Power of prizes to drive innovation

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Paul Jansen discusses his study, "And the Winner Is..." which explores and documents the ways in which governments and philanthropists employ prizes to produce social benefit and drive innovation. His report finds that prizes, as instruments of change, are "undergoing a renaissance," "growing in number and size, and appearing in new forms." His presentation will share his findings and address how new prizes hold enormous potential.

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Power of prizes to drive innovation

  1. 1. August 14 2010 Copyright © 2009 McKinsey & Company Capturing the promise of philanthropic prizes
  2. 2. Prizes are a unique and powerful tool for achieving social change and driving innovation <ul><ul><li>Prizes are undergoing a renaissance </li></ul></ul><ul><ul><li>Prizes work: many ways to produce change </li></ul></ul><ul><ul><li>Emerging best practices </li></ul></ul><ul><ul><li>The outlook for continued prize use is strong </li></ul></ul>
  3. 3. Historically, society has turned to prizes to solve difficult and pressing problems 1700 1800 1900 2000 2 * Approximate value in 2006 U.S. $ Source: KEI Research Note 2008:1; photos: Wikimedia commons, Smithsonian Institution; Project Gutenberg 1714 Longitude Prize $2 Million* Established 1714
  4. 4. Historically, society has turned to prizes to solve difficult and pressing problems 1700 1800 1900 2000 2 * Approximate value in 2006 U.S. $ Source: KEI Research Note 2008:1; photos: Wikimedia commons, Smithsonian Institution; Project Gutenberg 1714 1795 Food Preservation Prize $44,000* Established 1795
  5. 5. Historically, society has turned to prizes to solve difficult and pressing problems 1700 1800 2000 2 Source: KEI Research Note 2008:1; photos: Wikimedia commons, Smithsonian Institution; Project Gutenberg 1714 1839 1939 1900 1795 Royal Agriculture Society of England Various purses and medals Awarded 1839 to 1939
  6. 6. Historically, society has turned to prizes to solve difficult and pressing problems 1700 1800 2000 2 * Approximate value in 2006 U.S. $ Source: KEI Research Note 2008:1; photos: Wikimedia commons, Smithsonian Institution; Project Gutenberg 1714 1919 1939 1839 1900 1795 <ul><ul><li>Orteig Prize </li></ul></ul><ul><ul><li>$290,000* </li></ul></ul><ul><ul><li>Established 1919 </li></ul></ul>
  7. 7. Over the past 30 years, there has been a substantial surge in prize capital 7 Aggregate prize purse, prizes over $100,000 U.S. $ Millions <ul><li>Recent large-purse prizes </li></ul><ul><ul><li>Ansari X PRIZE (1996) </li></ul></ul><ul><ul><li>MPrize (Methuselah Mouse) (2003) </li></ul></ul><ul><ul><li>NASA Centennial Challenges (2003) </li></ul></ul><ul><ul><li>Netflix Prize (2006) </li></ul></ul><ul><ul><li>Google Lunar X PRIZE (2007) </li></ul></ul><ul><ul><li>Mo Ibrahim Prize for Achievement in African Leadership (2007) </li></ul></ul><ul><ul><li>Progressive Automotive X PRIZE (2007) </li></ul></ul><ul><ul><li>Saltire Prize (2007) </li></ul></ul><ul><ul><li>Virgin Earth Challenge (2007) </li></ul></ul><ul><ul><li>Energy Free Home Challenge (2008) </li></ul></ul>Source: McKinsey dataset of 227 prizes worth $100,000 or more 0 50 100 150 200 250 300 350 400 1970 1975 1980 1985 1990 1995 2000 2005
  8. 8. Prizes’ distinctive attributes are reinforced by broader social trends to encourage use and experimentation <ul><ul><li>Expressiveness </li></ul></ul><ul><ul><li>Flexibility </li></ul></ul><ul><ul><li>Openness </li></ul></ul><ul><ul><li>Success- contingent rewards </li></ul></ul><ul><ul><li>New wealth </li></ul></ul><ul><ul><li>Frustration with conventional approaches </li></ul></ul><ul><ul><li>Internet as driver of access and collaboration </li></ul></ul><ul><ul><li>Low-cost, distributed computing power </li></ul></ul><ul><ul><li>Multi-media intensive society </li></ul></ul>
