[Ip-health] X-Prize CEO on prize model for innovation

[ben.krohmal@keionline.org]

http://www.huffingtonpost.com/peter-h-diamandis/22nd-century-philanthropy_b_62006.html

Huffington Post
September 3
by Peter Diamandis

So you're trying to fight cancer, solve poverty, educate children...solve
the grand challenges of our day. How would you like to make sure that your
philanthropic donation was actually used to solve your chosen challenge?
Not to fund attempts at a solution, not to fund ideas, but to fund THE
solution that would be known in history books as a pivotal moment when an
intractable problem was conquered.

Hold on, it gets better than that. What if your donation caused others to
jump on your bandwagon and spend 10 - 50 times as much to lick the
problem? It's not a fantasy; it is the economic reality of incentive "X
PRIZEs" -- a very efficient and highly leveraged way to drive
philanthropic objectives... But more on this later.

There is a growing trend to make philanthropy more results-focused and
efficient. Successful entrepreneurs are translating their business savvy
into philanthropic enterprises that speak the language of the corporate
world: venture capital, ROI, open information. Philanthropies like
Google.org and the Skoll Foundation are turning .com success stories into
.org business ventures that pay dividends in social benefit -- capitalism
for the good of humanity.

The goal of this new generation of "philanthropreneurs" is to get the
greatest return on every charitable dollar. To this end, a historically
proven mechanism for success is re-emerging -- the "incentive prize."

Incentive prizes are a time-honored mechanism for driving breakthroughs.
One of the most famous prizes in history -- the Longitude Prize of 1714 --
led to the development of accurate nautical navigation. In 1919, Raymond
Orteig offered a $25,000 prize for the first nonstop flight between New
York and Paris. The competing teams spent $400,000 in pursuit of the
purse, multiplying Orteig's investment 16x. Charles Lindbergh won the
prize in 1927. His victory captured global attention and launched a new
aviation industry that revolutionized the way people travel.

Large incentive prizes break through market and government bottlenecks.
They reach across national and disciplinary boundaries and attract the
intellectual and financial capital required to achieve breakthroughs
through innovation. Public competitions shape public attitudes and spur
innovation adoption.

An incentive prize for achieving a specific goal stimulates
entrepreneurial investment that produces a 10x - 50x return on the prize
purse, and at least 100x in follow-on investment and social benefit. It
offers foundations and philanthropists the opportunity to complement
conventional giving strategies with low-risk, highly efficient, highly
leveraged approaches. Best of all, purses are only paid on success.

Prizes are also incredibly liberating for the competitors. Unlike a grant,
a prize does not impose budgets, reporting requirements or overhead. It
frees entrepreneurs from the constraints they find most limiting. It says,
"I don't care where you're from, where you went to school, if you have
ever gotten a government grant... If you achieve the goal, you win and get
the cash."

By clearly defining a finish line up front, prizes indirectly manufacture
breakthrough results. People stop asking "can it be done?" and start
thinking "how will we be the first to do it?" In the jargon of science, a
paradigm shift occurs. Limits become mere challenges and barriers all of a
sudden become breakable. Suddenly it's no longer a question of "if" but
rather "when?"

Inspired by the Orteig Prize, the X PRIZE was announced in 1996 to
stimulate a breakthrough in spaceflight by offering a $10 million prize to
the first privately financed team that could build a three-passenger
vehicle and fly it 100 kilometers into space twice within a 2-week period.
As it was later titled, the Ansari X PRIZE for Suborbital Spaceflight
inspired 26 teams from seven nations to compete and invest more than $100
million in pursuit of the $10 million purse. On October 4, 2004, the
Ansari X PRIZE was awarded to Mojave Aerospace Ventures (Burt Rutan backed
by Paul Allen) and it's SpaceShipOne, marking the beginning of the
personal spaceflight revolution and signifying a renaissance in prize
philanthropy.

The flight of SpaceShipOne was ground-breaking in two respects. First, by
launching an entirely new industry of private spaceflight, it clearly
established that non-government sponsored spaceflight was achievable and
practical. Second, it underscored that large, inducement prizes are highly
effective tools for stimulating creativity, inducing investment, and
spurring innovative and unique answers to challenging problems.

The X PRIZE Foundation's truly unique innovation in philanthropy has
attracted the attention and support of many forward-thinking,
results-driven change-makers. Larry Page, co-Founder and President of
Google put it best: "The success that the X PRIZE Foundation has achieved
so far with minimal resources is astounding. It is the kind of leverage
that we all look for. The X PRIZE model has huge potential to unlock
innovation around the grand challenges that are important to each of us."
Page joined the X PRIZE Foundation Board of Trustees to help turn the
organization into a world-class prize institute.

The X PRIZE Foundation is now planning to launch $250 -- $500 million in
prizes over the next few years. Our demonstrated expertise in identifying
the principal impediments to progress -- whether lack of established
commercial markets or the need for advances in technology -- uniquely
qualifies us to extend the incentive prize model to other important
domains that we identify as structurally, culturally, economically or
technologically stagnant.

On October 4, 2006, X PRIZE Foundation announced the launch of its second
prize -- the $10 million Archon X PRIZE for Genomics. Our goal is to
greatly reduce the cost, and increase the speed of, human genome
sequencing. This achievement will unleash a new era of personalized,
predictive and preventive medicine, eventually transforming medical care
from reactive to proactive.

We are currently investigating prizes in other key verticals: education,
life sciences, exploration, global entrepreneurship (poverty), energy and
the environment.

It is not unreasonable to forecast that with 10 - 15 successful X PRIZEs
totaling over $250 million, the combined investment by the competing teams
will exceed $2.5 billion, which in turn will result in more than $25
billion in industry development and social benefit. This is ultimately the
goal of the X PRIZE Foundation -- to combine the best of philanthropy and
entrepreneurialism to produce a better, more efficient mechanism of
world-changing.