Prizes for R&D – part 3

Don Tapscott and Anthony D. Williams tell a wonderful story about prizes and open source research in Innovation in the Age of Mass Collaboration on the Business Week website:

A few years back, Toronto-based gold mining company Goldcorp (GG) was in trouble. Besieged by strikes, lingering debts, and an exceedingly high cost of production, the company had terminated mining operations. Conditions in the marketplace were hardly favorable. The gold market was contracting, and most analysts assumed that the company’s fifty-year old mine in Red Lake, Ontario, was dying. Without evidence of substantial new gold deposits, Goldcorp was likely to fold.
Chief Executive Officer Rob McEwen needed a miracle. Frustrated that his in-house geologists couldn’t reliably estimate the value and location of the gold on his property, McEwen did something unheard of in his industry: He published his geological data on the Web for all to see and challenged the world to do the prospecting. The “Goldcorp Challenge” made a total of $575,000 in prize money available to participants who submitted the best methods and estimates.
Every scrap of information (some 400 megabytes worth) about the 55,000 acre property was revealed on Goldcorp’s Web site. News of the contest spread quickly around the Internet and more than 1,000 virtual prospectors from 50 countries got busy crunching the data.
. . .
The contestants identified 110 targets on the Red Lake property, more than 80% of which yielded substantial quantities of gold. In fact, since the challenge was initiated, an astounding 8 million ounces of gold have been found—worth well over $3 billion. Not a bad return on a half million dollar investment.

The lesson they draw from this, and other examples is stark: the old concept of hoarding your information is dead. The new corporation is about peer-production:

A new breed of 21st-century enterprise is emerging—one that opens its doors to the world; co-innovates with everyone, especially customers; shares resources that were previously closely guarded; harnesses the power of mass collaboration; and behaves not as a multi-national, but as something new: a truly global business. These new modus operandi revolve around four powerful new ideas: openness, “peering,” sharing, and acting globally.

And so what are the public policies needed to foster (and regulate) this new breed? That is what we need to discover.