There are four key pillars to running a Wastl-derived hackathon:
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it's not a design or ideas contest: you have to make something. those are important and difficult, but the point of a hackathon is to build software: some amount of coding is required.
This is similar to the first pillar. In fact, it's arguably entirely covered by the points that are made! But it's the single most important part of running a hackathon in my opinion.
Even if you only care about the benefits to the company -- and you shouldn't: it's okay to do things for your employees just to be nice -- there are still intangible benefits:
Given the opportunity to work on whatever they want, many people will still choose to work on something with business value. Maybe it's tech debt that can't get prioritized, or maybe it's a moon shot.
In fact: by my estimate throughout the seven hackathons that ACV has put on, when given the opportunity to work on whatever they want, 55% of all teams have had some amount of business value. This excludes projects that I couldn't immediately identify either way, and also groups by team and not individual: the percentage of teams could be as high as 65%, and I suspect that non-business-value teams are more likely to be one person working on a side project.[1]
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I've heard about a hackathon that was judged by executives. One team worked their asses off to restructure some tech debt. They presented their work and the CEO basically told them it was worthless because it wouldn't make any money. That's obviously a very stupid thing to have said to your employee in any situation, and it killed morale. The point of hackathons is to improve morale, not tank it.
Even if the non-participating judges aren't overtly insulting to the participants they still may be biased towards projects with business value. It's also to judge how difficult (or not) a project was to complete in the alloted time if you haven't just gone through it yourself.