Weekly Report – December 12, 2016

Congratulations to the team from Cal State Los Angeles for taking the top prize at the inaugural Mayor’s Cup.

The team was comprised of undergraduates from Cal State L.A. and their winning idea was the creation of a traveling small business resource center, which could deliver mentorship opportunities and pathways to capital to underserved, underrepresented, and under-connected small business owners. Cal State L.A.’s Small Business Strong team will claim a $25,000 prize and will work with the Mayor’s Operations Innovation Team for eight weeks to prototype their idea.

The Mayor’s Cup was developed by the Operation Innovation Team to develop a competitive environment for young entrepreneurs at L.A. universities to pitch innovative solutions for tackling the city’s biggest challenges. Competitors were asked to develop ideas to address one of two issues: growing L.A.’s economy and civic engagement in neighborhoods. More than 100 teams applied, with the top five competing in the finals.

The other four finalists were:

  • BIN-LA: Website which complements the L.A. Business Portal to connect small business owners and entrepreneurs to investors in the Greater Los Angeles area.
  • Hygiea: Waste management “Internet of Things” platform outfitting trash cans with sensors and real-time data to provide fill data feedback and suggest efficient routes.
  • Pangaea: Comprehensive professional resource bank with a focus on Black and Latino-owned small- and medium-sized businesses with enhanced search functionality and crowdsourcing.
  • The L.A. Skill-Builders Initiative: Web platform to cultivate entrepreneurial ecosystem by bridging the skills gap between manufacturers and the labor force (including community colleges).

Finalists pitched their proposals to a panel of judges, including: Troy Carter of Atom Factory; Jennifer Lopez of the Center for the Advancement of Science in Space; Brian Lee of The Honest Company and LegalZoom; William Pomerantz of Virgin Galactic; and Diana Trujillo of NASA.

Key partners in this year-long effort include the Lloyd Greif Center for Entrepreneurial Studies at the USC Marshall School of Business, USC Marshall School of Business, the Center for Entrepreneurship and Innovation at California State University- Los Angeles, the Fred Kiesner Center for Entrepreneurship at Loyola Marymount University, Startup UCLA, FuturizeX at UCLA, LA City Partners, Cross Campus, the Los Angeles Coalition for the Economy and Jobs, the Mayor’s Fund for Los Angeles, Mitú Network, AmplifyLA, Hacker Fund, Make in LA, LADWP La Kretz Innovation Campus, Hexlab MakerSpace, Nava College Prep Academy, Swipe Out Hunger, LegalZoom, Bixel Exchange, Indie Desk, Startup DTLA, Two Bit Circus, Crush Industries.

Once again I would like to convey a big thank you to L.A. Coalition members Charles Hirschhorn and Ben Van De Bunt for their very generous commitment of time and money to this event.

And to Juan Vasquez and Eric Espinosa from of the O-Team for their leadership in creating and making this event successful.

If you would like to be involved in the 2017 Mayor’s Cup please let Charles or I know.

Interesting WSJ article on the growing trend of offering prize money to incent innovators to turn their ideas into practice.

Need a Breakthrough? Offer Prize Money!

Sponsors hope everyday ‘makers’ can jump-start progress in smartphone voice recognition, carbon emissions and new uses for canned tuna

By Robert Lee Hotz


Edgar Sarmiento of Bogotá, Colombia, had a new degree in design, a head full of ideas, and no place to put them into practice. Then last year he saw a competition sponsored by a startup in Phoenix, called Local Motors, which offered a prize of $8,000 to anyone who could dream up a better city transit system.

That got him moving. Within two months, Mr. Sarmiento had created the winning entry on his home computer: an electric-powered, driverless shuttle bus that can be summoned on demand. Local Motors has already built two of the vehicles, using 3-D-printed parts, and is field-testing them in Berlin and at National Harbor, Md.

“It was amazing,” says the 25-year-old Mr. Sarmiento. Stumped for solutions to hundreds of industrial and technical problems, businesses and governments alike are turning the search for innovative ideas into prize-worthy puzzles that capitalize on the ingenuity of the crowd.

At a time when the pace of innovation seems to be slowing, prize sponsors hope that today’s hackers and makers can step into the breach and jump-start progress in a way that today’s research institutions—with their many constituencies and restraints—are struggling to do. Improve smartphone voice recognition? There’s a $10,000 prize for that. Design a delivery drone? $50,000. Extend the human lifespan? Venture capitalist Dr. Joon Yun offers the $1 million Palo Alto Longevity Prizes. Diagnose antibiotic resistance? That’s worth $20 million. And if anyone can profitably repurpose the carbon emissions involved in global warming, there are prizes totaling $55 million in the offing.

