If philanthropists seek to achieve impact in a growing field, a well-designed prize program can be a smart way to crowdsource innovation, increase public awareness of an issue, and attract private investment.
We recently had the opportunity to explore the world of innovation prize philanthropy. On behalf of an individual client, we sought to identify how to structure a prize with the potential to scale a burgeoning field. We learned that while many of the best known prestigious prizes recognize achievements after the fact, innovation prizes can be a powerful tool for philanthropists looking to jumpstart a nascent industry or re-energize a stagnant field.
Regardless of the size of the prize or the state of the field it aims to catalyze, the best innovation prizes are based on careful forethought, strategic planning, and effective implementation. If you are considering sponsoring an innovation prize, we recommend thinking through these four steps:
1. Assess your capacity and the role you should play. Prizes tend to require significant upfront investments in design and other costs that amortize over several years. It’s important to have a complete understanding of what you are taking on and implementation options. As our colleague Stephanie Fuerstner Gillis recently wrote, funders are best positioned when their resources align with the needs of the field they aim to serve. Before embarking on a prize project, first determine if your chosen field is in need of an innovation catalyst. If so, identify the resources you can best contribute to a prize program, including your funds, knowledge, and networks. For a good overview of the various types of prizes and what each requires, see this report from McKinsey & Company.
This inventory process may help you discover resource gaps that could be filled by strategic prize partners. Consider partnering with foundations, businesses, or government agencies to share infrastructure and networks. For example, in the Wendy Schmidt Oil Cleanup X Challenge, Wendy Schmidt sponsored a competition with the X Prize Foundation, who then partnered with Shell Oil Company. Shell donated $1 million worth of oil for the clean-up test tank for finalists and provided additional technical support throughout the competition.
2. Start with an outcome in mind. Identify the outcome you seek and base a problem statement around it that the prize will aim to solve. The experts we consulted described compelling challenges as those which are well defined yet require creative thinking, are difficult but not impossible to solve, have clear criteria for winning, and have the potential to benefit society at large. Experts consistently identified the Ansari X Prize as an exemplary program because it set an ambitious target—to develop commercial spaceflight—and provided no instructions other than objective evaluation criteria: the winner would be the first team to build and launch a reusable spacecraft that could carry three adults to an altitude of 100 kilometers twice in two weeks.
3. Design a program structure that reflects the prize’s goals. An effective prize program should be custom designed to recruit and motivate well-suited participants and should include these crucial elements:
- Participation guidelines: Identify who you wish to compete for the prize, and how. Do you want to recruit a wide range of participants with few barriers for entry, or target participants with particular backgrounds? Determine if participants may compete as individuals and/or on teams, and the minimum and maximum number of team members to allow. After making these decisions, craft your marketing and outreach plan to reach your target participants.
- Intellectual property (IP) rights: If all goes well with an innovation prize, the result will be at least one new, marketable idea. Establish who receives the IP rights to solutions generated through the prize, and communicate this policy to participants from the get-go.
- Prize money: Determine the number of awards, competition rounds, and award amounts. The right equation will depend on several variables, including the development stage of the field you are targeting, the IP agreement, the number of competitors (and hence, the perceived probability of winning), and the potential societal benefit and prestige associated with the prize.
4. Evaluate success. Perhaps you aim to solve one specific problem in a field with a single prize, or to proliferate new ideas throughout a field with a multi-year series of awards. Once you’ve set evaluation criteria for the prize itself, define what success looks like to you as the prize sponsor. For example, Imagine H2O, a competition host and accelerator for water startups, tracks a wide range of metrics to assess its success, including investment activity, customer introductions, job creation, and environmental benefits.
Ultimately, an innovation prize is a means to an end you seek to achieve as a funder. With thorough research and planning, an innovation prize can be a powerful tool for funders to promote growth. What have you learned from your own experience with prizes?
Anne Lebleu manages the foundation operations of Arabella’s managed foundation clients and provides essential strategic grant-making knowledge and expertise.
Lauren Statman is a foundation associate with Arabella Foundation Management, where she provides customized operational, grants management, due diligence, and governance support to individual and family foundation clients.