Companies are increasingly soliciting and engaging the crowd for new ideas, but they're making a fatal mistake by offering up crumbs in exchange.

For example, earlier this month, I came across The Kitchen Experience Challenge by GE Appliances. Contestants are prompted to "discover problems that a technology hub in the kitchen could solve and share [their] solution for the win." The grand prize is $2,500. To submit, an infographic depicting three major pain points and a fully rendered sketch or graphic of their problem-solving invention is required. The challenge is one of several that Giddy, GE Appliances' new Quirky-like startup, has announced it will launch every month.

On the one hand, it's fascinating to see corporations break down barriers and describe the kinds of products they want to bring to market in detail.

But they're going about it the wrong way. They're treating creative people like employees, not like entrepreneurs. And this is why they will never get truly great ideas. Why would you submit a great product idea for the possibility of $2,500? If you were able to license that idea you could earn much more. Why won't GE Appliances share a bit of the future revenue stream?

Historically, companies relied on an internal team of research and development staff to invent new products. But why count on just your team to come up with ideas when you can open the door and source inspiration from anywhere in the world? Today, manufacturers across industries and even retailers like Target are running challenges and contests to solve problems and find their next great hit.

Some of the best ideas are never going to emerge from in-house product developers because they're overworked and frustrated. That was my experience when I began licensing my ideas for products. It was obvious that the in-house designers I worked with weren't content. It was as if they were working an assembly line. Looming deadlines, demanding bosses, being cooped up in an office, and never receiving public acknowledgement nor appropriate financial compensation for the unique ideas you contribute? The end result is that people aren't inspired.

Fundamentally, those who are motivated to create don't do so because they receive a paycheck. They're driven to make an impact. They want to be recognized for their contributions. They have something to prove.

In an article about why innovation contests don't often work, business school professor Tim Kastelle puts it plainly: "The research shows that to motivate work built on creativity, people need autonomy, mastery, and purpose."

At a pet trade show in Las Vegas last summer, I met Mun Jen Ng, a talented industrial designer who had recently decided to start licensing his ideas after a successful career at iconic global brands like Oakley and Fossil. He described the seasons he was required to crank out 35 designs in two to three months, including technical blueprints for factories, as "brutal."

Every now and then, ideas from the outside made their way to his desk. At one of his first jobs after studying design at the Pratt Institute, upon realizing how much outsider designers were being paid for their ideas, he asked his boss if he could resign and begin designing for the company from home instead.

"I knew I could knock it out of the park," Ng told me. He laughed: "It was such a fast no." The company didn't want to start a trend, he surmised. He didn't see any more ideas from outside designers after that. Looking back, he said, the company was slow to catch on to the industry's next big hit. "I don't know if [shutting the door] was the right move for them."

Ng began working on his own ideas for products because he wanted more freedom, he confessed. When he looked at Kickstarter products that raised a million dollars, he thought: I could design that in my sleep! It was obvious to him that he had to start thinking differently to adapt to a new marketplace. Today, anyone can have an idea and make it reality.

In 2016, he began selling his first product -- a high-end stainless steel scrubber for cast iron pans -- on his own website. For every two units he sold, copycats on Amazon sold ten. Marketing was a full-time job in and of itself, he realized. Since then, he's decided to focus on licensing his inventions. (And, full disclosure, became a member of my coaching program inventRight.)

This is one of the reasons why I believe that independent product developers and inventors can out-design professionals. It might take some time; at first you won't know exactly what products companies are looking for. But if you stay with it long enough and develop meaningful relationships, you'll ultimately be far more motivated. You'll hustle harder. Because when you sign a licensing agreement, the sky is the limit as far as potential royalties. Moreover, you'll be rightfully credited as the inventor.

Which is why the way many open innovation contests are run today confuses me. I just don't see creative people working for prize money. Why would you, when you could become an entrepreneur instead? Recently published research has come to a similar conclusion. Companies will receive more ideas if they focus on other forms of non-monetary feedback, such as encouraging comments or ratings, reports.

In an article for the MIT Technology Review, Randall Wright points out that competitions have long been associated with scientific breakthroughs. But it's not because innovators are obsessed with proving they're smart. "Rather, they're obsessed with bringing to life paradigms that will empower human beings," he writes.

To bridge this disconnect, systems that foster stronger relationships with outside innovators must be put in place at companies who are serious about tapping into the talent outside their walls. What essentially amounts to a suggestion box isn't going to cut it.

Inventors, I recommend seeking out contests that offer you a piece of the pie in exchange for your creativity. Still want to participate in one that doesn't? You can always ask if they're willing to consider a different arrangement.

Gina Waldorn, the entrepreneur who was hired to relaunch the invention community Quirky last year, told me in a phone interview: "I do think companies are recognizing how difficult it is to be successful. To truly practice open innovation, you need to have scale, be receiving a number of diverse ideas, open to people of different backgrounds, and willing to kiss a lot of frogs to find ideas that truly resonate and are groundbreaking. Unless you have a well-thought-out methodology to manage, get through, prioritize, and validate ideas so that you find those gems...."

I agree with her. Inventors want recognition, freedom, and for society to benefit from their efforts. They want in on the revenue stream, not a reward! This isn't a job; it's our life's dream.

Do you have ideas for new products? Know that the largest and most powerful companies in the world want to hear from you -- and that, if you hustle, you are more than capable of inventing something better and more useful than their employees.

In my next article, I will explain how.