  9. 9. Seven ways that prizes deliver change Community of Solvers Identify excellence 1 Focus a community 3 Influence public perception 2 Strengthen community 6 Educate and improve skills 7 Mobilize capital 5 Focus Influence 4 Identify and mobilize new talent Topic/ problem Public
  10. 10. NASA Centennial Challenges Strong Tether <ul><li>The Centennial Challenges seek to: </li></ul><ul><li>Drive progress in aerospace technology of value to NASA's missions </li></ul><ul><li>Encourage the participation of independent teams, individual inventors, student groups and private companies of all sizes in aerospace research and development </li></ul><ul><li>Find the most innovative solutions to technical challenges through competition and cooperation </li></ul>Regolith Excavation Moon ROx Night Rover Power Beaming Astronaut Glove Lunar Lander Nano-satellite launch
  11. 11. Lunar Regolith Challenge
  12. 12. Lunar Regolith Challenge
  13. 13. Lunar Regolith Challenge
  14. 14. Lunar Regolith Challenge
  15. 15. 2009 Lunar Regolith Challenge Winners
  16. 16. This growth has been driven by new sponsors and new fields Source: McKinsey dataset of 227 prizes worth $100,000 or more 9 Sources of prize capital since 2000 Percent of prize capital Foundation/nonprofit est. 1995 or later 45% Corporation 26% Government 21% Foundation/nonprofit est. before 1995 4% Other 5% Large prize purses by sector U.S. $ Millions 17 72 1997 337 2008 72 Science & Engineering Other 39 Arts 30 Aviation & Space 88 Climate & Environment 108 26 13 4 12
  17. 17. We observed six major prize types Exemplar Network Participation Exposition Point solution Market stimulation
  18. 18. Effective prize development and delivery includes five steps IMPACT Post prize Build legacy Measure and improve Reinforce impact Design elements Prize process Prize strategy Stake-holder needs Prize types Goal setting Broad aspirations Specific objectives
  19. 19. Let’s dispel some of prize myths Common myths Research findings There are only two types of prizes <ul><ul><li>The ‘recognition’ and ‘inducement’ division is limiting </li></ul></ul><ul><ul><li>Prizes can use many other levers for driving change </li></ul></ul>Bigger purses are necessary to break through the noise <ul><ul><li>Publicity doesn't necessarily match purse size </li></ul></ul><ul><ul><li>Prize power results from effective strategy and marketing </li></ul></ul>It’s all about competition <ul><ul><li>Competition does motivate participant behavior, but many prizes are also using collaboration and participation to drive change </li></ul></ul>It’s all about the winner <ul><ul><li>Sponsors report that some of the best innovations don’t win the prize </li></ul></ul><ul><ul><li>In many prizes, the benefit is delivered via broad participation or changing perception, not the winning entry </li></ul></ul>Prizes are easy <ul><ul><li>Good prizes can take months to develop and refine </li></ul></ul><ul><ul><li>Prize development is a five-step process, with each step important to producing the desired outcome </li></ul></ul>
  20. 20. The outlook for continued growth in prizes is strong Drivers of prize growth BUT prize proliferation and poor design are still risks <ul><ul><li>Increased sponsor interest </li></ul></ul><ul><ul><li>Improved economic productivity driven by emerging prize industry </li></ul></ul><ul><ul><li>Greater attention to risks and IP challenges </li></ul></ul>Copyright © 2009 McKinsey & Company
  21. 21. For the full report, please visit: www.mckinsey.com/clientservice/ socialsector/And_the_winner_is.pdf Copyright © 2009 McKinsey & Company

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