About Nesta

Nesta is an innovation foundation. For us, innovation means turning bold ideas into reality and changing lives for the better. We use our expertise, skills and funding in areas where there are big challenges facing society.

Challenge Prizes Landscape Review

This review looks at the landscape for challenge, or 'inducement', prizes.

This review looks at the landscape for challenge, or 'inducement', prizes.

Key findings:

  • Challenge Prizes encourage dramatic advances by setting ambitious goals
  • They can attract innovators from any field to tackle complex problems
  • They can limit financial risk by awarding a prize only when the challenge is successfully met

This review looks at the landscape for challenge prizes.


As early as the 18th century, cash prizes were spurring breakthroughs from food preservation during war time to accurate marine navigation, and later from margarine to the commercial hydraulic turbine. Indeed, prizes were so important as a means of spurring technological development that American campaigners launched a sustained effort to replace the US patent system with prizes in the 1850s.


Prizes stimulated whole new industries. When Charles Lindbergh became the first pilot to fly non-stop from New York to Paris winning the Orteig prize in 1927, his celebrity transformed the aviation industry. The number of US passengers increased thirty-fold in three years, while applications for pilot licenses increased 300 per cent. But as technological innovation increasingly became the domain of universities and corporate labs, prizes fell out of favour.


Today, the practice of using prizes to stimulate innovation is back.


As open and collaborative innovation becomes the norm, rather than the exception, and as internet and social platforms offer unprecedented opportunities for collaboration, a new landscape of challenge prizes is emerging. A recent report by McKinsey & Company found that before 1991, 97 per cent of the prize money offered took the form of recognition prizes for past achievements. Since then, 78 per cent of new prize money has been offered for the future solution of problems.