Cisco Pays Big for New Ideas

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Gosen came up with a new system for energy consumption and distribution that will make power lines safer and more energy efficient.

Ideas even emanated from Iran, North Korea, and the tiny Cocos Islands and Keeling Islands off the coast of Australia. "We got more ideas in two months from this mechanism than our internal site did in about a year and a half," Jouret says. Not bad for a contest advertised almost entirely through blogs and word-of-mouth marketing. "There are many markets, many new ideas, and one particular country or area doesn't have a monopoly on all the world's ideas," Jouret adds.

Unconventional Background

Karr's team includes Jason Carr, 37, co-owner of the Bean Cup, and married couple Bill Dawson and Carla Ybarra-Dawson, both 35, and former colleagues of Karr's. The winning team will get $250,000 in prize money and the chance to found an emerging technology business unit. Cisco has said it may invest up to $10 million over three years to staff, develop, and market a business based on the idea. For Karr and Dawson, starting a company has been a long-time dream that until now seemed out of reach. "We're average people," says the affable Karr, who's referred to by Bean Cup regulars as "coffee Norm," after the Cheers character. "I can't go to my dad and ask for a million dollars."

Karr is director of technology for Patronpath, a company that helps restaurants set up online ordering. He got his I-Prize idea from a problem faced often by customers. Small restaurant owners are flocking to touch-screen cash registers, known as point-of-sale systems. But the technology can be expensive, costing new restaurants an average $18,000 to get up and running, he says. So Karr suggested that Cisco begin selling the systems over the Web, charging subscription fees that would help small businesses distribute costs over a long stretch—and give Cisco a toehold in what Karr estimates is a $6 billion market. "True breakthroughs occur when you look at an industry or area from a completely new point of view," says Peter Diamandis, CEO of the X Prize Foundation. "It doesn't matter where you went to school, what you've ever done before, or whether you've ever gotten a government grant."

Exhibit A: Karr. He has yet to earn a college degree, though he attended night classes at Tidewater Community College in Virginia Beach, Va., for six years. After his stint in the Navy and before moving to Indiana, he worked as a database marketing manager for The Virginian-Pilot newspaper. In addition to his day job, Karr runs two social networks, including one for Navy vets. He writes a technology marketing blog, does social media consulting for the Indianapolis Colts, and recently volunteered on the team that helped convince the Super Bowl to come to Indianapolis in 2012.

Success-Failure Balance

While innovation prizes can be a low-cost way to generate great ideas, they're also fraught with potential legal and HR headaches. Hsieh and Jouret wanted to ensure participants retained ownership of their ideas if they weren't chosen as the winner. They had other matters to consider, including making sure an idea truly belongs to the contestant and that a winner isn't found to be a convicted felon. So Cisco hammered out ways to prevent fraud and notified candidates that they'd have to go through background checks if they made it past the semifinals.

Not everything went according to Cisco's plan. Initially, the I-Prize site let contestants vote on each other's ideas, à la news-rating site Digg. But then executives discovered that some contestants were trying to game the system. So Cisco decided not to use the community voting mechanism to influence the selection of semifinalists and finalists.

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