(Illustration by Robert Nuebecker) 

Foundations play a critical role in addressing needs not met by governments and for-profit companies. Achieving their mission requires money, of course, but it also requires access to new ideas and previously unexplored solutions. In other words, it requires innovation. By expanding their innovation capabilities, foundations can accelerate progress toward their mission.

The innovation journey of Lumina Foundation offers a case in point. Lumina is an independent private foundation with an endowment of more than $1 billion, and its mission is to increase the proportion of Americans with postsecondary learning credentials. It makes grants and sponsors issue papers in support of that mission. In 2008, the foundation announced Goal 2025, an initiative aimed at achieving a broad objective for education attainment—that by 2025, at least 60 percent of Americans will obtain a college degree, certificate, or high-quality postsecondary credential. Yet Lumina does not grant degrees. So how could the foundation work toward this goal?

Lumina’s commitment to innovation led to the creation of a new position: vice president of communications and innovation. One of us, Kiko Suarez, took that position in 2010. He and his colleagues investigated various methods of fostering innovation, but one model in particular that caught their attention was open innovation. Unlike traditional innovation processes, which are often internal and proprietary in nature, open innovation seeks ideas from a wide variety of external sources.

One variant of open innovation, known as crowdsourcing, uses online tools to enable any participant to submit an idea to solve a specific problem. While exploring open innovation, Lumina discovered InnoCentive, an online marketplace that hosts crowdsourcing events. Through InnoCentive, an organization (known as a “seeker”) can contract with InnoCentive to define a specific problem (known as a “challenge”) and offer a financial award that ranges from $5,000 to $1 million for the best solution offered by any participant (known as a “solver”). A single challenge can reach thousands and sometimes even millions of solvers from around the world.

The other coauthor of this article, Alph Bingham, is a cofounder of InnoCentive, and he has worked with Lumina to help the foundation use this platform as effectively as possible. As of October 2016, Lumina had run 15 challenges, had attracted submissions by 656 solvers, and had disbursed 27 awards that totaled $190,000 in value. Lumina still awards many traditional grants, and it continues to fund research on education issues. But today it also uses open innovation as a way to scour the world for novel ideas that are worthy of scaling up.

A Large Pool of Experts

At some level, most foundations already practice one form of open innovation through their request-for-proposal (RFP) process: They seek ideas from outside entities and award grants on the basis of proposals submitted by those outsiders. But the RFP and grantmaking process tends to favor the established experts in any given field. These experts know where to find RFP announcements, and foundations will often approach them directly about submitting proposals.

The main value of crowdsourcing lies in finding breakthrough ideas in the “long tail” of activity within a field—in being able to gather input from people outside a small pool of well-known experts. Tapping into the knowledge of people who are at the margins of a field can be especially valuable. Foundations, moreover, typically work with approved nonprofit organizations—not with individuals—whereas crowdsourcing makes it possible to reach all types of solvers.

In the past, Lumina routinely sought grantees for its projects by issuing RFPs to traditional nonprofits, universities, and think tanks. As a result, it awarded 95 percent of its grants to known experts. But consider what happened when Lumina conducted its first crowdsourcing challenge—“Design of Student-Centric Websites for Open-Enrollment Colleges and Institutions.” The challenge solicited “fully coded examples of a front-end user interface for deployment by community colleges.” It offered a $20,000 prize, and it attracted 762 solvers. The winner was Andrew Ambrosino, a student at the University of Massachusetts Lowell. His software lets students select their career goals and then map a visual path that leads toward those goals. Using the software, students can estimate the cost of pursuing different types of education, compare different institutions and courses of study, evaluate curriculum requirements, and investigate opportunities for workplace learning.

Without the structure of a crowdsourcing challenge, Lumina would never have known to approach someone like Ambrosino, and Ambrosino would not have known about Lumina’s interest in solving this particular problem. For Lumina, the fact that a student won the challenge—that it provided an example of value creation for students, by a student—was icing on the cake.

