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.
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.