Building a 21st-Century Coffee House — Prize Architecture and Open Innovation
If you walk into an elementary school classroom, you’re likely to find gold stars on desks or report cards — a sticker signaling excellence and achievement. As we grow older, this recognition might take the shape of certificates, medals or even internationally-acclaimed awards. From these seemingly-insignificant stickers to competitive feats like the Olympics and celebratory events like the Grammys, competition and awards have been — and continue to be — an underlying thread in our cultures and various disciplines. In fact, this desire to compete and to celebrate victories — our own and those of others — is part of our psychology, often bringing out the very best within us.¹
During my undergrad at Minerva University, I pondered in the question of “what if there was a way to channel this underlying drive not only within an individual’s competitive context but also as a way to nurture innovation, foster communities, or drive entire industries forward?”
Two years and one 100-page dissertation later, I found one such system already exists in the form of prize challenges — and I’d say we are only just beginning to see their full potential.
First, let’s get some definitions out of the way:
💡 Prize challenge: A structured initiatives that include a predetermined problem statement tied to an incentive such as a cash or publicity. (Think: hackathons, innovation challenges, the recent Earthshot Prize, etc.)
Because each challenge is unique in its approach and purpose, it requires a method of building and designing these initiatives, which I call prize architecture.
A prize architect, in turn, is someone who constructs and combines various design elements to produce the desired challenge outcomes. (More on this later.)
The Background
As part of my senior capstone project at Minerva University, I delved deep (And I mean, like, really deep) into the world of prize design. For a subject matter that I didn’t even know existed until my junior year of college, the breadth and analytical-nature of the literature both surprised and fascinated me. Over a two year period, I ended up creating a 50+ page guidebook and 9-part framework for prize architects — to not only build stellar challenges, but purpose-driven challenges — and partnered with a London-based events company, EdTechX, to design and execute a global innovation challenge as proof-of-concept of this framework.
What started as a university project and a simple question of how to creatively achieve business objectives outside of traditional marketing or R&D investment, ultimately evolved into a journey of exploring open innovation, building a global prize challenge, and discovering how good ideas are actually nurtured.
Here’s what I learned along the way.
Prize Architecture and Business
In many ways, prize architecture can be seen as a unique type of marketing strategy — an effective prize challenge is one that builds authentic connections with your audience, incentivizes collaborative innovation, and ultimately furthers business/brand objectives. This thought is exactly what led me to discover a gap in the literature and why I think prize challenges are such a valuable and versatile tool for business.
Throughout my research, I realized that, while there are many examples of prize challenges tackling social issues or product development, information around prize challenges within enterprise contexts to achieve a specific business purpose or brand objective was sparse. I concluded that this was likely due to a combination of three factors:
- The prominence of “challenge-focused brands’’ in the private sector.
- In other words, companies like XPRIZE or Hult Prize, which are solely focused on building grand challenges as the business, rather than using prize architecture to achieve a separate brand or business objective. These large-scale challenges incentivize many incredible scientific breakthroughs but their main objective is not necessarily to further a specific company’s purpose or brand objective through the challenge.
2. The lack of business or brand objectives in public sector prize challenges.
- Public sector prize challenges are usually focused on achieving a targeted, societal objective and thus absent from conversations around business or brand implications. An example, from arguably the first ever documented prize challenge, is the 18th-Century Longitude Prize in which the British Government offered a large prize of £20,000 for anyone who could invent an effective way to determine logitutudes that could help sailors navigate at sea. (John Harrison’s Marine Timekeeper took the prize, saving many sailor’s lives and becoming the first portable chronometer.)
3. Analyzing prize challenges through the same lens as patents
- Prize challenges are often compared to the more-commonly known incentive-based tool: patents, to which they are peripherally but not fundamentally comparable. Patents award exclusive rights (but can result in deadweight loss inefficiencies and market monopolies) while prize challenges can incentivize wide-scale R&D and innovation without any monopolistic ownership. Additionally, with much of the analysis of prize challenges coming from an economic or uni-dimensional perspective, this somewhat myopic approach puts them against their immediate market-based impact, potentially overlooking business outcomes and spillover effects resulting from prize challenge systems and networks.
Innovation mechanisms
With this understanding of the landscape, I went back to the basics — seeking to understand where and how good ideas are born. I knew that at the fundamental level, prize challenges can incentivize the right stakeholders to develop creative and innovative ideas. But what was it about the structure of challenges that actually drove innovation? I found that the answer begins with the way we view new ideas in the first place.
Ideas are often portrayed as coming to individuals in a “stroke” of insight or during an “eureka” moment. However, as described by Steven Johnson in Where Good Ideas Come From, ideas usually emerge slowly over time through the collision of “hunches” — half formed ideas — that are exchanged between people in collaborative spaces or systems.³
Even Darwin’s theory of natural selection, which we usually envision coming to him in a “lightbulb moment,” only bloomed and matured into a fully formed theory over time as shown by analysis of his documented writings.
In another example, a group of researchers set out to better understand the root of scientific breakthroughs inside molecular biology labs. After much observation and analysis, their results showed that the best ideas arose not in isolated study, as one might imagine, but during regular lab meetings in which scientists formally and informally conversed about their work.⁴
So there it was — rather than a lucky stroke of lightning, these “half-baked hunches” need time to mature, evolve, and interact with other hunches before they can blossom into truly innovative ideas.
