Keep Your Eye on the Prize: A Winning Strategy in International Development

Astronaut Mike Melvill was part of the team that was awarded the $10 million Ansari X Prize in 2004. His record-breaking 100 km flight into outer space essentially created the personal spaceflight industry.

We adore winners. We exalt them to near mythical status and seek inspiration and determination from their stories. We commit to fond memory past Super Bowl champions, courageous Olympic gold medalists, and perhaps even American Idol finalists. But do we know who won the last Centennial Innovation Challenge or the Ansari X Prize?

According to a report on philanthropic prizes published by McKinsey & Company, “philanthropic prizes…are being applied to a wider range of societal objectives by a wider range of sponsors than ever before.”  The study reports that the value of prizes worth more than $100,000 has “more than tripled over the past decade” to a total of $375 million, with foundations and nonprofits being the overwhelming source of philanthropic prize capital.

Prizes and contests are unappreciated drivers in what observers are calling a paradigm shift in philanthropy. Dr. Susan Raymond, a Center for Global Prosperity board member, notes that “[Young philanthropists] are not interested in writing checks for social problems, they are interested in investing their resources to create sustained solutions…their commitments extend far beyond gift-giving.”

The use of open contests and prizes as a philanthropic instrument—as opposed to traditional grants and investments—is most effective when there is a clear and measurable societal aim, there are many problem solvers in a vibrant civil society, and the solvers are willing to absorb outcome risk. Contests shift risk from prize sponsors to the unconventional group of innovators prizes attract—experts, researchers, students, and social entrepreneurs—and are contingent on the achievement of a defined goal, a far more attractive proposition than a conventional grant or contract.

Prizes philanthropy aligns with the consensus that the U.S. government and its agencies are the catalytic minority shareholders in development. Therefore, government resources must attract private and human capital, not displace it.

It is safe to say that competitions and prize philanthropy are not replacements for traditional grantmaking but it comes as no surprise that governments have been sluggish to utilize this resource. After all, it does demand more efficiency and market-like results rather than throwing money at an asymmetrical relationship between giver and receiver year after year and to some controversial receivers at best. Prizes philanthropy aligns with the consensus that the U.S. government and its agencies are the catalytic minority shareholders in development. Therefore, government resources must attract private and human capital, not displace it.

Surprisingly so, instances of our government using contests to solve very specific development problems do, in fact, occur. The Grand Challenges for Development (GCD) initiative of the USAID is “exploring how to use prizes to access untapped solutions and solvers for specific development problems” and is predicated on engaging more than the donor community in development. Earlier this month, USAID partnered with its development agency counterpart in Sweden, Sida, to announce a continuing $25 million dollar challenge to develop a more effective and market-based method to manage water in developing countries and combat water scarcity. Other open grand challenges issued by USAID are pursuing solutions to energy access issues for farmers in the developing world, a method to use mobile technology to improve government transparency, and a process to deliver treatment and preventive medicine to pregnant women at the time of giving birth.

Social entrepreneur Amit Jain brought together private actors and devised an award-winning business model tor providing affordable and safe drinking water to rural areas. (Source: Business Outlook India/Bhupinder Singh)

The most resounding success story is that of Amit Jain, an Indian social entrepreneur who started Health Point Services in the Malwa region of Punjab, an area notorious for its scarce water resources and contaminated groundwater. Jain was awarded the USAID Grand Challenge Award in 2011 for purifying water through a novel reverse osmosis process and making it affordable via water outlets containing a storage tank, a reverse osmosis machine, and a pump for pulling up groundwater. Each water outlet has two employees who issue water containers and monitor usage. Each customer gets a 20 liter container for 160 rupees and pays 80 rupees a month to fill the container daily. And better yet, Health Point Solutions uses the revenue from this venture to support telemedicine facilities which have provided over 38,000 telemedical consultations since its 2009 launch.  What was the effect of the USAID open challenge and prize bestowment in this case? The award brought recognition to a small social entrepreneur’s business model and led to the creation—from the most interesting and unlikely of people and global regions—of an implementable solution to a vital development issue.

Prize philanthropy is a win-win-win strategy for cash-strapped governments and result-driven foundations; talented problem solvers and start-up businesses; and those in need of solutions and not just cash. Incorporating this philanthropic instrument into an articulated vision for growth will make sustainable development the world’s most prized asset.


4 thoughts on “Keep Your Eye on the Prize: A Winning Strategy in International Development

  1. Jeff September 19, 2013 / 11:05 am

    What criteria do these competitions use to judge these ideas (severity and scope of the problem it addresses, efficiency, implementability, profitability)? and when you think more “idea-makers” like Amit are coming out of developing countries with large income distributions like India, will these international competitions neglect the problems in countries with the fewest resources and smallest potential pool of entrepreneurs?

    • Szymon Barnas September 20, 2013 / 11:02 am

      You key in on one of the more difficult aspects of creating an effective philanthropic competition. It is hard to define winning criteria that produce the desired result without overcomplicating the process or stifling innovation. The more difficult it is to understand what it takes to win, the more this will deter competitors from submitting entries. For most prizes, objective and measurable success criteria like the ones you mention are essential, especially efficiency and its ability to be implemented. To cite an example, the Ansari X PRIZE for space flight was awarded on relatively simple criteria: altitude and frequency of flight. On the other hand, if a foundation’s main goal is to influence perception in a particular field or issue, an often high-profile judging panel will obviously use a more subjective evaluation of the entries.

      You also bring to light a potential pitfall of these competitions: their neglect of countries with the fewest resources and smallest pool of entrepreneurs. After reading extensively on the USAID Grand Challenges for Development, they most likely had the same qualms as evidenced by their criteria for the various challenges. For the “Securing Water for Food” grand challenge, the rules stipulate that “innovators can come from anywhere in the world” yet “implementation must take place in a developing or emerging country.” Successful applications must also already have a presence in a developing country or be in the process of identifying a local partner. Moreover, USAID targets submissions that have been verified in at least one market and then tested and adapted in another emerging market before focusing on the commercial growth and scaling potential of the solution. I think this is the way USAID ensures that countries with the fewest resources and smallest potential pool of entrepreneurs are not left out of the conversation.

      Thanks for reading and commenting on the CGP blog!

      • Jeff September 24, 2013 / 2:14 pm

        Thanks for going back and addressing these questions. Competitions obviously can’t achieve all the goals of global aid organizations. You know what they say, in policy you can only maximize for one variable or goal at a time. Really, competitions are best suited achieving a great breadth of ideas to tackle the most visible problems in the developing world. Probably the best way to achieve a quality pool of ideas is to have an open competition with minimal limitations.

        The ramification of such a free competition is that all the resources will flow to these visible large-scale problems, and the more obscure problems will be neglected. Other possible market-based solutions (such as a kickstarter-type fundraising campaign) face the same issue. The campaigns addressing the highest-profile problems are bound to overshadow the efforts of campaigns concerning problems of smaller scope.

        One way competitions do help these smaller issues is by bringing their causes to light. By facilitating the exchange of information (in this case, providing a directory of proposed solutions to different problems around the world), they help raise awareness of issues and promote piggy-backing, innovative solutions to these obscurer issues.

        Thanks again!

  2. Jeff September 19, 2013 / 11:05 am

    awesome post btw, szymon

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