(Photo by Mark Krynsky)

You’ve likely heard about some of the contests that the X Prize Foundation has sponsored: Ansari (build and launch a spacecraft capable of carrying three people to 100 kilometers above the earth’s surface, twice within two weeks), Progressive (build cars that achieved at least 100 MPGe in real world driving), and Wendy Schmidt Oil Cleanup (removal of test oil in a test environment with salt water). How can your business benefit from offering its own X Prize-like contest?

The key of the contest is that the winner get a sum of money to those that successfully complete an audacious challenge. No winner, no pay. Instead of paying people to solve these challenges, you invite public competition.  The goal is to remove your company’s risk – the risk is all in the hands of the competitors. The more the prize value, the more likely people will want to compete. The best part is if your stated goals aren’t met, then you keep your prize. But in any case, you’ll get a lot of free PR opportunities from both your competitors and the contest itself. You also get to learn from others what works (and doesn’t).

There’s a wealth of crowd-sourced online competitions for such things as graphics and logos. These likewise can provide you a similar experience to an X Prize.  However, the key difference is that these smaller competitions are based on appearance – not results. I don’t know of any competitions for logos where you pay only if the logo improves your business by a specific percentage. Therefore, be realistic in your goal-setting and be willing to toss the “prize” if it doesn’t truly pay off for your business.

If you’re thinking of creating your own contest, first determine the bottom-line value is to solving the problem. If you’d likely see a yearly increase of net income of $100,000, then offer a similarly large prize purse. What do you have to lose?