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Prize competitions have unearthed unconventional and breakthrough solutions, and sometimes from the most unlikely innovators.
Prize competitions date back more than 300 years. In more recent history, prizes have been used by entities ranging from governments, who led the series of DARPA challenges, to private companies such as Netflix. Most of the largest global competitions, however, have been funded by philanthropists and companies sponsoring a prize operator, like the many prize competitions designed and run by XPRIZE. This long history has contributed to best practices and understanding what makes a well-designed prize.
A well-designed prize can be an exciting and effective tool for philanthropists looking to further their goals and create transformative impact. Unlike traditional prizes that award people for work already done, or grants that stipulate a scope of work, philanthropic prize competitions challenge entrepreneurs to push toward new solutions and build new markets, and then reward them when they succeed. The unique potential for prizes to create lasting change is why the Milken Institute Center for Strategic Philanthropy is expanding to include prize philanthropy to our core offerings.
Although prize competitions have been extremely effective for finding a diverse range of innovative solutions to a given problem, they are not necessarily the best tool for every problem. Further, the process requires an appetite for a significant amount of planning and administration and can be very unpredictable. Philanthropists should consider some key elements before deciding whether a prize is the right mechanism to reach their philanthropic goals.
First, philanthropists must determine if there is a need for a prize competition for the causes they care most about. Is there a problem, or a piece of a bigger problem that could benefit from an influx of bold new ideas, diversified problem-solvers, capital, and/or the creation of new markets? If yes, a prize competition could be a powerful tool to maximize innovation and impact. A prize competition is not a replacement for traditional forms of grantmaking or other proven philanthropic tools, but rather, a pull mechanism to spur innovation where there is a true market failure.
Next, prize competitions take far more planning and heavy administration than grants do. While there are different ways to structure an impactful prize, a successful philanthropic prize competition requires clear articulation of goals and a careful design. This means a rigorous process of landscape analysis, field test design, data collection and judging, investment-readiness training, recruitment of teams, and the management of a wide array of entrepreneurs. There are significant benefits to counterbalance the heavy administrative lift. This structure is necessary to find the more non-traditional, disruptive, and innovative ideas while also applying rigor and increasing the likelihood of invest-ready and scalable solutions.
Third, donors must be prepared for the unpredictable. While a prize competition defines a problem, creates judging criteria, and tests innovative designs, it does not dictate what solution is best to solve the problem. This open field for innovation means a donor cannot know exactly what winning solutions or final product will look like.
It is often said that philanthropy is private capital for public good. Prizes take this philosophy further. Crowd-sourcing ideas consistently brings a return of investment of 10x or more, supports new voices and ideas, minimizes risk to donors, creates the opportunity to shape public perception of a given problem, and incentivizes private work for the public good. In well-designed prizes, donors achieve a kind of “two-for-the-price-of-one” effect. How? Because, in addition to the substantive issue the prize addresses, donors at the same time support, nurture, and in many cases help cultivate a global community of entrepreneurs. A donor, then, should consider longer-term outcomes alongside what will be a heavier administrative lift--and whether they have an appetite for an innovative, unpredictable final product.
Prizes are powerful, but they are not right for every problem. Philanthropists should continue with traditional tools for giving, and also explore whether a prize competition is right for their goals, and for the problem they want to help solve. With careful design and execution, prize philanthropy can transform the giving landscape, spur innovation and the creation of new markets, and empower a new community of entrepreneurs.
That just may be a prize worth fighting for.
To learn more about the Milken Institute's prize philanthropy offering, contact email@example.com.