Open innovation: Virgin Hyperloop One’s Global Challenge

Hyperloop – most people have an opinion about the technical feasibility of Elon Musk's space-age proposal transportation. Setting this discussion aside for a moment, consider an equally fundamental question: how would you even fund it, much less run one profitably? Enter the Virgin Hyperloop One Global Challenge, an open innovation competition to crowdsource a startup's commercialization plan. Thoughts welcome 🙂

Elon Musk launched into the transportation infrastructure debate in 2013, stating that current modes of transport are too slow and expensive. He published the “Hyperloop Alpha” whitepaper, expanding on previous inventors’ concepts for a new form of high-speed transportation and suggesting that this was the solution for “the specific case of high traffic city pairs that are less than about 1500 km or 900 miles apart” [1]. Musk’s opinions often incite public controversy, and this whitepaper was no exception: prominent business leaders and academics raised doubts about the concept’s safety and technical feasibility [2,3], and stressed the difficulty of making the project profitable – noting that the transportation infrastructure projects’ high capital costs and adoption risks typically compel public rather than private funding [4].

Musk’s SpaceX and Virgin Hyperloop One, both private companies, launched two open innovation programs to address these concerns. The first, SpaceX’s Pod Competition, focused on the technical challenges, awarded its most recent trophy to a German team whose prototype propelled itself from a standstill to 457 kph on a 1.2km track [5]. The second, Virgin Hyperloop One’s Global Challenge (VHOGC), was a startup’s attempt to outsource its commercialization effort, asking entrants to develop a business plan for launching the VHO Hyperloop in the entrants’ home markets [6].

The VHOGC has achieved the company’s initial goals: quickly review the potential of a wide range of markets, then focus VHO’s efforts on development of the best prospects. It did this by adapting entrants’ incentives across the timeline of the program, first maximizing the breadth of markets by promoting independent work in the initial “ideation” phase (by promising to select 12 winning teams out of the 2,600+ competitors), then enhancing the success of top prospects by sharing best practices across the network of winning and finalist teams in the later “concept validation” phase.

In the ideation phase entrants developed business plans for implementing VHO’s hyperloop technology in their home regions. Winners and finalists were selected based on their “demonstration of a real corridor opportunity, favorable economics, a favorable investment climate and the willpower to advance regulatory climate” [6]. This phase was competitive, motivating entrants with the satisfaction of working on a topic of interest to their home region, and the promise that winning teams could work with VHO to validate their business plan in the second phase.

VHOGC is now in that concept validation phase, which inverts the initial phase’s competitive feel by organizing the winning and finalist teams into a collaborative community. In the short term VHO will work with the selected teams to validate their business plans, and in the medium term it will give those teams the opportunity to participate in the execution of their plan during a third “implementation” phase. In lieu of public information about these second and third phases, I will lay out my suggestions for how VHO should proceed and identify a few key issues for readers to consider.

Suggestions:

Short term: One key risk to VHOGC is the possibility that the concept validation phase’s collaborative feel will create the perception that winning teams have already “made it,” and offer little motivation to continue innovating. VHO can counter this by announcing new policies to reintroduce a competitive element: first, that VHO’s constrained resources limit their implementation phase support to a subset of the winning teams, and second, that winning teams will be replaced if their progress is eclipsed by one of the finalist teams.

Medium term: VHO’s current technology development process is entirely internal because VHOGC’s scope was limited to the company’s commercialization opportunity. Should they encounter any intractable R&D issues, they could launch a technology hackathon to harness the power of Open Innovation in a new context. This hackathon would attract a different group of technologists from those participating in SpaceX’s Pod Competition; those entering Pod are interested in developing greenfield technology for a broad issue (“design your own hyperloop”), while those entering the VHO hackathon would be interested in the program’s narrower scope (“work with VHO to fix this discrete technical issue”). Moreover, the fact that VHO’s R&D team is already funded and operating (compared to the bootstrapped teams entering Pod) offers entrants a stronger chance that they would have an opportunity to implement their hack.

