Inducement prizes are a motivational technique that's got a great deal of attention in recent years, but which actually has a fairly well established history. In the pictures here, you can see 2 people. The one on the left is Charles Lindbergh, the famous aviator. The one on the right is not so familiar. He's Raymond Ortieg, a New York City hotel owner. So, why are they in the picture together? Well in 1919, Orteig promised a prize of $25,000 which was a lot of money at the time to the first person or team to successful fly nonstop across the Atlantic Ocean from New York to Paris. Lindbergh was competing successfully as it turned out to win the Orteig prize. So, prizes are a way to either reward certain behavior. We give out prizes like the Nobel Prize based on something that people have done in the past, but they can also be a way to induce behavior, to encourage people to do something in the future. In this sense an inducement prize is a way of motivating certain activity to gain a result which hasn't been achieved before, which is an alternative to other kinds of methods like giving a grant out. You can hire a person or a company to do something or you can put up prize of the same amount of money and give it to whoever successfully reaches the achievement. So what's the benefit of doing it through an inducement prize? Well, there are a few fairly substantial ones. One of them is efficiency. So Orteig's prize again was $25,000. It's estimated that Lindbergh and all the others chasing the prize spent a total of $400,000 in the money of the time, chasing the prize. So Orteig by putting up 25,000 incentivized far more investment to try to reach the accomplishment. The second major reason why inducement prizes are valuable is that they can encourage interest, creative out of the box kinds of solutions. So here's an example. When the Exxon Valdez oil tanker ran aground in Alaska, the Oil Spill Recovery Institute created a prize for someone who could come up with a way to pump oil that had become viscous to solid in the frigid waters off of Alaska, where the tanker had run aground. Under current techniques, it was too cold to pump the oil easily out of the water. The winner was an Illinois chemist, and the technique that he submitted which turned out to be very successful, he developed because a few years earlier, he had been helping a friend lay some concrete. And he developed a technique using vibration to keep the concrete from getting to hard as it was being poured and it turned out, the same technique worked extremely well for oil in the cold waters off of Alaska. Had the Oil Spill Recovery Institute or anyone gone out and looked to hire someone to develop a technique, it's pretty certain they would not have gone to this Illinois chemist or looked at a technique that came from pouring concrete and trying to apply it oil in the water, but it turned out to work very well. The contest by not specifying the means, just specifying the end, specifying the objective was able to sweep in that great out of the box solution. So what do inducement prizes then have to do with gamification? Well, the first point is inducement prizes are about motivation. It's a prize to motivate a result. And as I've been talking about all along, gamification is a systematic way of employing techniques to motivate. An inducement prize is a particular kind of reward structure that's designed to motivate behavior. Now the question though is, it's clearly an extrinsic reward. An inducement prize typically involves money. It's not something that says do this just because it's inherently fun. So, is an inducement prize something that fits into the techniques of gamification that I've been talking about? Well actually, yes it is. So think back to the various factors that I've talked about under self-determination theory for something being intrinsically rewarding: competence, autonomy, and relatedness. All of them are present in a well-designed inducement prize competition. It requires skill and accomplishment by the person or group that submits the successful answer. It requires them to show mastery to prove that they have a great solution to a really hard problem. People submit for the prize, not just to win the tangible reward but to demonstrate the success of the technique they have. We'll see this with some of the more recent inducement prizes such as the X Prize Foundation and the prizes that they put into place in which lots and lots of teams spent almost as much, if not more money than the value of the prize because they wanted to prove how great their solutions were more so than caring about the amount that they'd win. So that's competence. Secondly, autonomy. Again, the inducement prize does not tell you how to come up with a solution, it just says you figure it out, come up with something that achieves this result. And that allows a tremendous amount of freedom and flexibility which hits on that aspect of autonomy that's important for intrinsic motivation. And finally, relatedness. Inducement prizes go out to everyone or to a large group of people and organizations and they typically require collaboration and coordination among teams of people. And in many cases, they are about achieving some major important societal goal. Orteig wanted to show that it was possible to fly a plane across the ocean nonstop. Some of the more recent prizes are designed to achieve public policy goals like building autonomous cars. And therefore people