Centre for Challenge Prizes

Centre for innovation prizes

Vicki Purewal - 08.12.2011

What do the marine chronometer, baked beans and the private spaceflight industry have in common? They were all developed or accelerated in response to challenge prizes. 

Today the Department for Business, Innovation and Skills has announced that NESTA will establish a centre of expertise on prizes. Through this we will advise on, set up and run challenge prizes, and will develop evidence and knowledge about how challenge prizes can usefully be applied. The centre will draw on our own challenge prize and wider innovation experience and will also bring together expertise from across the world.

Also known as inducement prizes, challenge prizes are used as an incentive and awarded based on successful responses to a specific challenge, rather than given retrospectively for past achievements. These prizes have a long history. Often cited successful examples are the eighteenth century Longitude Prize, the nineteenth century French Government's food preservation challenge and the early twentieth century Orteig Prize for transatlantic flight.

We see from research (for example Harvard Business School, McKinsey), and from our experience, that challenge prizes can be effective in galvanising organisations and people around a specific challenge and in attracting new innovators to respond to a challenge. If set up to reward results they can also de-risk investment in a particular challenge for the sponsor of the prize.

There has been renewed interest in challenge prizes over recent years.  The $10m Ansari X-Prize for private space flight (awarded, 2004) broke new ground in modern challenge prizes, and the X-Prize Foundation now does great work on large scale prizes in other fields. DARPA have applied the concept to focus on driverless vehicle technology.  The Saltire Prize is an exciting UK based £10m prize focussed on tidal energy. 

Modern technology opens up new possibilities for challenge prizes, far beyond what has previously been possible. Innocentive combine open innovation techniques, incentives and the setting of specific problems through a successful online platform. The US government's challenge.gov hosts a growing number of US public service related challenges

Features of challenge prizes also appear other innovation programme developments. Open processes to seek responses to specific challenges are used for example in the Technology Strategy Board's SBRI programme and by 100% Open. The focus on rewarding results is seen in developments in outcome based public sector commissioning.

NESTA's own experience of prizes began in late 2007 when we launched the £1m Big Green Challenge - a challenge prize accessible to grass-roots community groups.  Our Finalists achieved CO₂ reductions of 10- 46% over 12 months - far beyond government targets.

Since the Big Green Challenge we have been approached by organisations across the world interested in running challenge prizes. In blogs and at events (such as a roundtable on social challenge prizes we ran in March, and at The Prize Summit this April), there has been demand for more experimentation with challenge prizes and more opportunities to access and share expertise. Through the centre for prizes we hope to meet some of this demand by generating more practical experimentation and understanding on how challenge prizes can work as part of a new generation of tools focussed on challenge driven innovation.