A Little Competition Brings Out Astonishing Innovation

Traditional ways of finding new ideas, such as investing in big R&D laboratories, are expensive. What’s more, they “often produce disappointing results,” write Alan MacCormack, Fiona Murray and Erika Wagner in the Fall 2013 issue of MIT Sloan Management Review.

What’s working for many companies now are contests — contests that present a company problem or challenge to the outside world, and that offer a wide variety of rewards for outsiders’ ideas. In fact, MacCormack, Murray and Wagner note, such contests often trigger major breakthrough ideas.

Take, for example, the Oil Cleanup X Challenge.

In their article “Spurring Innovation Through Competitions,” MacCormack, Murray and Wagner explain that the Oil Cleanup X Challenge is an example of how an organization can generate new solutions to a known problem.

The contest offered a $1.4 million prize in 2011 for the most effective product to recover oil from the surface of the sea. It was sponsored by Wendy Schmidt, a philanthropist whose foundation “works to advance the development of clean energy and support the wiser use of natural resources,” according to Schmidt’s bio at the contest’s website. “Once [spilled] oil hits the shore or is weathered on the sea surface, much damage has been done,” says the website. “We must have the technologies necessary to stop surface oil spills at the spill site.”

The winning team, drawn from more than 350 entries, was Elastec/American Marine, a company in Carmi, Illinois. The company is no Exxon or BP; it had revenues of $7.2 million in 2009 and $18.9 million in 2012, according to the company’s listing on the 2013 Inc. 500.

As it turned out, E/A Marine had been working in the oil recovery industry and selling products in this area for many years when the X Challenge contest was announced, MacCormack, Murray and Wagner write.

The authors explain that E/A Marine rallied its forces for the challenge: The company “had already identified several ideas for significantly improving oil-spill cleanup performance, but the ideas had remained on the drawing board until Schmidt announced the prize. Spurred by the challenge, CEO Donnie Wilson assigned ten engineers to flesh out the ideas during an intense 60-day effort. Their breakthrough solution featured rapidly spinning plastic discs with built-in grooves that create a channel for the oil to adhere to. Their product could recover 4,670 gallons of oil per minute from the water’s surface — four times the prior industry standard.”

Wilson’s enthusiasm rubbed off on the company’s 140-plus employees, according to an article at Inc.com. “Morale was very high,” Wilson told Inc.com. “We asked a lot of people to get up early and stay late and work weekends — but it was still easy to motivate people to be involved.” The company spent nearly $600,000 building the prototype, according to the article.

E/A Marine went on to win other awards for the oil skimming technology, including the top prize at Oil & Gas Warsaw 2012, an industry conference and exhibition held September, 2012, in Warsaw, Poland, and the Popular Mechanics 2012 Breakthrough Technology Award.

And awards are now giving way to production. According to E/A Marine’s Spring 2013 newsletter, the company’s new X150 skimmer, based on the winning technology, is scheduled for production and delivery soon.

E/A Marine’s journey from contest to production is exactly the kind of journey that MacCormack, Murray and Wagner are seeing across industries in the United States and Europe. As they put it: “Innovation competitions represent a high-leverage tool that taps into powerful motivations to draw out disproportionate efforts from a wide variety of participants.”

(A bit about the article’s authors: Alan MacCormack is the MBA Class of 1949 Adjunct Professor of Business Administration at Harvard Business School. Fiona Murray is the Alvin J. Siteman (1948) Professor of Entrepreneurship at the MIT Sloan School of Management and faculty director of the Trust Center for MIT Entrepreneurship. And Erika Wagner is business development manager at Blue Origin, a company in Kent, Washington, that develops technologies to enable human access to space. Read their full article for more about why contests are so good at generating such good ideas.)