CASE STUDY

Orteig Prize
Incentive Prize Competition
Version 1.0 | October 7, 2011

Vijay Goel, MD Principal, Goel Insights

2011 Goel Insights, LLC. All rights reserved

CASE EXAMPLEINCENTIVE PRIZE COMPETITION

CHARLES LINDBERGH AND THE ORTEIG PRIZE

ORTEIG PRIZE REQUIREMENTS

Nonstop flight between New York and Paris Allied nationality Complete within 5 years of offer (extended 5 years in 1924) Award of $25,000 to go to the first to accomplish the feat Terms and conditions set by the Aero Club of America

OVERVIEW
On May 21, 1927, Charles Lindbergh completed the first nonstop flight betwen New York and Paris to win the Orteig Prize and worldwide acclaim. The 25 year old Lindbergh was an underdog who successfully completed a 33 hour solo flight that had killed 6 others who had attempted it prior. He braved uncertain weather to leave ahead of two teams of seasoned competitors housed in the airports of New York at the time of his flight. The Orteig Prize offered a $25,000 prize for the first allied aviator to fly nonstop between New York and Paris. Raymond Orteig was a hotelier in New York who had housed a number of French airmen during World War I, and sought to improve French-American connection. Announced in 1919 and extended for 5 additional years in 1924, it was won in 1927. 6 men died in the attempt and 2 teams proved their abilities at transatlantic flight within months following Lindberghs capture of the prize. Following Lindberghs win, 30 million Americans came to see him and the Spirit of St Louis; and became captivated with the potential of the air. This marked the dawn of commercial air travel. Over 9 teams formally entered the competition and over $400,000 in capital was spent in pursuit of the prize. Charles Lindbergh was an unknown considered unlikely to win and raised $15,000 in pursuit of the Orteig Prize.

IMPACT
Increase in U.S. airline passengers from 5,782 to 173,405 in three years (1926-1929) 300% increase in applications for pilots licenses, 400% increase of licensed aircraft in the United States in one year (1927) The Spirit of St. Louis was personally viewed by 30 million Americans within one year of Lindberghs historic flight
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CASE EXAMPLEINCENTIVE PRIZE COMPETITION

CHARLES LINDBERGH AND THE ORTEIG PRIZE

HOW THE ORTEIG PRIZE WAS WON

Flying over endless golden fields on a routine mail run to Chicago, 25 year old Charles Lindbergh set the course that would lead him to international acclaim. It was 1926 and aviation was seen as the realm of barnstorming pilots and daredevil wing walkers. Lindbergh was still unknown, cobbling together a living as a mail pilot, flight instructor, and barnstormer. Aviation speed and endurance records were falling regularly as plane technology and pilot skills leapt forward. Lindbergh dreamed of participating in these famous firsts and helping to drive the mastery of the air and the business opportunities that would follow close behind. What Lindbergh was missing was a modern plane that would let him join the ranks of the captains of the airhe realized how different a cutting edge Wright-Bellanca was from his old biplane. With it, he could change the world! As he wrestled with how he would be able to raise the money to get one, he kept coming back to the $25,000 prize offered by Raymond Orteig. While businesses of the air were still risky ventures at best, the prize provided Lindbergh a simpler platform with which to approach local aviation enthusiasts in the business community as investors. On that day in September 1926, Lindbergh decided he would enter the Orteig Prize and make the first nonstop flight between New York and Paris. The Orteig Prize had been announced in 1919 by Raymond Orteig, a New York hotelier. Orteig was looking to honor the close relationship he had developed with the French aviators who stayed in his hotels and helped America build its initial Air Force. His $25,000 pursea large sum worth substantially more than the $300,000 in todays inflationadjusted dollarsplaced a spotlight in the aviation community on his challenge to fly nonstop between Paris and New York. Offered initially for a 5 year term that expired in 1924, it had been extended for 5 more years to 1929 under the auspices of the Aero Club of America. Lindbergh approached the Saint Louis business community, where he had a number of relationships with aviation enthusiasts, to gain funding for his venture. The initial response was lukewarmconventional wisdom argued for a number of safeguards that Lindberghs plan eliminated, like multiple engines and crewmen. Lindbergh, instead argued for minimalism as a means of keeping weight down on takeoff and providing extra fuel for range. With eloquence and persistence Lindbergh was able to bring on board quality supporters who believed in his disruptive approach and achieve enough financial backing to acquire a plane and fund his venture. With financial backing secure, Lindbergh needed to select a plane. His initial choice, the Bellanca aircraft he had initially wanted for the mission, was owned by a person whose terms for sale proved unacceptable. Other prominent manufacturers, like Fokker, were unwilling to provide a single-engined plane for risk to their reputation. With the newspapers announcing a number of prominent aviators making attempts on the Orteig Prize scheduled for the spring of 1927, Lindbergh found his dream hanging by a thread. He reached out to a small, but promising, manufacturer in San Diego named Ryan Aircraft. They offered to build him an aircraft based on one of their new models, but modified for

