbetweenfundamentaldiscoveriesandtheirusefornationalsecurity.
DARPAhastechnologiesneededtocreatethefirstfullyautonomousgroundvehiclescapableofcompletingasubstantialoff-roadcoursewithinalimitedtime.
Thethirdevent,TheDARPAUrbanChallenge,whichtookplaceonNovember3,2007andwasbroadcastviawebcast,[1]furtheradvancedvehiclerequirementstoincludeautonomousoperationinamockurbanenvironment.
TheGrandChallengewasthefirstlongdistancecompetitionfordriverlesscarsintheworld;otherresearcheffortsinthefieldofdriverlesscarstakeamoretraditionalcommercialoracademicapproach.
TheU.
S.
CongressauthorizedDARPAtoofferprizemoney($1million)forthefirstGrandChallengetofacilitateroboticdevelopment,withtheultimategoalofmakingone-thirdofgroundmilitaryforcesautonomousby2015.
Followingthe2004event,Dr.
TonyTether,thedirectorofDARPA,announcedthattheprizemoneyhadbeenincreasedto$2millionforthenextevent,whichwasclaimedonOctober9,2005.
Thefirst,secondandthirdplacesinthe2007UrbanChallengereceived$2million,$1million,and$500,000,respectively.
Thecompetitionwasopentoteamsandorganizationsfromaroundtheworld,aslongastherewereatleastoneU.
S.
citizenontheroster.
Teamshaveparticipatedfromhighschools,universities,businessesandotherorganizations.
Morethan100teamsregisteredinthefirstyear,bringingawidevarietyoftechnologicalskillstotherace.
Inthesecondyear,195teamsfrom36USstatesand4foreigncountriesenteredtherace.
TheAnsariXPRIZE:TheAnsariXPRIZEwasaspacecompetitioninwhichtheXPRIZEFoundationofferedaUS$10,000,000prizeforthefirstnon-governmentorganizationtolaunchareusablemannedspacecraftintospacetwicewithintwoweeks.
Itwasmodeledafterearly20th-centuryaviationprizes,andaimedtospurdevelopmentoflow-costspaceflight.
TheprizewaswononOctober4,2004,the47thanniversaryoftheSputnik1launch,bytheTierOneprojectdesignedbyBurtRutanandfinancedbyMicrosoftco-founderPaulAllen,usingtheexperimentalspaceplaneSpaceShipOne.
$10millionwasawardedtothewinner,butmorethan$100millionwasinvestedinnewtechnologiesinpursuitoftheprize.
Intotal26teamsfrom7nationsregisteredtocompete.
Thecompetitiongeneratedawidevarietyofapproachesincludingsolid,hybridandliquid-enginesandverticalandhorizontallaunchapproaches.
PeterH.
Diamandis,MD/XPRIZEFoundationXPRIZEFoundation,2009Pg13MITOpenCourseWarehttp://ocw.
mit.
eduESD.
172J/EC.
421JXPRIZEWorkshop:GrandChallengesinEnergyFall2009ForinformationaboutcitingthesematerialsorourTermsofUse,visit:http://ocw.
mit.
edu/terms.