McKinsey’s model for decision making on prize-based (open) innovation

McKinsey & Company has recently published a report with the title “And the winner is…” reviewing the current academic and business literature on prize-based innovation. The report is also partly based on a number of case studies from companies and governmental organization practicing such strategies in different forms.

One of the main messages in the report is that, nowadays we are witnessing a renaissance in prize-based innovation: The type of the prizes, the forms of the competition between participants and the technological infrastructure used in this area have become much more sophisticated.

Therefore, making the right decision on what for of prize-based competition or/and technology should be adopted is significantly harder. The figure below is one of the simple models they propose for these types of decision making:

The focus of this model is basically on three things: Clarity of the problem definition, the number of potential solvers out there and the degree of risk taking among participants: Different scenarios lead to different mechanisms such as prize, contract, grant and hybrid prize-grant.

Source: www.enovationmatters.com