Questions for readers:

  • Short term: What are VHO’s options for continuing to engage the members of winning teams after the “concept validation” phase has ended and the “implementation” phase has begun? How should it decide between these engagement models?
  • Medium term: Should VHO launch a technology hackathon to fix any future R&D roadblocks? If so, what are the factors they should consider in determining the scope of technical issues to cover in this program?

 

Word count: 779

 

 

Works cited:

  1. Musk, Elon. Hyperloop Alpha. Aug. 2013, spacex.com/sites/spacex/files/hyperloop_alpha-20130812.pdf.
  2. Gates, Bill. “r/IAmA – I’m Bill Gates, Co-Chair of the Bill & Melinda Gates Foundation. Ask Me Anything.” Reddit, 27 Feb. 2018, reddit.com/r/IAmA/comments/80ow6w/im_bill_gates_cochair_of_the_bill_melinda_gates/dux5evg.
  3. Moskvitch, Katia. “Scientists Explain Why Hyperloop Is so Dangerous and Difficult.” WIRED, WIRED UK, 26 Oct. 2018, wired.co.uk/article/elon-musk-hyperloop-boring-company-trial.
  4. Bradley, Ryan. “Elon Musk’s Hyperloop Sounds Impossible, but This Company Is Making Impressive Progress.” MIT Technology Review, MIT Technology Review, 21 Oct. 2016, technologyreview.com/s/601417/the-unbelievable-reality-of-the-impossible-hyperloop/.
  5. Hawkins, Andrew J. “WARR Hyperloop Pod Hits 284 Mph to Win SpaceX Competition.” The Verge, The Verge, 23 July 2018, theverge.com/2018/7/22/17601280/warr-hyperloop-pod-competition-spacex-elon-musk.
  6. “HYPERLOOP ONE GLOBAL CHALLENGE.” Competitions, Quizzes, Hackathons, Scholarships and Internships for Students, 28 Oct. 2016, com/o/hyperloop-one-global-challenge-hyperloop-one-19054.

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9 thoughts on “Open innovation: Virgin Hyperloop One’s Global Challenge

  1. Thanks for sharing this article… Quite interesting and never had heard of crowdsourcing the business model of an initiative… Coming to your questions, I think the VHO team should try to engage the winning teams through consulting and research projects – especially in new geographies, where the VHO team is less knowledgable about buying powers and decision making processes, local support can help significantly in redefining the market-entry strategy. Additionally, in the long-run, hackatons can support technical issues and help solve certain smaller issues, however, I disagree to the point that I am not convinced that crowdsourcing technical issues can solve major problems – given that the hyper loop technology is extremely new, the team should try to engage consultants of employees full-time to work on the technology aspect. I doubt that there’s sufficient specialized talent in the market to support them on a hackaton basis.

  2. This interesting article represented me 2 challenges about open innovation of commercialization of Hyperloop. First, commercialization of an innovative project might require significant experience in this area. This made me think that whether VHO would be able to get any great ideas. With this hackathon, VHO might not source the right crowd. Second, commercial plans are generally long term plans that should be executed step by step. However, in the case that VHO get the commercialization idea through crowd sourcing, business plans might not be implementable by working executives. Thus, in the short team, I would narrow down the crowd that VHO want to source (we can make it limited to Tesla, SpaceX and Virgin Group maybe). Then, I would also require teams to have some executive experience so that if their business plan is selected for implementation, these employees can quit their current jobs and would join as an executive team to VHO.

  3. Very intriguing topic to write about – Elon Musk’s ability to continually generate brilliant ideas and will them to execution never ceases to amaze me. However, this idea he has largely passed on to others to execute. In response to your first question, I would suggest pairing the teams up with infrastructure investors (ideally with experience in the associated local markets) to continue to incentivize the teams and assist them with the implementation phase. There is a large amount of capital looking to be deployed in the infrastructure space, and investors have extensive project development experience. To address the second question, I am not sure a hackathon is the best approach to solving technical issues with cutting edge, brand new technology. I believe the problem is best addressed through full-time employees that have experience working for VHO’s R&D team and the development history of the technology.