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CASE EXAMPLEINCENTIVE PRIZE COMPETITION

CHARLES LINDBERGH AND THE ORTEIG PRIZE

the transatlantic flight, for slightly over $10,000 in three months. After a whirlwind trip highlighting a meeting of the mind with their executives and chief engineer, Lindbergh signed a contract for the creation of the Spirit of St Louis to be delivered in the next 60 days. The Spring of 1927 brought pressure as news of prominent airmen and their quest for the Orteig Prize traveled through the newspapers. A number of key decisions needed to be made, as the planes weight tolerances bumped up against needs for safety, pilot tolerance, and fuel. Lindbergh was forced to develop a novel framework to assess risk across all the critical elements of his flight, for example the weight of safety equipment over the seas that would increase the risk of a crash on take-off. Similarly, Lindbergh was forced to develop a new model of dead reckoning by air, enabling a single pilot to successfully plot his course over the shapeless seas. Excitement over the impending attempt was tempered by the human tragedies of others who were similarly focused on winning the Orteig Prize. French ace Rene Fonck crashed and burned on takeoff as the landing gear of his 3 engine Sikorsky plane broke under the severe strain, killing 2 crewmen. Navy pilots Davis and Wooster died in a takeoff crash while testing the 3 engine American Legion. French heroes Nungesser and Coli disappeared after taking off from Paris on their attempt to win the prize. Two prominent teamsled by Rear Admiral Byrd and Clarence Chamberlin, are already in New York waiting on good weather as Lindbergh reaches arrives on his journey from San Diego to St. Louis to New York. The media barrage from the close proximity of attempts and a gathering of competitors brings Lindbergh into the spotlight as a heroic underdog. While officially not yet able to attempt the prize, as his application has not yet been accepted for a required 60 day holding period, the desire to be the first leads Lindbergh and his backers to damn the rules and make the attempt. Taking a chance on a favorable report of clearing skies over the Atlantic, Lindbergh gets a jump on his competitors and takes off on May 20, 1927. 331/2 hours later, Lindbergh is met by an estimated 150,000 enthusiasts at Le Bourget airport in Paris and becomes an international sensation! His competitors in New York also successfully completed transatlantic voyages in the following months to less acclaim. The Lindbergh Boom boosted the aviation industry and made a skeptical public take air travel as a serious alternative to car and train. Within a year of his flight, the Lindbergh tour across 48 states and 92 cities enables an estimated 30 million Americans (about a quarter of the US population) to personally see Lindbergh and the Spirit of St. Louis. Over the remainder of 1927 applications for pilots licenses in the U.S. trebled, the number of licensed aircraft quadrupled, and U.S. airline passengers grew between 1926 and 1929 by 3,000% from 5,782 to 173,405. Charles Lindbergh successfully leveraged the Orteig Prize to get his modern plane . . . and became an aviation legend.

