The current system does not reward organizations that do their best with what they got (thus producing a more competitive, superior product). The current system rewards the organizations with moronic or lazy GMs. The current system rewards lack of effort (thus producing a less competitive, inferior product). It's kinda like communism. There's no incentive to do well.
And, to repeat what Chawx repeated - all teams who make the playoffs are excluded from the lottery - just as it stands now.
All the non-playoff teams (the losers, if you will) compete to not be the biggest loser, but - like Battier mentioned - compete to be the best of of the losers. Reward them with a top pick and a decent team can compete with the top playoffs teams in just a few months. No more dynasties. Every year things could totally change up. If the top pick goes to the Bobcats or Sacramento - nothing changes. The top teams remain the top teams and Charlotte, Sacramento probably miss the playoffs again anyway - despite getting the top pick.
Eventually, Anthony DAvis, Demarcus Cousins, John Wall will be done with their initial contracts and bail on their original teams to go to better run organizations. Can you blame them? The current system sucks. We're stuck with it.
Chawx' rocks. It'll never happen.