“You name it, there is a prize for it,” said Karim Lakhani at the Harvard Business School’s Crowd Innovation Lab, who has helped run 650 innovation contests in the past six years. In addition, crowdsourcing companies such as InnoCentive Inc., NineSigma, and Kaggle have posted hundreds of these lucrative research contests on behalf of corporate and government clients, offering cash prizes up to $1 million for practical problems in industrial chemistry, remote sensing, plant genetics and dozens of other technical disciplines. Among them, the three companies can draw on the expertise of two million freelance researchers who have registered for access to the prize challenges.

Edgar Sarmiento won $8,000—and a new job—for designing a transit system built around a driverless shuttle bus. Edgar Sarmiento won $8,000—and a new job—for designing a transit system built around a driverless shuttle bus. PHOTO: CARLO FURGERI GILBERT FOR THE WALL STREET JOURNAL

All told, more than 30,000 significant prizes are awarded every year worth $2 billion and growing, according to McKinsey & Co. The total value of purses from the 219 largest prizes has tripled in the past 10 years. Not only are there more prizes than ever, but nearly 80% of all the major new prizes announced since 1991 are designed to spur specific innovations.

To be sure, there is little evidence that crowdsourcing competitions have significantly altered the innovation landscape yet. “Prizes are important, but they are not the ultimate incentive for innovation” said Luciano Kay, a research fellow at the University of California at Santa Barbara who studies incentive prizes. “They are not big enough to change how industry works in general.” Still, corporate sponsors are embracing the prize challenge as a safe, inexpensive way to farm out product research. Even the Pentagon has gotten into the act, offering prize challenges through its Defense Advanced Research Projects Agency to encourage out-of-the-box thinking for military applications. Intelligence agencies are offering prizes to improve surveillance techniques.

For the federal government, which has awarded $220 million in incentive prizes in hundreds of competitions since 2010, it offers a way to set an ambitious goal without having to predict which team or approach is most likely to succeed. Private philanthropists are using charitable giving to force a breakthrough on topical issues from affordable housing to space transportation. “A prize allows for crazy open innovation to test a new idea, to take a gamble, to take a risk which you cannot do with grant money,” said Zenia Tata, executive director of XPrize India, which expects to launch a $1.7 million XPrize this fall for better ways to extract fresh drinking water from the atmosphere.

While making up just a fraction of the money spent on research and development world-wide—$477 billion a year in the U.S. alone—these incentive competitions are part of a trend toward open innovation that reflects a frustration with more traditional research practices, tighter budgets, and, despite steady growth in new patents world-wide, a nagging feeling that genuine economic progress has stalled.

“It is not that innovation is so much less effective,” said Ellen Jorgenson, executive director of Genspace, a community biotechnology laboratory in Brooklyn, N.Y., and a leader in the do-it-yourself biology movement. “It is that the problems we’re tackling are now harder and harder and harder.” These incentive prizes tap into a new wave of experimental engineering in classrooms and community laboratories from Australia to Afghanistan. Advances in digital manufacturing, such as 3-D printers, laser cutters, gene-editing kits and inexpensive computer circuits such as Arduino and Raspberry Pi, make it easier for amateur inventors to get into the act.

“We have access to the tools to make almost anything,” said Katie Rast, director of Fab Lab San Diego, a thriving nonprofit digital fabrication and design center. It is one in a network of more than 1,000 community-based Fab Labs in 78 countries organized by the Center for Bits and Atoms at the Massachusetts Institute of Technology. “These can make anyone’s ideas tangible so quickly.” There is no task so small that it cannot be deemed prize worthy. Stanford University computer software pioneer Donald Knuth offers the “Knuth Reward Check”—a prize of $2.56—to the first person who reports an error in one of his 24 books on computer programming. Since 2001, he has written more than 2,000 checks.

For the person who finds a new use for canned tuna fish, the French food supplier Petit Navire offers a prize of €5,000. For breakthroughs in baggage handling, Royal Dutch Airlines and Schiphol Airport in Amsterdam will award €10,000. For a better way to keep its chocolate from melting on the way to stores, Hershey Chocolate Co. is awarding a $25,000 “Cool Ship Technology” prize.

