X PRIZE Foundation: Revolution Through Competition

By David Hoyt, James Phills
2007 | Case No. SI90
In October 2004, SpaceShipOne rocketed into space, winning the $10 million Ansari X PRIZE. This competition for the first privately funded, manned, spaceflight was organized by the X PRIZE Foundation, and attracted 26 competitors, who had spent more than $100 million in pursuit of the prize. The success of SpaceShipOne generated intense media and public interest. Many of the competitors for the Ansari X PRIZE also planned to continue their efforts and develop commercial spaceflight businesses. After this success, Peter Diamandis, founder and CEO of the X PRIZE Foundation considered the future of the foundation. He saw three options: shutting down, continuing with a focus on space, or creating a “world-class prize institute that uses the prize-incentive model to solve today’s grand challenges.” He chose the third alternative, with the vision of developing 10-15 prize competitions. The foundation chose to work on fields including space, medicine and genomics, energy and transportation, education, and other social challenges. The case describes lessons learned about prize competitions through the Ansari X PRIZE program. It discusses issues in creating and operating a successful competition, as well as the advantages of using incentive prizes, which include: bringing new thinking to bear on difficult problems, and paying out only when an important goal is accomplished (paying for results, not effort). The case poses several problems facing the Foundation as it begins to focus on fields outside of space: could prize competitions work in fields that were not technology-centric (such as poverty), could the organization scale up to support as many as 10-15 competitions, and what areas should the foundation focus on. Finally, could the prize model revolutionize philanthropy by using financial incentives to stimulate investment in important fields, and leverage philanthropic dollars by paying only for results?
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