Private Business Getting Into Innovation Prizes

from the for-fun-and-profit dept

For some time, we've been noting the increased use of prize money as a way of spurring innovation, an idea made popularized by the X-Prize foundation's prize for private space travel. For the most part it's been government and non-profit foundations awarding the prizes, as they hope to spur advances that benefit some broader good. Now, however, the concept is being applied to the business world. Last year Netflix announced that it would award $1 million to anyone who could develop an improvement to the company's recommendation algorithm. Increasingl, venture capitalists are starting to wonder whether the model could be applied to their business, as well. It's not exactly clear how it would work. Some think that prizes could simply be a useful tool in building up a sector that the VCs could then invest in. Others envision models whereby a VC firm would take a stake in whichever company won the prize. Critics of the idea argue, however, that its the role of VCs to invest in companies that can make money, and that it's the market that ultimately rewards innovation. Offering prizes for innovation isn't really a market mechanism, and it could lead to "winners" that don't perform well as businesses. While it's likely that the prize model could not be transported perfectly to the for-profit realm, it does seem worth exploring further. Prizes like the one offered by Netflix show how they can be used to target something that could be turned directly into a business improvement. For VCs, perhaps a prize on how best to use prizes is in order.

Reader Comments (rss)

(Flattened / Threaded)

  1. identicon
    dorpus, Feb 16th, 2007 @ 12:43pm

    How About a No-Suicide Tamiflu?

    Tamiflu has been implicated in several dozen suicides, when perfectly normal children suddenly decide to go flying like a birdie out of windows. Can someone devise a safer Tamiflu?

    In the latest fatality, a 14-y.o. girl decided to fly off a 10th floor balcony, and went to heaven.

    reply to this | link to this | view in thread ]

  2. identicon
    Anonymous Coward, Feb 16th, 2007 @ 1:27pm

    another brilliantly on topic post by dorpus, wonderful

    reply to this | link to this | view in thread ]

  3. identicon
    Sanguine Dream, Feb 16th, 2007 @ 1:47pm

    I'll bet...

    that within 2 years someone will try to patent the business model of awarding prizes in this manner.

    reply to this | link to this | view in thread ]

  4. identicon
    Joe Smith, Feb 16th, 2007 @ 6:25pm

    Prior art

    "that within 2 years someone will try to patent the business model of awarding prizes in this manner."

    This business model is hundreds of years old but they will say that they are using computer to manage the contest and that will make it new and patentable.

    reply to this | link to this | view in thread ]

  5. identicon
    dorpus, Feb 17th, 2007 @ 6:12pm


    How DARE you accuse me of being on-topic! My entire existence is based on being completely ignorant, totally biased, and 100% off-topic.

    tamiflu was created by the CIA to subvert the government of (random country name here), not that it matters because people who live in (random country name here) are ignorant savages.

    Let's stay off topic, please. I like it when everyone pretends my stupid rants are worth replying to.

    reply to this | link to this | view in thread ]

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