submit to the prize partly as a way of moving science and knowledge forward. So even though inducement prizes clearly have an extrinsic component in the tangible reward, they can be designed in ways that leverage the power of intrinsic motivation and fun as well. Now recently, there's been a spate of inducement prizes both from the private sector and the public sector. There are whole companies like you know, Innocentive, Kaggle and TopCoder, which specialize in designing inducement price competitions for various different kinds of scenarios, some of the them scientific, some of them more commercial. And then there's even organization like the X Prize Foundation which are in the business as a non-profit, of developing various kinds of inducement prize competitions. The X Prize Foundation got its start with the Ansari X Prize, which was a $10 million prize to the first team able to privately build a space craft capable of entering low earth orbit and the winner was a team that was funded by Richard Branson, the entrepreneur behind Virgin. And that inducement prize competition had the same effect as the Orteig prize. It generated a tremendous amount of activity. So the prize in this case was $10 million dollars. It's estimated that teams spent over $100 million chasing that reward and thereby vastly advanced the state of aerospace research especially in the private sector thanks to the prize. So in addition to private competitions like the ones I've described, there also are a number of price competitions that are being pushed by government agencies, in particular in the United States. The organization DARPA which funds military related research has a series of grand challenges that they call it including the self driving car one that I mentioned which had been extremely successful. The Office of Science and Technology Policy in the White House has an initiative that has led to a number of different agencies developing these competitions and the United States Congress passed something called the America Competes Act which encourages and makes possible these kind of competitions on a wide scale. So overall, there have been more than 45 US government agencies that have established these kinds of challenges or prize competitions and more than 200 challenges that they've put forth. And that's just what's happening in the United States government. So, what does it take to design one of these prize competitions effectively? You can't just put up money and expect to get results. As with gamefication, design matters. Coming up with a contest and a system that really encourages behavior, that encourages again that intrinsic motivation of the participants is critical. The first issue with an inducement prize is there have to be enough people able to compete and win it. If this is a challenge that only one group, one company say, has the necessary skills and resources to achieve, then you should just go and hire them and pay them to do it. So it needs to be something that a number of organizations can think that they can accomplish. Secondly and in a related vein, it has to be something that is cheap enough so that those organizations are willing to spend their own money chasing the inducement prize only pays off to the winner. Everyone else puts out the cost, but doesn't get the prize. Third, there has to be a balance of the scale of the competition and the incentives of the participants. So what do I mean by this? Karim Lakhani is a professor at Harvard Business school who has written some of the most significant and influential work on these inducement prizes. And one of the things that he and his collaborators have talked about is that in designing one of these inducement prizes on the one hand, there's the incentive to make it as big as possible, get as many people or as many companies as possible competing for the prize. That leads potentially to more out of the box solutions. You've got more competitors, more of a likelihood someone's going to come up, going to come up with a great solution that no one else thought of. The challenge though, is that the more competitors, the less of a chance that any one competitor will win which potentially reduces motivation. If you know there are a 1,000 or 10,000 teams competing, you might think, well what chance do I have of actually being the winner? That may disinsent your participation. On the other had, if it's something that only 10 teams are seriously pursuing, that may motivate you to think you've got a great change of being the one that's successful. And again, it's a balance in designing any competition. The designer needs to think about the nature of the task at hand and how best to design it. Finally, there ideally should be some opportunity to leverage the results. In the public prizes, the ones that government agencies put forward, there almost always is. These are competitions designed for the purpose of advancing the scientific state of the art and often private organizations have benefits as well. So why did Richard Branson spend 10 million dollars or more competing for that 10 million dollar On Sorry X prize. Well in that case, it was partly the glory but it was also partly to set up a private space tourism business called Virgin Galactic which is based on the technical research and the notoriety that the team gained in the competition. So prices are one area where potentially a tangible monetary reward can have actual benefits and lead to important results.