The impact of competition for even a minor improvement can be surprising. Consider the 1863 Billiard Ball Prize. As the game gained popularity in the 19th century, an equipment supplier offered $10,000 for a suitable substitute for the scarce elephant ivory then used to make billiard balls. Rising to the challenge, inventor John W. Hyatt developed a new material called celluloid—which led directly to the development of the modern plastics industry, business historians say. Of course, not every prize pans out, no matter how lofty or lucrative the challenge. In 2004, Nevada-based Bigelow Aerospace offered the $50 million “America’s Space Prize” to the first team that could fly five people into orbit and back, and then repeat the feat within 60 days. The prize expired, unclaimed, in 2010.

Moreover, people sometimes spend more in pursuit of a prize than they stand to win. A private spaceflight company called Armadillo Aerospace in Mesquite, Texas, spent about $3.5 million of its own funds to win two incentive prizes worth $850,000, as part of the 2006 Northrop Grumman Lunar Lander Challenge. And by itself, a prizewinning idea isn’t enough for an innovation to gain acceptance, management analysts said. In 2006, Netflix offered $1 million to the team that could improve its movie recommendation algorithm by 10%. Thousands of people vied for the prize. In 2009, the company awarded the cash to the winning formula—and then never used it. In the interim, Netflix had changed from mailing DVDs to streaming videos online, which fundamentally changed the type of viewing statistics available for analysis.

“These prizes have all this attractive potential, but there is a lot more needed for these to have a business impact,” says Henry Chesbrough, director of the Garwood Center for Corporate Innovation at the Haas School of Business at the University of California, Berkeley. Incentive prizes make some business executives nervous because they sometimes reveal product strategies, internal data, and research needs, several management analysts said.

“There is a lot of tension and a lot of resistance within organizations,” says Hila Lifshitz-Assaf at New York University’s Leonard N. Stern School of Business, who studies how traditional R&D centers adapt to new practices. In 2012, General Electric launched a $500,000 prize competition through Kaggle, an online innovation platform that can call on the expertise of about 600,000 freelance data scientists. The company sought a more effective formula for improving airline flight arrival times.

In just three months, 223 teams entered more than 3,800 possible solutions. The winning algorithm—developed by a data scientist in Barcelona with no aviation experience—beat the industry standard by 389%. “For us, it was a bit of an ah-ha moment,” said Dyan Funkhousen, GE’s director of open innovation and advanced manufacturing. “We really started to experiment with these new tools of open innovation” Then, when General Electric wanted to try out 3-D printing technology, it launched a global competition to redesign a 5-pound, titanium jet engine bracket through GrabCAD, an online community of more than a million engineers and designers. Three hundred contestants from 56 countries, she said, “generated close to 700 new product designs.”

First prize went to a young engineer in Indonesia named Arie Kurniawan who slashed the part’s weight to less than a pound, offering the potential for millions of dollars in fuel savings. He won $7,000. Before winning the contest, Mr. Kurniawan made his living by selling electronic parts imported from China and by making aluminum pens with coconut shell holders for export to the U.S. “After I won the competition, a lot of [engineering] orders came, mostly from outside Indonesia,” he said. “It’s not easy to sell innovative products here in Indonesia.”

None of those designs became part of a GE product. By building on the prize experience, however, GE engineers last year printed a working jet engine about the size of an NFL football. In April, they started testing the largest commercial jet engine ever built, made with many 3-D printed parts. John Rogers, CEO of Local Motors, which ran the incentive contest that inspired Mr. Sarmiento’s smart bus, knows innovation is a risky business. The company—one of five firms that are building an autonomous electric bus—is itself an experiment in the business of open innovation.

He is combining crowdsourced designs with rapid digital production to slash the time it takes to produce specialized vehicles. In addition to the smart bus, the company recently unveiled the first electric car made entirely with 3-D printing. In August, they announced the winners of an open-source drone competition co-sponsored with Airbus. “We are ready to kill these concepts if there is no business case for them,” Mr. Rogers said. “I’m hoping we’ll find enough orders.” Edgar Sarmiento came up with a smart bus dubbed Olli. Edgar Sarmiento came up with a smart bus dubbed Olli. For Mr. Sarmiento, incentive competitions offered an opportunity to showcase his abilities on a global stage. Before winning the Local Motors design challenge, Mr. Sarmiento had entered 25 national or international incentive competitions. He now studies design in Turin, Italy.

Unlike many other corporate prize sponsors, Local Motors made him part of its manufacturing team, paying him an additional $20,000 in fees. And when his smart bus, dubbed Olli, goes into limited production later this year, he can expect a royalty check for every vehicle sold.

“With projects like Olli, they are trying to support and encourage real innovations,” Mr. Sarmiento said. “It’s incredible.”