May 222011
X PRIZE Foundation

Image by Chris Radcliff via Flickr

THE Internet is revitalizing an old stalwart in the innovation game: the prize as incentive.

Every few weeks, some big new contest arrives. This month,, the online retailer, announced that it would sponsor a competition paying $1 million to the person or team who comes up with new technology that most improves its product recommendations. And Qualcomm and the X Prize Foundation — a group known for its huge prizes for grand challenges, like private space flight — announced a $10 million competition for a smartphone application that could diagnose health problems as accurately as human physicians could.

Last month, the Heritage Provider Network, a medical group in California, supplied details and data for its $3 million prize. It will go to the team with the best algorithm for predicting which patients are most likely to be admitted to hospitals in the next year.

Perhaps the most far-reaching effort, however, comes from the federal government. Legislation passed in December, the America Competes Act, gives government agencies far greater freedom to sponsor prize contests with purses of up to $50 million. Last September, even before the legislation, the Obama administration put up a Web site,, listing government challenges, some with prize money and some without, as part of its goal of tapping innovative ideas from citizens.

The proliferation of prizes, says Josh Lerner, a professor at the Harvard Business School, is part of the larger trend of opening corporations and government to wider networks of people with fresh ideas by using the Internet. Crowdsourcing and open-source software — computer programs developed and debugged by far-flung groups of contributors — are other examples of the “open innovation” approach, he says.

“But while the current popularity of prizes is facilitated by the Internet, the prize model goes way back — long before computers,” Mr. Lerner observes.

The prize model does indeed have a long, rich history. In 1714, Britain offered a prize of £20,000 — nearly $4.5 million today — to anyone who could invent a way to accurately determine a ship’s longitude. That prompted John Harrison to create the marine chronometer, an invaluable tool of seafaring navigation. In 1795, the French government created a sizable prize for the inventor of a way to preserve food, because provisions for Napoleon’s armies were spoiling in transit. So Nicolas Appert devised a technique for canning food. In 1919, Raymond Orteig, a New York hotelier, announced a $25,000 prize — more than $300,000 today — for the first person to fly nonstop between New York and Paris. In 1927, Charles Lindbergh picked up that prize, opening the door to transoceanic air travel.

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