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CASE EXAMPLEINCENTIVE PRIZE COMPETITION

CHARLES LINDBERGH AND THE ORTEIG PRIZE

KEY CHALLENGES FOR TEAMS

The Orteig Prize was won 8 years after it was initially offered. At its inception, the technology required to accomplish the task was not yet available. At the time it was won, multiple teams were converging on the opportunity simultaneously. Technology enablers available to all teams included advances in plane design and improvements in reliability due to the Wright J-5 engine. Key challenges linked to the Orteig Prize that teams needed to solve for included: Range: The weight of fuel sufficient to reach a destination 3600 miles away without landing added substantial strain to vehicles, especially on takeoff. Reliability of plane, engine and pilot over a 30+ hour voyage were also elements that needed to be solved for Navigation: Navigation over land enabled pilots to use maps and landmarks to guide their travel. Navigation over a large ocean required means of plotting and staying on course new to aviation Risk: Managing risk required tradeoffs between weight, safety equipment, pilot endurance, and redundancy across multiple stages of a flight. Finance: Ability to raise money to fund purchase of required equipment was a substantial barrier to entry

WINNING FORMULA
Charles Lindbergh applied the following approach to win the Orteig Prize Maximize range: Extra fuel provided room for error. Every non-essential ounce was stripped from the plane to accomodate fuel Dead reckoning: Lindbergh borrowed naval and tested naval maps and dead reckoning to chart a course over the Atlantic Minimalism: Lindergh decided a single engine and a single pilot were sufficient for the journey. By reducing the redundancy in engines and crew of other teams, he reduced construction time, politics, and funds required. He stayed nimble where others became bogged down. Near-term Profitability: With $15,000 in projected expenses, Lindbergh was able to leverage the $25,000 Orteig Prize to highlight the potential for nearterm profits

KEY STAKEHOLDERS
While Raymond Orteig offered the prize, a number of other stakeholders participated and gained benefit from the successful attempt. Airplane Manufacturers: Ryan Aircraft company, which built Lindberghs plane for $10,580, later sold 228 Brougham planes advertised as sister ship to the Spirit of St. Louis. Oil Companies: Both Standard Oil and the Vacuum Oil Company supplied and distributed airline fuel for Lindberghs flight. They benefited from the growth in fuel sales as aviation took off. Component Vendors: The Wright companys new J-5 engines were in all of the competitors. Wright engines led the boom in early commercial aviation.

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CASE EXAMPLEINCENTIVE PRIZE COMPETITION

CHARLES LINDBERGH AND THE ORTEIG PRIZE

DESIGN DECISIONS
The Orteig Prize inspired a group of pioneers in aviation to pursue the challenge by the rules that Raymond Orteig and the Aero Club of America had laid out. This large sum of money leveraged the creativity and courage of 9 teams and drove the publics interest in an emerging industry. Here are the decisions they made as they put the prize together : Target Participants: Orteig wanted experienced, adventurous aviators to enter. He chose a tough goal, required substantial investment and risk-taking, and affiliated with the leading aviation organization. He left solutions as open as possible and did not put any encumbrance on IP. Participants gravitated to his target as the prize offered a focal point. Desired Accomplishment: The winning metric was a nonstop flight between New York and Paris. Boundary conditions were allied nationality and a 60 day waiting period. Tracking to validate success included a barograph installed in the cockpit, sealed fuel tanks, and certification of successful takeoff and landing. Otherwise, minimal support was provided for teams. Timing: The competition was launched as a single demonstration to occur by 1924. It was later extended for 5 years, a simple task given Orteigs control over the funds. Operating funds and sponsorship impact were not significant considerations for this effort.

