From Nobels to the best T-shirt prize?

Will a multi-million dollar prize find a cure, preserve our environment, or get us to Mars (the other Mars)?

McKinsey & Company’s recently published report “Using prizes to spur innovation” (McKinsey Quarterly – July 2009) focuses on the increased use of philanthropic dollars to fund prizes that solve problems, in some cases some very large problems.

According to the McKinsey report  “prize philanthropy” is burgeoning and the role of prizes is changing:

• Since 2000 60 plus new prizes have debuted equaling $250 million in new prize money.
• The goals and objectives of the prizes are shifting from recognizing excellence to promoting innovation and achieving specific objectives.
• Baby Boomer philanthropists and businesses are responsible for giving more then two-thirds of the prize money since 2000.
• Prizes in science, engineering, aviation, space and the environment have significantly expanded whereas prizes in the arts and humanities make up less then 10% today.

McKinsey lists six model prize structures: Exemplar, Exposition, Network, Participation, Market Stimulation, and Point Solution.  The report cites examples ranging from the Nobel Prizes (Exemplar) that reward excellence and influence thinking in specific areas to an online T-shirt store (Point Solution) that holds weekly competitions for the best shirt design.

They stress that for prizes to be effective three conditions are essential:

1. A clear objective – one that is measurable and achievable within a reasonable amount of time.
2. Availability of a relatively large population of potential problem solvers.
3. Willingness on the part of some of the participants to bear some of the costs and risks.

Or as Peter Diamandis, Founder of the X Prize Foundation succinctly notes “There is an art and science to designing a prize.”

A recent article in the Wall Street Journal – The Science Prize: Innovation or Stealth Advertising? by Robert Lee Hotz shares opinions from  individuals who “dismiss the newest trend in prize-giving as a form of advertising that masquerades as public service – a clever ploy to attract top research talent at a discount”.  James F. English a University of Pennsylvania scholar and author of “The Economy of Prestige: Prizes, Awards and The Circulation of Cultural Value” says “I hate these inducement prizes and their language of social benefit.  It’s a cover for what they are really about, which is getting attention.  I don’t think that kind of small-scale frantic prize-chasing investment is the best way for us to solve big problems”.

Are prizes a powerful agent of change or a quest for recognition of a few individuals?