Prizes for Innovation Yield Big Returns for Social Problems

Big-dollar competitions to come up with solutions for pressing social problems are gaining currency as donors search out ways to maximize the effectiveness of their philanthropic investment, writes the Financial Times.

Competitions that offer $100,000 or more for winning scientific and social innovations in areas such as energy and the environment have exploded in popularity, with their aggregate value more than tripling to $375-million in the past decade, according to a study by management consulting firm McKinsey & Company.

Such prizes offer significant advantages over more traditional giving, capturing media attention, raising the profile of a particular cause, cutting out costly development of programs or institutes, and yielding multiple problem-solving ideas that can attract private investment.

“Philanthropists are saying: ‘We are innovative capital,’” said Lynn Taliento, a McKinsey partner. “And prizes are extremely attractive to new philanthropists with business backgrounds who would like to pay for a solution.”