Government, Foundations Turn to Cash Prizes to Generate Solutions

Megan O’Neil at the Chronicle of Philanthropy: “Government agencies and philanthropic organizations are increasingly staging competitions as a way generate interest in solving difficult technological, social, and environmental problems, according to a new report.
“The Craft of Prize Design: Lessons From the Public Sector” found that well-designed competitions backed by cash incentives can help organizations attract new ideas, mobilize action, and stimulate markets.
“Incentive prizes have transformed from an exotic open innovation to a proven innovation strategy for the public, private, and philanthropic sectors,” the report says.
Produced by Deloitte Consulting’s innovation practice, the report was financially supported by Bloomberg Philanthropies and the Case; Joyce; John S. and James L. Knight; Kresge; and Rockefeller foundations.
The federal government has staged more than 350 prize competitions during the past five years to stimulate innovation and crowdsource solutions, according to the report. And philanthropic organizations are also fronting prizes for competitions promoting innovative responses to questions such as how to strengthen communities and encourage sustainable energy consumption.
One example cited by the report is the Talent Dividend Prize, sponsored by CEOs for Cities and the Kresge Foundation, which awards $1-million to the city that most increases its college graduation rate during a four-year period. A second example is the MIT Clean Energy Prize, co-sponsored by the U.S. Department of Energy, which offered a total of $1 million in prize money. Submissions generated $85 million in capital and research grants, according to the report.
A prize-based project should not be adopted when an established approach to solve a problem already exists or if potential participants don’t have the interest or time to work on solving a problem, the report concludes. Instead, prize designers must gauge the capacity of potential participants before announcing a prize, and make sure that it will spur the discovery of new solutions.”