Feature Story

I-Prize Contest Proving a Winning Approach to Discovering Billion-Dollar Business Ideas

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Cisco's ambitious global innovation competition exceeding expectations; attracts more than a thousand ideas, two thousand participants; finalists nervously await decision

July 14, 2008

by Charles Waltner

And then there were 12.

After seven months and 1,170 ideas, Cisco Systems is close to announcing the winning team for its first-ever I-Prize, a global competition to come up with a concept for the networking giant's next $1 billion business. The company plans to announce its verdict later this month.

The uniquely ambitious innovation contest is now down to 12 finalists, each with a shot at winning $250,000 and a chance to join Cisco as leaders of the new business venture. Cisco says it will commit as much as $10 million over the next three years to fund the effort.

The company is still reviewing the remaining ideas but says it has narrowed the field down to three contenders. "We have one idea that addresses a $50 billion market, and the other two have a $2 billion to $3 billion potential," says Guido Jouret, chief technology officer for Cisco's Emerging Technologies group, which sponsored the contest and will incubate the new business. "So it's just a matter of determining which one will be the best fit for the company."

Certainly, the Cisco I-Prize is no publicity stunt. The networking giant is serious about finding new ways to power its now massive $30 billion global operation. It recognizes that acquisitions and its current product lines can only take it so far.

In fact, I-Prize organizers have said that if the ideas are good enough, they might pick more than one winning team, funding each group under the same signing bonus and investment commitment. Cisco also notes that if none of the ideas seem solid bets, it will not launch a new business. Instead, it will award the team with the best idea a $10,000 prize.

But certainly, the contest has far exceeded Cisco's expectations, so much so that the company might make it a recurring event, Jouret says. Not bad for a spur of the moment suggestion.

At a meeting last year, Marthin De Beer, leader of the Emerging Technologies group, was pressing his team to become even more creative in its efforts to "innovate the art of innovation." He also wanted something noteworthy to announce at the October unveiling of Cisco's Globalization Center in India. While the team tossed around ideas, David Hsieh, the group's marketing director, suggested a worldwide innovation contest. De Beer bit on the concept and a month later the team pulled it together, not sure what they were getting into.

More than 2,000 people from 104 countries have contributed ideas to the Cisco I-Prize. As was the intention, the contest attracted interest from all corners of the world, especially from people out of the loop of traditional technology and venture capital circles.

While innovation contests are nothing new and some companies have offered more prize money, industry observers say no corporation has ever run a contest to jump-start a major new business operation.

Most corporate innovation competitions focus on products or solving a specific problem. Cisco's I-Prize is wide open and asks one basic question: Would this idea make a good business for Cisco?

A Three-Part Vetting Process

The contest comprised three stages. First, participants simply posted ideas at the Cisco I-Prize site. Key to Cisco's philosophy, the site made it possible for participants to interact and collaborate through Web 2.0 social networking tools. People could "promote" or "demote" an idea, while discussions and postings were all open to view. Through this process, Cisco also encouraged contestants to combine efforts with other participants to form teams with the best mix of skills and perspectives.

Though Cisco I-Prize organizers have had to work out an assortment of legal, human resource, intellectual property, and technology issues, the contest has so far avoided any major complications.

But as a new contest to Cisco and all involved, mild confusion happened during the preliminary stage. While Cisco said it wanted to use participant voting to tap the "wisdom of the crowds," some contestants thought such rankings were crucial to success and obsessed about maintaining their standings. But after a while, the dust settled as Cisco clarified that participant voting would not ultimately influence the success of a team.

Approaching the semi-finals, Cisco was looking for as many as 100 contenders but settled on 32 teams in early March. I-Prize ideas were assessed in the same way the company scrutinizes any other internal venturing business proposal. The Emerging Technologies group used its established nine-point checklist, including: size of the possible market for the idea, degree to which Cisco can influence the market, how related the idea is to Cisco's existing product lines, and quality of the team.

The I-Prize organizers also brought in company experts on various technologies and markets. Innovation consultant and author of "Crossing the Chasm" Geoffrey Moore also assisted in the judging.

Once Cisco picked the semi-finalists, things got serious. Each team was assigned a "mentor" from the I-Prize staff and outfitted with Cisco WebEx online collaboration tools. The mentors helped the teams refine their ideas and business strategies. In late March the groups submitted their plans.

In early April, Cisco picked the 12 finalists. Again, the I-Prize mentors helped each team further refine their ideas and prepare for a final live "in-person" meeting using Cisco's TelePresence video system. Just as in any other venture capital pitch, top Cisco executives grilled the teams as they searched for weaknesses or undiscovered insights.

