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Winning the R&D Game

Are you trying to develop the next big thing? Enlist help from bright minds outside your company by throwing in a prize.

NASA wants its own Willy Wonka-esque elevator that will reach all the way to space. Instead of building it from scratch with its limited manpower and investing millions of its own money, the agency is holding competitions and offering a few thousand Ben Franklins to whoever can make it happen. The newest R&D teams aren't in the back office; they're in society at large. R&D is quickly becoming a game, and the prize is cold, hard cash.

Colin Nederkoorn of Houston is the poster child for today's solution-seekers. When Apple announced it was switching to Intel processor chips, internet forums buzzed with theories that Mac hardware would be able to run the Windows OS natively--a function that would benefit the shipbroking company Nederkoorn works for, as well as Mac users everywhere. Nederkoorn put up $100 to the first person who created the missing link that would enable the Mac to run Windows, and allowed others to contribute to the prize. Within months a solution was found, and the winning team collected $13,854.

This wasn't the first time prize money was offered up to innovators and risk-takers. In 1927, Charles Lindbergh became the first person to fly solo nonstop across the Atlantic, from New York City to Paris. He did it for a $25,000 prize.

Lindbergh's story inspired Peter H. Diamandis, 45, founder of the X Prize Foundation in Santa Monica, California. In 2004, the X Prize Foundation awarded the largest prize in history ($10 million) to Mojave Aerospace Ventures for the flight of SpaceShipOne, which was able to carry the weight of four people into space twice within two weeks.

But why prizes? Nederkoorn, 24, says his growing prize purse was creating a fervor to innovate. "The contest was a perfect vehicle because of the low barrier to entry that gave me access to hundreds of minds working to solve my problem," says Nederkoorn.

Diamandis warns it's not always that easy and gives pointers to those wanting to create prizes. "You have to be very clear about the problem you're solving and understand what's causing the problem," says Diamandis. "The size of the purse and people involved have to be in line with the size of the challenge." Whether the prize is big or small, Diamandis says the solution should offer a radical breakthrough and a dramatic conclusion.

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This article was originally published in the September 2006 print edition of Entrepreneur with the headline: Eye on the Prize.

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