[cross-post from EC blog on research and innovation ]

We live through important times in the context of innovation policy in Europe. Just after launching the flagship Innovation Union, the European Commission recently opened the consultation on the future research and innovation support measures. The wider macro-economic context is even more unstable, between the freeze in public spending and the ever increasing speed of innovation, with new players (both countries and companies) rapidly growing and others rapidly declining, and totally new products and markets being created from scratch often from unexpected sources.

In this context, we need to look at the current policy measures and ask ourselves: how can we get most out of the funding instruments for innovation? We need to look not only at the funding level and the research priorities, but at HOW the funding instruments are designed.

Evaluation studies and experts agree on the key issues to be addressed:

– the capacity to involve the real innovators, rather than the best proposal-writers

– the administrative simplification both for government and for recipients

– the capacity to turn research results into marketable solutions

These are not new, but there is now an emerging trend that could help addressing them. In the last years, mostly in the US, there has been an increasing usage of prizes, rather than grants. Companies and governments have set up “challenges”, where the financial reward goes not to the best proposals, but to the innovators who come up with the best working solutions.Examples are the DARPA challenge (http://www.darpa.mil/grandchallenge/index.asp ) for the self-driving car, or the recent Australian prize for the best algorithm to identify patient at risk (http://www.heritagehealthprize.com ).

This trend is becoming extremely powerful and structured, not just a one-off exercise. The US government has created a dedicated platform, called www.challenge.gov , to enable the organisation of competition by any government, and has promulgated the America Competes Act(http://en.wikipedia.org/wiki/America_COMPETES_Act ) to simplify and streamline the organisation of challenges by government. In the private sector, not only challenges are being organised by the largest corporation, but there are now many companies who have as core business the organisation of prizes for both government and business.

The results are highly promising precisely to address the three issues listed above: these competitions are able to attract the best innovators, even those traditionally not engaged with government funding. They reward concrete results, not proposals. They don’t require complex control systems. They are able to attract a far superior number of high-quality results than traditional grant systems.

I was personally involved in the design of the Flemish INCA award (http://www.inca-award.eu/INCA09 ): with a total prize of only 20.000 Euros we received 35 innovative working applications, ranging from Internet of Things to smartphone apps.

Yet we must not consider prizes a panacea: they work only in certain conditions, for example where barriers to entry are low and innovation is not capital-intensive. They have to be properly promoted and designed. It is not clear to what extent they can upscale or there is a risk of prizes overload. Prizes tend to overlook basic research, which can lead to fundamental but unexpected results. Intellectual Property has to be clear, and in some countries such as Italy there are administrative barriers to the organisation of prizes.

In conclusion, prizes offer opportunities that the current debate around EU innovation policy should take closely into account. But we need to have a clearer picture of the state of the art, assess the impacts and the lessons learnt, understand the potential for upscaling and the risks. These issues will be discussed at the Prize Summit (http://theprizesummit.com ), a high-level conference in London next April the 8th. Practitioners from all over the world will come together to share their knowledge and hands-on experience on the opportunities and limitations of prize-based competitions.

What is clear is that today there is no one-size-fits–all solution: governments have to increasingly experiment with innovation policy and continuously re-design their measures, rapidly learning from the experimentation. Prizes are the “flavour of the day” but it’s only by concrete experimentation that we’ll understand the implications and be able to properly design the “next generation” of policy instruments.