Certainly, not all the ideas for the I-Prize were winners. One clunker: a suggestion to merge San Francisco and San Jose, Calif., into one mega-city called "San Jose Frisco." A couple of other participants proposed "massaging socks" and a self-deodorizing laundry hamper. It was unclear if these products were network enabled. "Maybe they didn't read the contest instructions very closely," Jouret says. "But I wouldn't mind a pair of the socks."

Also, a home grocery scanner that received a lot of votes made it to the semi-finals, even though Cisco executives couldn't see a $1 billion dollar future for the idea. "We wanted to make sure we hadn't missed something," Jouret says.

Jouret says Cisco also had to leave a lot of really good ideas on the table. Either the concepts addressed too small of a market or were slightly out of the company's range of interest. Nevertheless, Cisco tried to help those teams develop their ideas through other avenues.

Web 2.0 Opens the Floodgates

BrightIdea, an "innovation management" company, hosted the I-Prize site and used its WebStorm online brainstorming and collaboration software for organizing idea submissions and collaboration among participants.

Matthew Greeley, chief executive of the company, says the Internet and Web 2.0 technologies have revolutionized the ability of companies to collect ideas, helping boost what he calls the "signal-to-noise" ratio for large-scale brainstorming. "With these new networking tools, you can get more ideas faster from more areas with far less work and resources," he says. "And the more ideas you have, the more good ideas you have."

His company, now eight years old, started helping organizations generate ideas long before the days of Web 2.0. He laughs when recalling the overwhelming amount of labor involved in manually sorting through proposals by using sticky notes and highlighters.

But now the Internet and social networking have eliminated those kinds of barriers. These new tools dramatically improve or even replace intensive person-to-person meetings with university researchers, venture capitalists, individual inventors, and start-ups, Greeley says.

He says most of BrightIdea's Fortune 1000 customers use his company's software for managing internal innovation processes, and about 35 percent of his customers tie incentives to their idea collection programs.

Tim Bajarin, president of Creative Strategies, a technology research and consultancy in Campbell, Calif., says contests and Websites powered by Web 2.0 tools can be invaluable in helping companies reach beyond traditional venues for new business ideas. "In Silicon Valley, a lot of it is about who you know, including your personal network and the money men that will talk with you. But now more than ever you don't know where the next idea will come from. Certainly, Silicon Valley can no longer claim to have a monopoly on technology innovation."

Business Processes Key to Ultimate Success

While the I-Prize is new to Cisco, using Web 2.0 tools to cultivate business ideas is not. The I-Prize was inspired in part by Cisco's internal innovation Wiki, the I-Zone. Any one of Cisco's 65,000 employees can post business ideas, work collaboratively with other Cisco employees to develop an idea, and, if lucky, be a part of launching a new business. I-Zone was working so well, Cisco wanted to open the concept to the public. "Why not at least give it a try, we thought," Jouret says.

The I-Zone is one of the new tools of Cisco's Emerging Technologies group. Cisco formed the group in 2006 as an "internal venturing" operation dedicated to hatching all-new billion-dollar businesses from within the company. The group has already made its mark as the birthplace of the company's extremely successful Cisco TelePresence video meeting system.

Satish Nambisan, a professor at the Rensselaer Polytechnic Institute's Lally School of Management, an expert on innovation networks, and author of "The Global Brain," says such well-developed business processes are crucial to the ultimate success of any innovation effort. "While the Internet and Web 2.0 technologies are great facilitators, what a company ultimately does with an idea is the true test of success."

Many organizations, Nambisan says, simply collect ideas and don't make the changes necessary for moving these potential moneymakers through the company. "Without the proper cultural and business process adjustments, winning teams end up walking into what we call "The Valley of Death," and their ideas die from a lack of organizational support."

While Cisco has an excellent track record integrating start-ups and other acquired companies, Nambisan says teams from an innovation contest are an animal of a different stripe. The winners may not be prepared for working at a major corporation. Also, misunderstandings can easily happen regarding intellectual property rights. "These people often need lots of education and hand-holding," he says. "It's all about communicating and building trust."

Jouret recognizes that picking a winner of the I-Prize is just the beginning of Cisco's adventure in Web 2.0 business prospecting. "The I-Prize is not an automated mechanism," he says. "The human middleware in this is very important. These ideas are pretty raw. Just because you have some eggs and butter doesn't mean you can whip up a soufflé like a four-star chef. But our group has been cooking up businesses for a while now. We've developed some special techniques, and we've got a few secret ingredients up our sleeves."

Ultimately, the benefits of the I-Prize for Cisco rests in the company's ability to accurately judge which of the ideas will make the best investment. "It is a skill that companies develop over time," Nambisan says. "As companies do this more, they tend to get better and better. But there is a learning curve."

Regardless of who Cisco picks to win the I-Prize or how this new approach to innovation turns out, Jouret does guarantee at least one thing: it will be interesting. "They will be strapped into jet packs for the ride of their lives," he says.

Charles Waltner is a freelance writer in Piedmont, Calif.