LESSONS LEARNED
Despite its great impact, the design of the Orteig Prize technically disqualified its eventual winner. In todays legal environment, this could have led to a number of problems. Here are some lessons for those who would offer prizes in the future: Flexible timing: Ambitious targets can require years for underlying science and engineering to enable the attempt. Make sure you allocate enough time or flexibility to extend. Outsized reward: The winner of Orteig achieved recognition for an ambitious first, a very large cash sum, and no restrictions on the plane or future business opportunities. An unmatched value proposition will attract the best possible people. Streamlined: Lindbergh technically didnt win the Orteig Prize because he violated the 60 day waiting period. Clearly, this requirement was superfluous. So then why was it a requirement? Drama drives headlines: The proximity of 3 death-defying teams with their machines in public view at the same airport drove international interest. The underdog story of Lindbergh fed the flames. Lindbergh became an international star as the drama of the prize came to conclusion, while his competitors who achieved a similar feat weeks later received much less acclaim or reward. How can your effort design in dramatic media-friendly events?

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CASE EXAMPLEINCENTIVE PRIZE COMPETITION

CHARLES LINDBERGH AND THE ORTEIG PRIZE

Contest setting: The prize administration organization did little to aid the teams, marshal vendors and sponsors, or create media hooks. However, the drama of multiple teams independently closing in on the prize was heightened by the convergence of 3 teams in New York immediately after a failed attempt. In addition the sheer audacity of the pilots attempting this feat carried newspaper headlines, which substantially aided public awareness and interest. Importance: A compelling challenge coupled with a substantial sum of money attracted a critical mass of aviators to attempt the Orteig prize. All the top aviators who may have otherwise attempted endurance challenges or other geographic firsts were focused by the prize money on the challenge laid down by Orteig.

SUMMARY
Raymond Orteig created one of the most successful Incentive Prize Competitions in history. While the historical record is unclear on how Orteig may have leveraged the competition personally, his broader goals to advance the ties between the US and France and the perception of aviation were clearly successful. Orteig supplies a blueprint that philanthropists could utilize to spark desired developments in science and technology. The competition generated outsized interest in aviation and likely accelerated by years the demand for air travel and the supply of pilots and planes. Significant benefactors included Lindbergh and other aviators, airplane manufacturers, oil companies, and business communities surrounding airports. The Orteig Prize utilized a challenge format that focused record-breakers on his challenge (due to a large purse) while requiring little supporting infrastructure. The lack of infrastructure and support likely contributed to the 8 year gap between the announcement of the prize and its capture, as teams were left completely to their own devices. The prize benefitted from substantial media coverage, especially as teams physically gathered at the designated takeoff points in New York. A very limited set of specifications enabled the underdog Lindbergh to win by disproving the conventional wisdom around safety, although it technically disqualified him around administrative approvals. Raymond Orteig provided a terrific blueprint for competition to advance a nascent field. It was successfully mimicked by the X PRIZE Foundation in its Ansari X PRIZE competition to create a reusable private sector space vehicle. How might it spark achievement in an emerging sector important to you?

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CASE EXAMPLEINCENTIVE PRIZE COMPETITION

CHARLES LINDBERGH AND THE ORTEIG PRIZE

RESOURCES
Wikipedia: Orteig Prize CharlesLindbergh.com Spirit of St. Louis NYTimes archive: Letters creating Orteig Prize

ABOUT THE EFFORT

Innovation in the Crowd is a project to describe the stories and best practices of pioneers in open innovation. Our goal is to write a book containing these stories as well as assemble a case library of examples and tools to help organizations utilize the open innovation toolkit to drive their innovation agenda. We will explore Open Innovation across 5 models: Incentive Prize, Open Source, Open Platform, Innovation Network, and Structured Crowdsourcing. Author, Dr. Vijay Goel is Principal at Goel Insights, a management consulting and innovation firm in Los Angeles. He was introduced to the tremendous potential of these models during an initiative at the X PRIZE Foundation where he led the development of a Health X PRIZE - a joint effort between WellPoint and X PRIZE. He was previously a consultant with McKinsey & Co and CEO of HealthShoppr.com. He can be reached at vgoel@goelinsights.com.

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