Sourcing innovation: Public and private feedback in contests

Contests, in which contestants compete for a prize offered by a contest holder, have become a popular way to source innovation. Despite great interest from the academic community, many important managerial aspects of contests have received very little formal inquiry. The most important of these is feedback from the contest holder to the contestants while the contest unfolds. This paper sets out to establish a comprehensive understanding of how to give feedback in a contest by answering the questions of when to give feedback and when not to give feedback and which type of feedback to give, public (which all solvers can observe) or private (which only the concerned party can observe). We find that feedback will not affect the behavior of competing problem solvers unless the contest holder credibly precommits to a truthful feedback policy. We then set up a framework that reduces the feedback decision to a pair of conceptual questions. First: Is the contest's ultimate objective to increase average quality or to find the best solution? Second: How uncertain are outcomes for the solvers? We show that no feedback or public feedback generally dominate private feedback. However, if the host is interested exclusively in the best performance and if the contest displays large uncertainties, private feedback is optimal

Incentives in New Product Development Projects and the Role of Target Costing

This paper investigates how self-optimizing engineers affect new product development (NPD) project outcomes and development times. A variety of widely used NPD project management approaches, including heavyweight project management, may allow or even encourage engineers to introduce late design changes and exhibit weak cost compliance, reducing the product's profit or competitiveness. Providing specifically designed incentives for individuals can eliminate such encouragement, and thus improve cost compliance and project timeliness. This paper discusses several practical incentive schemes, including profit-sharing contracts and component-level target costing. For many industrial projects, component-level target costing makes the most efficient use of available information to optimize project outcomes and reduce development times.R&D management, new product development, incentives, target costing

Sourcing innovation: On feedback in contests

It is notoriously difficult to provide outside parties with adequate incentives for innovation. Contests—in which solvers compete for a prize offered by the contest holder—have been shown to be an effective incentive mechanism. Despite considerable interest in this concept, we lack a thorough understanding of important aspects of contests; in particular, feedback from the contest holder to the solvers has received only limited attention. This paper discusses how contest holders can improve contest outcomes by devising an optimal information structure for their feedback policies. We first identify when, and when not, to give feedback as well as which type of feedback to give: public (which all solvers can observe) or private (which only the focal solver can observe). We uncover a nontrivial relationship between contest characteristics and optimal feedback choices. Second, we examine whether the contest holder should mandate interim feedback or instead allow solvers to seek feedback at their own discretion. Third, we discuss how changing the granularity of feedback information affects its value to solvers. This paper was accepted by Ashish Arora, entrepreneurship and innovation. </jats:p

Problem--Solving Oscillations in Complex Engineering Projects

Coordination among many interdependent actors in complex product development projects is recognized as a key activity in organizational theory. It is well known that this coordination becomes progressively more difficult with project size, but we do not yet sufficiently understand whether this effect can be controlled with frequent and rich communication among project members, or whether it is inevitable. Recent work in complexity theory suggests that a project might form a "rugged landscape," for which performance deterioration with system size is inevitable. This paper builds a mathematical model of a complex design project that is divided into components (subproblems) and integrated back to the system. The model explicitly represents local component decisions, as well as component interactions in determining system performance. The model shows, first, how a rugged performance landscape arises even from simple components with simple performance functions, if the components are interdependent. Second, we characterize the dynamic behavior of the system analytically and with simulations. We show under which circumstances it exhibits performance oscillations or divergence to design solutions with low performance. Third, we derive classes of managerial actions available to improve performance dynamics, such as modularization, immediate communication, and exchanging preliminary information. Some of these have not yet received adequate attention in literature and practice.New Product Development, Engineering Projects, Complexity, Oscillations, Control Theory, Random Matrix Theory