Prize-Driven Innovation Gets a New Push From an Unexpected Sponsor

By Paul Jansen

Prize competitions for innovation have a long history of producing beneficial change – from the 18th-century Longitude Prize, which enabled more accurate transoceanic navigation, to Napoleon’s food preservation prize that led to long shelf-life canned foods, and the Braent Prize that produced a cure for cholera. But as the use of patents and research grants grew, prizes became more peripheral to innovation.

Today, however, prize competitions are booming again – and government is embracing them to better tap the creativity and skills of the public at large.
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In 2009, a team from McKinsey took a fresh look at whether prizes still had relevance as a tool to drive social change and innovation. You can read our report here. We discovered a thriving ecosystem of organizations that used incentive prizes to drive innovation by tapping the power of the crowd to solve tough problems. These organizations, be they nonprofits like the XPrize Foundation or for-profits like Innocentive or Netflix, embraced incentive prizes for the simple reason that they work. That’s because, almost by definition, prizes pay only for desired results rather than for noble but unsuccessful attempts. The power of prizes to stimulate innovation comes from their ability to mobilize resources, intellectual as well as financial, and their power to draw attention that can influence the perceptions and actions of targeted communities.

Government agencies played a role in all this, but it was still limited at the time of our report. Our research showed about 17% of new prize capital from 2000 to 2007 came from government sponsors. But it was the signing of the America Competes Reauthorization Act in 2010, and the creation of, that unleashed federal agencies. The new law gave government departments the authority to uses prizes to leverage solvers around the world. Agencies embraced the tool, as well as the platform and the technical support provided by experienced prize designers from NASA.

According to, 260 prizes, sponsored by more than 50 agencies, have been offered since the site opened in early 2011. The prizes vary greatly in intent and prize value. At one end of the spectrum is the Department of Energy’s $15 million Bright Tomorrow Light Prize seeks to substantially accelerate America’s shift from inefficient, dated lighting products to innovative, high-performance alternatives. On the other end is the National Institute of Health’s Center for Scientific Review, which launched a $10,000 challenge to uncover the best ideas for detecting possible bias in the peer review of scientific grants.

It’s not only the federal government that has gotten into the prize act. In July 2012, the Mayor’s Office of New Urban Mechanics in Boston launched a project called Street Bump, an app that allows drivers’ smartphones to automatically report road hazards to the city as soon as the phone picks up the distinctive “thud” vibration of a pothole. Initially, however, the app generated too many false reports, which caused the city to waste scarce resources chasing down non-existent potholes. The city contracted with InnoCentive to improve Street Bump, which launched a $25,000 prize to its network of over 400,000 solvers. Good ideas came in from many sources and the result, while still not perfect, is a large improvement. According to the Street Bump website, thousands of bumps have been accurately detected. It’s a quantum leap over the manual, antiquated method of reporting potholes that is still being used by most public works departments.

So what is the future of prize use by government? Eighteen prize competitions are currently open on right now. Some competitions will fail to deliver the desired result, because they are poorly designed or marketed. Other prizes will go unclaimed. Not every problem has a quick solution. But government at all levels seems to be getting a good return on the investment in prizes, in part because they tap into the power of crowds to attract unconventional ideas from unexpected sources. As a result, we are likely to see more prize competitions in our future – some of which may be waiting for your own ideas.

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