Using open innovation to build back better
Since the America COMPETES Reauthorization Act passed in 2010, federal agencies have conducted nearly 1,000 prize competitions in pursuit of new approaches to complex problems. But even for the most committed agencies, prize competitions are still an entirely new way of getting a job done. Pioneering a new competency is never easy, and there’s no established playbook for open innovation. We surveyed leaders across sectors, and found that open innovation is described and practiced differently from organization to organization; likewise, every federal agency approaches public prizes differently.
On behalf of federal agencies, Luminary Labs has designed and produced open innovation programs that support the development of novel, high-tech solutions for healthcare (Artificial Kidney Prize), foster the commercialization of innovative hardware products (Ready for Rescue), drive new solutions for detection and monitoring (Opioid Detection Challenge, Hidden Signals Challenge, FDA Food Safety Challenge); define new methods for understanding Earth’s magnetic field (MagQuest); and increase access to career and technical education (Ed Prizes).
Our nation’s recovery is contingent upon collaboration; we can meet this moment by embracing open innovation as a mechanism for tackling challenges together. With that in mind, we offer five ideas for making public prizes even more powerful.
1. Set up a centralized shop to coordinate the nation’s open innovation policy.
The General Services Administration’s Digital.gov communities of practice and internal federal agency innovation listservs have created opportunities for sharing and connection, and yet, both government employees and federal contractors have felt the lack of a neutral, centralized coordinator. Not unlike a “grant shop” or a “contract shop,” a government-wide open innovation policy shop could answer critical questions and help agencies determine how to use prize authority. In the absence of this centralized coordinator, many agencies are currently interpreting laws and regulations more strictly than necessary, which holds innovation back.
Government employees have expressed confusion and frustration regarding how to interpret the COMPETES Act — specifically, what is permissible when it comes to private sector partnerships and how to determine if the Paperwork Reduction Act applies to prizes. One federal employee recommended that the new administration quickly reinstate memoranda related to these matters. A neutral innovation policy shop, sustained across administration changes, could provide guidance on common questions, allowing for greater freedom and efficiency. Agency innovation leaders could focus strategically on how open innovation helps advance their mission and feel more confident about the execution of open innovation programs.
2. Reinstate a White House lead for open innovation and prizes.
As a complement to a neutral, centralized open innovation policy shop, a White House lead for open innovation and prizes could attend to this particular administration’s priorities — including climate change, education, and equitable economic growth. Within the White House Office of Science and Technology Policy (OSTP), an open innovation lead could also use the administration’s convening power to bring public attention to prizes and ensure that the nation’s brightest minds are coming together to solve the most important problems.
In collaboration with a central policy shop and individual agencies, this OSTP role has historically strengthened the existing prizes community and helped federal innovators coalesce around new ways of working — regardless of prize authority. Small obstacles shouldn’t hold a prize back; a White House lead could elevate open innovation programs and clear pathways for public engagement and contribution.
3. Supercharge problem definition and challenge design.
While the government’s interest in open innovation has not waned, federal agencies do not yet have a consistent understanding of the role of problem definition through the lens of a prize. Far too many requests for quotes (RFQs) continue to emphasize execution over design, and few take into account how successful prizes balance fidelity, timeline, and incentives to achieve a desired outcome. Ideally, the federal government would shift the conversation from the volume of prizes produced to how agencies and their partners arrived at a particular outcome through problem statement definition and prize design.
Rather than spotlighting prescriptive solutions or novel technologies, successful prize competitions commence with a clear and concise definition of the problem to be solved, as well as the piece or pieces of the problem that they aim to address through an open innovation mechanism. Defining a problem too broadly can make it difficult to obtain actionable results. Too narrow a definition can limit innovation within a prescriptive range of approaches. An ideal problem sits somewhere in the middle, where it has the opportunity to stimulate and expand a market.
