It takes a lot of planning and research to create an effective prize contest, says Jaykumar Menon, senior director for education and global development and prize development at the X-Prize Foundation, which offers monetary awards for technological advances in space travel, automotive fuel efficiency, and other areas. And there’s no guarantee that anyone will succeed in the challenge and win the prize.

“It’s difficult to do a prize well,” Mr. Menon says. “You can have a prize that is not won. You can have a prize that is won but has no impact. You can have a prize that no one pays attention to.”

To make sure that it’s not wasting time and money, the X-Prize Foundation takes great care to develop its prizes.

For each project, it spends six to 12 months studying how to create meaningful criteria, how to appeal to competitors, and other factors.

In the video above, filmed at the NextGen: Charity conference in New York City in November, Mr. Menon talks about that process and the challenges of running an effective prize contest.