For years, Elastec/American Marine, a Carmi, Illinois–based maker of equipment used to clean up oil spills, had been tinkering with plans for a promising new oil-recovery system. But the project never got off the back burner. Things at the $30 million company were rolling along smoothly, after all, and CEO Donald Wilson was unsure about the potential market. The project might still be languishing were it not for the 2011 Wendy Schmidt Oil Cleanup X Challenge.

Sponsored by the wife of former Google CEO Eric Schmidt, the contest offered a top prize of $1 million to the team able to create a device capable of recovering oil from the ocean's surface at a rate of at least 2,500 gallons per minute. That's no small task: The industry standard is less than half that amount, about 1,100 gallons per minute. As the largest manufacturer of oil-spill-cleanup equipment in the U.S., Elastec felt the pressure to respond to the gauntlet being thrown down. "We like challenges, and this certainly was a challenge," says Wilson.

The oil-cleanup challenge was presented under the banner of the X Prize Foundation, which is best known for contests designed to spur innovation in aerospace and, more recently, the understanding of the human genome. But the foundation is hardly the only outfit sponsoring such contests. In this age of crowdsourcing and open-source everything, innovation challenges can be found in nearly all industries. DARPA, a division of the Department of Defense, is well known for its annual challenges, which have included competitions for creating unmanned vehicles and re-creating shredded documents. Likewise, Netflix famously offered $1 million to whoever developed the algorithm that best improved upon its movie-recommendation system. For contestants, the benefits of such challenges often go beyond the prize money. Win or lose, competing can speed product development, create a team spirit, and produce some free publicity.

Wilson first read about the X Challenge when online registration for the prize opened, in October 2010. Given the difficulty of the undertaking, there was plenty of internal discussion about whether Elastec ought to take the plunge and enter. And then there was the question of whether it truly had a shot at winning. A number of team members were openly skeptical about the likelihood of even completing the project on time.

To begin with, the company's existing technology had never achieved the kinds of numbers the contest required. What's more, even though Elastec had cooked up the basis of its new idea years earlier, it was still a tall order to get it built, tested, and ready to compete within the contest's required time frame of 90 days. "We always give at least a year for any new product development," says Wilson. "And for this one, there are a lot of things going on with the design. It might otherwise have taken us, maybe, five or 10 years."

Were it not for Wilson's faith in the proposed technology, which involves a series of rotating discs designed to skim the water's surface and capture the oil from it, Elastec might have passed on the challenge. "We felt it was going to be head and shoulders above anything else that was on the market," says Wilson.

Besides, there's nothing like a challenge with a deadline to light a fire under people. "Contests like this bring benefits like set timelines and deliverables that focus you as a business owner to get something on paper, a prototype, and something out the door," says Megan Mitchell, senior associate director of Wharton Entrepreneurial Programs at the Wharton School of the University of Pennsylvania.

Wilson's enthusiasm for the project soon drifted down to almost every one of the company's more than 140 employees. "Morale was very high," Wilson says. "We asked a lot of people to get up early and stay late and work weekends—but it was still easy to motivate people to be involved."

The company spent nearly $600,000 building the prototype. Some 350 companies entered the contest; Elastec and the nine other finalists were invited to demonstrate their devices at the National Oil Spill Response Research & Renewable Energy Test Facility in Leonardo, New Jersey. The facility contains a giant water tank designed to simulate the saltwater and wave conditions of an actual oil spill. To Team Elastec's great excitement, the company's new oil skimmer performed as intended.

When the results were announced at an award ceremony last October in New York City, Elastec walked away with the top prize of $1 million. Its device achieved an efficiency rate of 89 percent and took in more than 4,600 gallons of oil a minute—more than four times the industry standard, and nearly twice that of the nearest competitor.

In addition to the prize money, which Wilson says will be used to recover some of the costs associated with the contest as well as commercialize its new technology, Elastec can now market to its clients an oil-removal device that has been field-tested and recognized by a panel of industry experts as demonstrably better than anything else available. Attracting clients is also likely to be a little easier, given the extensive media coverage the company received after the X Challenge win, which included interviews on CNN, Fox Business News, and National Public Radio. Wilson says Elastec has received calls from numerous customers around the world inquiring about the new technology.

For all the success Elastec had, Wilson acknowledges the risks that failure in the X Challenge might have entailed. The money and manpower sunk into the challenge would have been wasted, at least to some extent. Morale might have been compromised. Food for thought for any company with thinly stretched resources that is considering participating in an innovation challenge.

Besides the oversize, lottery-style check, the biggest takeaway for Elastec has been the sense of accomplishment employees feel in bringing a technology from idea to fully functioning prototype that shattered existing industry standards. "We didn't leave any stone unturned," says Wilson. "We did a huge amount of engineering, research, and testing. We did a lot of smaller-scale testing. But we can only test. You never know until you actually get into the tank." 

Up for a Challenge?

Innovation contests abound. Finding them is easy, thanks to a number of websites that serve as platforms that allow various organizations to post their challenges. Here are three sites that would-be contenders should check out:

1. hosts more than 120 active challenges in a number of industries, although it leans heavily toward engineering, chemistry, and health care–related competitions. (Example: $30,000 to develop a room-temperature-activated adhesive)


For number crunchers, is the leading hub for data-mining and predictive-modeling challenges. (Example: $3 million to develop an algorithm that uses available patient data to predict and prevent unnecessary hospitalizations)


Still in beta testing, posts more lighthearted challenges, usually with less-lucrative prizes. (Example: The Methuselah Mouse Prize—$100 to the team with the longest-living laboratory mouse)