Lumina has experimented with two types of challenges: “reduction to practice” challenges, in which solvers submit both a written proposal and a working prototype of their solution; and “ideation” challenges, in which solvers submit only a proposal that describes their solution. The challenge won by Ambrosino is an example of the first type. Another challenge, College Scorecard Design, exemplifies the second type. It asked solvers to improve upon the College Scorecard, an online tool released by the White House in February 2013 to help students evaluate colleges. Lumina received submissions that suggested ways to display types of information that traditional college rankings often omit—from cost statistics and outcomes data, such as graduation rates and alumni earnings. The winning submission suggested that students should be able to compare colleges on parameters such as frequently chosen careers upon graduation and forecasted break-even dates for an investment in attending college. Along with selecting a winner for this challenge, Lumina compiled a set of compelling ideas from the top 50 submissions and provided that list to the White House for consideration in the next iteration of the College Scorecard.

A Tool with Multiple Uses

In using a crowdsourcing platform to seek out mission-relevant solutions, Lumina has discovered several ways to get the most out of this approach to innovation.

Leveraging partnerships | For two of its challenges, Lumina partnered with the Economist Group, a global publishing company that also runs conferences on topics of public interest. Collaborating with that organization allowed Lumina to achieve greater visibility both for its challenges and for its overall mission. In a challenge called Quantified Work, for instance, Lumina and the Economist Group selected three finalists from a set of crowdsourced submissions and invited them to present their solutions at the Economist Higher Education Forum. The forum included a “shark tank” event in which a panel of judges picked the challenge winner. In Skills Gap, its other challenge with the Economist Group, Lumina asked solvers to create a product or service that would help students gain the skills that employers want them to have upon graduation. The winner, a software entrepreneur named Diana Cobbe, received $10,000 for OnCampus, a mobile app that lets students learn about the skills in demand at specific companies. The app also enables students to track skills that they develop in college, and it generates an “employability score” that hiring managers can use to recruit employees.

Exhausting possibilities | Crowdsourcing can help organizations tackle one of the toughest problems associated with innovation: How do they know whether to discontinue a seemingly promising innovation project that has yet to yield results? In some cases, a solution is just around the corner. But in other cases, a project may be at a dead end, and an organization would do better to spend its money on other, more fruitful ideas. A crowdsourced challenge offers a way to take one last bid to find the right solution to a hard problem. In 2014, for example, Lumina held a challenge called Student Financial Support Models, in which the foundation asked solvers to design new ways to help students pay for postsecondary education. Through the crowdsourcing process, solvers from around the world can respond to this challenge and thereby assure Lumina that it has exhausted all of its options for that line of inquiry.

Sharing resources | Through crowdsourcing, Lumina has developed an alternative form of grantmaking—the donation of a challenge, rather than money, to a grantee. Crowdsourcing, in effect, can become another kind of philanthropic currency. Lumina added this approach to its tool kit when it realized that small-scale nonprofits might benefit from the reach and the publicity that a prominent crowdsourcing platform can provide. In 2015, for example, Lumina donated a challenge to Camelback Ventures, an incubator that supports entrepreneurs of color who work in the higher education field. Using Lumina’s corporate account at InnoCentive, Camelback created a challenge in which the winner would not only receive a monetary prize but also land a spot in the incubator. In this way, Lumina helped Camelback to scale up and achieve its goals, and that in turn helps Lumina to achieve its goals.

The primary benefit that foundations gain from crowdsourcing is that it helps them cast a wider net for ideas on how to further their mission. It’s also an opportunity for individual solvers—even if they are “outsiders”—to share their ideas directly with a foundation. That kind of broad connection to the public can help foundations tackle the tough social and technical problems that they aim to address.

The low cost of crowdsourcing and the high value of crowdsourced solutions translate into a high return on investment. Lumina typically awards between $50 million and $60 million in grants each year. Crowdsourcing, in contrast, costs only $10,000 to $50,000 per challenge, and it yields useful and often priceless ideas. In addition, the results of a challenge can help define Lumina’s grantmaking priorities and can inform the evaluation of its grant proposals. Crowdsourcing has not replaced grantmaking at Lumina, but the foundation has learned that it can effectively combine open innovation practices with other innovation methods to achieve greater impact.

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