A 21st Century Coffee House
Through the lens of Johnson’s innovation framework, providing a physical (or virtual) space where many hunches can collide is key. My favorite example of one such environment is the 18th-century English coffee house that brought individuals from a wide range of backgrounds together into a shared intellectual space. Traveling businessmen, local university students, and writers were frequent visitors — discussing everything from politics and poetry to new inventions and business ideas. These spaces were so central to the flow of information that many credit these coffee houses as being a central catalyst of the Enlightenment.
Fast forwarding to the current day — we (sadly) don’t talk to each other in coffee shops anymore (but we should!), and many of these spaces of conversation, debate, and information have become digitized and almost fully democratized through the power of the world wide web. However, we have to remember that the internet is still just a tool and a platform, requiring intentional structures to fully maximize its power.
I see Prize architecture as one such structure which creates a system that not only brings diverse individuals together but incentivizes them towards a shared, desired objective. The diversity of individuals, often ranging from students and entrepreneurs to large corporates and research teams, comes precisely because this structure taps into communities of people who otherwise might not have been incentivized to solve a problem in the given industry.
Take for instance, a 2010 challenge designed by Harvard Medical School, in which participants were asked to submit hypotheses of out-of-the-box ways to treat Type I diabetes. Of the 190 submissions received, the winners included an “undergraduate student in chemistry, a retired dentist, a geophysicist, and high profile genetics researcher with no prior background in diabetes”⁵ — probably all people who would not have worked on this problem in absence of this challenge. Hunches that would have never collided.
In my view, prize architects (those who are designing these challenges) as essentially building a “21st-century coffee house” — bringing together people from different backgrounds and perspectives with half-formed hunches to further facilitate innovation.
The Case for Open Innovation
Okay, finally, let’s talk about business side of things — How does all of this connect?
In today’s current business innovation paradigm, secrecy is usually favored over openness with businesses opting to remain a “closed system” that require high levels of secrecy. While it’s true that many technical industries need an element of secrecy to gain a competitive advantage, part of this perspective is based upon an outdated model of heavily investing in solely a closed-door approach to R&D.
This model worked for the majority of the 20th century but began to erode mainly due to a “dramatic rise in number and mobility of knowledge workers” in addition to a rise in private capital, making it difficult for companies to control their proprietary ideas and expertise (Chesbrough, 2003).
However, in the 21st century, the boundaries between the firm and the surrounding environment have become increasingly “porous” as seen in the image on the right. The firms that leverage both internal and external ideas can generate more value by entering new markets that were previously undiscovered (Chesbrough, 2003). In other words, businesses can and should be creating more collaborative environments between the firm and the external world — creating systems that nurture “half-baked hunches” and ultimately increase innovation.
But just as all spaces of innovation must be intentionally crafted, simply opening up firm boundaries will not automatically serve the company. Firms must have clear objectives and strategies before tapping into open-source networks to fully benefit from external input. One example of a successful external collaboration is P&G’s “Connect & Develop”
But the innovation potential, is actually only one side of the story. With an effective prize design and challenge execution, a business can achieve objectives that may typically be distributed across marketing, R&D and other departments including: increasing brand awareness, creating new partnerships, building communities or even accelerating parts of an industry. While marketing is often seen as decoupled from R&D and innovation focusing rather on higher-funnel activities, good marketing should do both — in a creative, unconventional, and authentic way.
I see it as ripe area that many businesses haven’t, but should tap into.
If you’re curious to learn more about how prize challenges can work for you and your business, check out the guidebook below. The 50-page guidebook provides an in-depth analysis of prize architecture and a practical, 9-element framework for designing your own prize challenge to meet your specific business objectives — along with various case studies, worksheets, and helpful tips. It will help you decide on running a more product-centric vs. a community-centric prize challenge, how to choose the best incentivize based on your target audience, and how to think about judging criteria, marketing, and recognition ceremonies for your challenge — covering everything from conception to design to execution.
Ultimately, prize architecture is not a ‘one- size-fits-all’ approach where one successful design can be templated to another; Rather, it is a complex combination of prize elements and design decisions that can be used to achieve specific objectives.
If you’d like to find out how, purchase the full guidebook here:
Reference Photos:
The EdTechX Challenge
As a proof-of-concept of this framework, I worked with a London-based events company, EdTechX, to create a global innovation challenge focused on their mission to further connect the learning community. I led this initiative over the course of 16 months with two team members from the EdTechX team.
The challenge invited students to submit proposals with ideas that could transform the future of learning and work. The top 3 applicants pitched their ideas to a panel of expert judges at a virtual competition and were invited to an award ceremony with EdTechX and our sponsors, which included Google Cloud, MoocLab, and IBIS Capital.
EdTechX Challenge Homepage
Final Pitch Competition & Awards Ceremony
References
[1] McKinsey&Co. (2009). ‘And the winner is…’: Philanthropists and governments make prizes count | McKinsey.
[2] Burstein, M. J., & Murray, F. (2016). Innovation Prizes in Practice and Theory (SSRN Scholarly Paper ID 2741827). Social Science Research Network.
[3] EdTechX. (2021). EdTechX | Events, Insights, Community.
[4] Cho, M. (2021). 2021 EdTechX Challenge Brief.
[5] Kremer, M., & Williams, H. (2010). Incentivizing innovation: Adding to the tool kit. Innovation Policy and the Economy, 10(1), 1–17.
[6] Mitchel, K., Parker, N., Sahil, J., Goldhammer, J., & Anderson, B. (2014, June 19). The craft of incentive prize design: Lessons from the public sector | Deloitte Insights.
