power of prizes to drive innovation

C O NFID E NTIAL

D ocum e nt

D ate

Th is re port is sole ly for the us e of clie nt pe rsonne l. No part of it m ay be

circulate d , quote d , or re prod uce d for d is tribu tion outs id e the clie nt

organization without prior writte n approval from McKinse y & C om pany.

Th is m ate rial was us e d by McKins e y & C om pany d uring an oral

pre se ntation; it is not a com ple te re cord of the d is cus s ion.

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Last Mod ifie d 8/9/201 0 1 :53:07 PM Pacific S tand ard T im e

Printe d 8/9/201 0 1 :22:29 PM Pacific S tand ard T im e

August 1 4 201 0C opyright 2009 McKinse y & C om pany©

Capturing the promise ofphilanthropic prizes

2

Unit of measure

* FootnoteSource: Source

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C opyright 2009 McK inse y & C om pany ©

Prize s are a unique and powe rful tool for ach ie ving

social change and d riving innovation

• Prize s are und e rgoing a re nais sance

• Prize s work: m any ways to prod uce change

• E m e rging be st practice s

• The outlook for continue d prize use is s trong

3

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17

00

18

00

19

00

20

00

2

H istorically, socie ty has turne d to prize s to solve

d ifficult and pre ss ing proble m s

* Approxim ate value in 2006 U .S . $

S ource : KE I R e s e arch Note 2008:1 ; photos : Wikim e d ia com m ons , S m ithsonian Institution; Proje ct G ute nbe rg

1714

Longitude Prize$2 Million*E stablis he d 1 71 4

4

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17

00

18

00

19

00

20

00

2





1714 1795

Food PreservationPrize$44,000*E stablis he d 1 795

5

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17

00

18

00

20

00

2




1714 1839

Royal Agriculture S ociety of EnglandVarious purses and medals Award e d 1 839 to 1 939

1939

19

00

1795

6

Unit of measure


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17

00

18

00

20

00

2





1714 1919

Orteig Prize $290,000*E stablis he d 1 91 9

19391839

19

00

1795

7

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7

Aggregate prize purse, prizes over $100,000U .S . $ Millions

O ve r the past 30 ye ars , the re has be e n a

substantial surge in prize cap ital

Recent large-purse prizes

• Ansari X PR IZE (1 996)

• MPrize (Me thuse lah Mouse )

(2003)

• NAS A C e nte nnial C halle nge s

(2003)

• Ne tflix Prize (2006)

• G oogle Lunar X PR IZE (2007)

• Mo Ibrah im Prize for

Ach ie ve m e nt in African

Le ad e rsh ip (2007)

• Progre ss ive Autom otive X

PR IZE (2007)

• S altire Prize (2007)

• Virgin E arth C halle nge (2007)

• E ne rgy Fre e H om e C halle nge

(2008)

0

50

1 00

1 50

200

250

300

350

400

1 970 1 975 1 980 1 985 1 990 1 995 2000 2005

S ource : McKinse y d atase t of 227 prize s worth $1 00,000 or m ore

8

Unit of measure


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Prize s ’ d is tinctive attribute s are re inforce d by broad e r

social tre nd s to e ncourage use and e xpe rim e ntation

• E xpre ss ive ne ss

• Fle xib ility

• O pe nne ss

• S ucce ss-

continge nt

re ward s

• Ne w we alth

• Frustration with

conve ntional

approache s

• Inte rne t as d rive r

of acce ss and

collaboration

• Low-cost, d is tribute d

com puting powe r

• Multi-m e d ia inte ns ive

socie ty

9

Unit of measure


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S e ve n ways that prize s d e live r change

Identifyexcellence

1 Focus a community

3 Influence public perception

2

S trengthencommunity

6

Educate andimprove skills

7

Mobilize capital

5

Focus Influence

4 Identifyand mobilize new talent

Topic/problem

Community of S olvers

Public

1 0

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NAS A C e nte nnial C halle nge s

S trong Tether

The Centennial Challenges seek to:

• D rive progre ss in ae rospace

te chnology of value to NAS A's

m iss ions

• E ncourage the participation of

ind e pe nd e nt te am s , ind ivid ual

inve ntors , s tud e nt groups and

private com panie s of all s ize s in

ae rospace re se arch and

d e ve lopm e nt

• F ind the m ost innovative

solutions to te chnical challe nge s

through com pe tition and

coope ration

Regolith Excavation

Moon ROx

Night Rover

Power Beaming

As tronaut Glove

Lunar Lander

Nano-satellite launch

1 1

Unit of measure


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Lunar R e golith C halle nge

1 2

Unit of measure


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1 3

Unit of measure


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1 4

Unit of measure


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1 5

Unit of measure


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2009 Lunar R e golith C halle nge Winne rs

1 6

Unit of measure


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C opyright 2009 McK inse y & C om pany ©S ource : McKinse y d atase t of 227 prize s worth $1 00,000 or m ore

Th is growth has be e n d rive n by ne w sponsors

and ne w fie ld s

S ources of prize capital s ince 2000Pe rce nt of prize cap ital

Found ation/nonprofit

e st. 1 995 or late r45%

C orporation 26%

G ove rnm e nt 21 %

Found ation/nonprofit

e st. be fore 1 9954%

O the r 5%

Large prize purses by sectorU .S . $ Millions

1 7

72

1997

337

2008

72

S cie nce &

E ngine e ring

O the r39

Arts30

Aviation &

S pace88

C lim ate &

E nvironm e nt108

26

13

412

9

1 7

Unit of measure


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We obse rve d s ix m ajor prize type s

Exemplar

Network

Participation

Expos ition

Point solution

Market s timulation

1 8

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IMPACT

Pos t prize

Build legacy

Meas ureand improve

Reinforce impact

Des ignelements

Prizeproces s

E ffe ctive prize d e ve lopm e nt and d e live ry includ e s

five s te ps

Prizes trategy

S take-holder needs

Prizetypes

Goalsetting

Broad aspirations

S pecific objectives

1 9

Unit of measure


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Le t’s d ispe l som e of prize m yths

Common myths Research findings

There are only two types of prizes

• The ‘re cognition’ and ‘ind uce m e nt’ d ivis ion is lim iting

• Prize s can us e m any othe r le ve rs for d riving change

Bigger purses are necessary to break through the noise

• Publicity d oe sn't ne ce ssarily m atch purse s ize

• Prize powe r re sults from e ffe ctive s trate gy and m arke ting

It’s all about competition

• C om pe tition does m otivate participant be havior, but m any

prize s are also us ing collaboration and participation to d rive

change

It’s all about the winner

• S ponsors re port that som e of the be s t innovations d on’t win

the prize

• In m any prize s , the be ne fit is d e live re d via broad

participation or changing pe rce ption, not the winning e ntry

Prizes are easy• G ood prize s can take m onths to d e ve lop and re fine

• Prize d e ve lopm e nt is a five -ste p proce s s , with e ach ste p

im portant to prod ucing the d e s ire d outcom e

20

Unit of measure


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The outlook for continue d growth in prize s is

s trong

Drivers of prize growth

BUT prize proliferation and poor des ign are s till ris ks

• Incre ase d s ponsor inte re st

• Im prove d e conom ic

prod uctivity d rive n by

e m e rging prize ind us try

• G re ate r atte ntion to ris ks and

IP challe nge s

20C opyright 2009 McK inse y & C om pany ©

21

Unit of measure


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socialse ctor/And _ the _ winne r_ is .pd f

21C opyright 2009 McK inse y & C om pany ©

power of prizes to drive innovation

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