In addition to understanding the problem, prize sponsors must know if it’s prizable. Federal agencies are experts in their respective topics and spaces, but often hire partners that are experts in prizes. Research and environmental analysis are essential to understanding behaviors and motivations. In the absence of challenge design, even the strongest problem statement is no guarantee that a program will meet its objectives. Thoughtful challenge design first addresses why the problem has not yet been solved. Some problems are hard nuts to crack, expensive, or even dangerous to solve. In other cases, potential solvers might be unaware of the problem, uninterested in the problem, or unaware that their current work has applicability in other fields. In rare situations, there are simply not enough solvers with the required expertise. A successful challenge design balances the answers to this question with incentives.
Partners don’t want to execute a prize that hasn’t been designed well, and solvers won’t want to participate, either. Poor challenge design compromises outcomes, but investment in challenge design pays dividends. In this case, quality matters more than quantity: It’s better to run one prize that changes the world than 100 prizes that don’t produce results. The federal government should champion problem definition and challenge design; if the full scope of a prize is uncertain, agencies can issue an RFQ specifically for problem definition and challenge design, then find the right partner to execute a well-designed prize.
4. Invest in the RFQ.
Different types of programs require different types of partners. The General Services Administration’s Challenge Toolkit and growing open innovation expertise within the federal government make it possible for agencies to design and execute prizes on their own. But many open innovation programs require strategic engagement with partners to achieve the goal. To make these partnerships effective, agencies must clearly articulate their needs.
We love a good RFQ — especially when it specifies a problem and identifies a clear goal. The best prizes embrace the ingenuity of potential partners; it pays to be prescriptive about the problem but not how it’s solved. Good RFQs should also match desired outcomes to the level of effort, available budget, and the agency’s intended investment.
Prize administration budgets vary widely between agencies, or even different parts of the same agency. Identical RFQs currently have grossly different expectations, and often completely omit all pre-launch planning activities. Some agencies prefer to fund overhead but not prizes; others fund a prize purse but make no consideration for the cost of executing the program. There are still too many “big idea, small budget” requests. For partners, this often results in overbidding or underbidding, picking up tasks that were not in scope, or pushing out a timeline by months or even years.
Like any new way of working, we anticipate that budget consistency will arrive with experience. In the interim, agencies could adopt the NASA Tournament Lab’s standard RFQ format with a not-to-exceed (NTE) budget that signals rough order of magnitude to potential partners. When no NTE is provided, partners can safely assume that the agency is open to big thinking.
Every agency has its own culture; that’s both good and necessary. But government sponsors and private sector partners don’t want to waste each other’s time. Clearly articulating needs and expectations in an RFQ goes a long way toward ensuring a more efficient procurement process.
5. Pilot advance market commitment.
Given the country’s immediate needs, advance market commitments (AMCs) from the federal government or a private sector partner would accelerate the rate at which we build back better. While many agencies desire such partnerships, leaders struggle to navigate new ways of working.
For our 2018 report on the State of Open Innovation, we interviewed Tom Kalil, Chief Innovation Officer at Schmidt Futures and the former Deputy Director for Technology and Innovation at the White House. Tom has been an advocate for using AMCs; these are “purchase orders for products that don’t exist yet, and they can play an important role in accelerating the development of innovations that have a high social return but a low private return.” In 2021, Americans are familiar with the value of AMCs: The U.S. government pre-purchased COVID-19 vaccines, which helped accelerate the development, production, and distribution of this desperately needed innovation. There’s never been a better time for the government to make financial commitments that are contingent on success; that includes incentive prizes, advance market commitments, and milestone payments.
“In many instances, individuals, teams, and entrepreneurs won’t have the financial resources to solve a large, complex problem,” Tom told us. “The sponsor of a challenge might be able to address this by breaking a problem into intermediate milestones, and providing payments for each one. NASA did this to accelerate the development of rockets capable of delivering cargo (and ultimately astronauts) to the International Space Station, and it has been a huge success.”
Public prizes are already augmenting traditional procurement. IDSS, winner of the Opioid Detection Challenge, entered into a contract with the government to pilot its advanced threat algorithms at international mail facilities. And the results of MagQuest’s Phase 3 will inform NGA’s acquisition strategy for a World Magnetic Model global magnetic field data collection capability, with an expected procurement that can provide operational capacity by 2027.
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