  4. I think the question you pose (and addressed in this last comment) about when to engage a hackathon team to address a technical issue is great. Doing some research on crowdsourcing for my own post, it seems that crowdsourcing fits best when creativity is needed, and internal solutions are more successful when it is a purely technical challenge. I guess the question of whether or not to use a team of outside innovators is still kind of case-specific: is it just a matter of iterating and improving on a current process that’s hitting a roadblock? Or, does the entire process need to be redesigned? Depending on the resources required to run the competition (staff; prizes) VHO might consider using an annual hackathon for difficult issues; the creative, crowdsourced solutions may not always work, but after being reviewed and updated by the internal technical team, they may be able to improve the speed of innovation. This boils down to a cost : benefit problem, but it may make sense to continue the hackathons, with the added benefit of keeping the original teams engaged.

  5. Very interesting use of open innovation. I think this was a great opportunity for VHO to slim down their potential targets for the hyperloop by ruling out markets that were less commercially attractive, but I would definitely be careful with how closely I allow the partners to be involved in the next implementation phase. Ultimately when implementing these solutions VHO are the experts and will need to make decisions in the best interest of the company. I could envision clashes with their partners if situations arise in which they need to alter or go back on aspects of the partners’ commercialization plan. I would make sure that the partners are looped in with the projects but might want to consider keeping them at arms length during implementation.

  6. Great article on the use of open innovation! In response to your questions, I believe the implementation phase will require a large scaling effort that will require a unique and diversified skillset. If VHO can source the right talent, from change management, technical, to leading effective teams, they will be better positioned to have a successful launch. The biggest hurdle I see, or the bottleneck, will be talent. VHO should devote a considerable amount of resources to the next phase of implementation and supplement the winning teams by filling the talent gaps.

  7. This is very interesting. For a company (especially a startup) to outsource the technological and commercial challenges to the crowd and create competitions that got so many people to participate. I think this worked in this case with having lots of participants just because these were Elon Musk’s startups.

    Regarding your second question, I think that for the first stages it was a good idea to create these kinds of tournaments because they were searching for creative ways to solve the problem, and then choose between them, but for the future R&D challenges you need people who will be experts on the subject and who work for the company. Creating limited scope technical problems to solve using Hackathons is an interesting idea, but I am not sure that it is in the best interest of the company to expose its challenges in the longer run, because if the idea is financially lucrative this will entice others to enter this space, and by revealing your challenges to the outside you are exposing your R&D and providing your competition with an unnecessary advantage.

  8. The post talked about open innovation in a novel and original way. While most of us would perhaps associate innovation exclusively with technology and science, the fact that it was used to solicit a commercialization plan as well is refreshingly unexpected. The choice of hyperloop is a perfect example of the utility of open innovation across these different field and problem areas.
    It was very enlightening to understand how hyper loop engaged with sourcing and managing commercialization plans through a staged approach, taking competitors through the various phases of the business validation process from high-level to executable.

  9. Hyperloop technology is in my opinion one of the most exciting promises of our time. Transportation is integral to nearly every business that functions globally, and finding a way to transport people and materials in an expedited fashion promises huge potential, not to mention monumental environmental gains if we can move away from carbon fuel emissions. To address your question – At first thought I believed that engaging individuals beyond the concept validation phase could be solved with additional competition. However, upon reflection I question whether those who succeeded in the concept phase are the right individuals to be tackling the implementation phase? Having no background in this field (!) I do question if the skills that allowed these individuals to be successful in idea creation want to, are motivated by, and can succeed in the mechanics of implementation. I think this is an interesting question for an open innovation platform.

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