In just over a month, a small team from San Francisco was able to reconstruct five readable documents from 10,000 scraps of paper. The U.S. Department of Defense paid out $50,000 and gained, in turn, a new method for reconstituting shredded papers.
The federal government has hosted more than 150 contests like this one—the so-called Shredder Challenge—since January 4, 2011, when President Obama signed the America COMPETES Reauthorization Act, permitting agencies to offer prizes to spur innovation and solve problems. The essential aim of such contests, according to Challenge.gov, is to empower “the U.S. Government and the public to bring the best ideas and top talent to bear on our nation’s most pressing challenges.”
In contrast to conventional methods—convening a core group of experts to hash out answers—these contests have proven a surprisingly inexpensive and efficient mechanism for problem solving. In the case of the Shredder Challenge, the Department of Defense ended up paying about $85 per hour to the winning team; this figure ignores the time spent by each of the other 9,000 participating teams. Additionally, payment is contingent on a contest entry that works sufficiently well; if no adequate solutions are presented, then no payments are made. These savings are particularly important in a time when budget shortfalls are hobbling government activity.
A growing field of research demonstrates that, with important limitations, outsiders are often most effective in solving the challenges of a niche subject. “Innovation happens when someone comes in from a different perspective and breaks a problem open,” said Karim Lakhani, an assistant professor at the Harvard Business School, in an interview with the New York Times. “But rarely do we have mechanisms in place so this happens systematically.”
Prizes provide this systematic mechanism and are quickly growing in popularity, according to a recent report from McKinsey & Company: Before 1991, 97 percent of all prize money given out honored historical achievements. Since 1991, nearly 80 percent of all prize money has been offered for solutions to existing problems.
A full list of ongoing federal contests is available at Challenge.gov.