In a hugely welcome development, Mr. Anand Mahindra of the Mahindra group is offering a million dollar challenge to innovators who can provide solutions for two of India’s major problems- traffic stress and electricity shortages. The challenge is to build a driverless car for congested traffic and develop a solar DIY (Do-It-Yourself) kit for household needs. The prize money will be split 70:30 for these solutions respectively.
This challenge is part of Mr. Mahindra’s inaugural ‘Rise Prize’ which is aimed at spurring breakthrough Indian innovation which captures the mainstream imagination. According to Mr. Mahindra, these particular projects were selected this year “on the basis of relevance to society, potential to create disproportionate impact, scalability and probability of causing a multiplier effect in allied areas.” He said that he “hoped this will ignite ecosystem building and change societal mindset.” The competition was launched yesterday and is open to candidates at all stages of technological readiness. (Readers can go here and here for details) The first edition is to have a timeline of 24-36 months split across submission of proposals, creating prototypes and real world demonstration.
The Rise Prize is also India’s largest innovation challenge yet. This is a wonderful gesture which has the potential to be an extremely effective innovation inducer unlike patents which cannot claim to be as effective for the same. The question of whether patents are optimal incentives for innovation has been discussed in academic circles. This working paper published by the National Bureau of Economic Research in the USA engages in this very same question. This paper is an interesting read that provides both theoretical and empirical evidence for this question. One such study is that performed by Qian in 2007 which argues that while national patent protection does not generally stimulate domestic innovation activities and that above a certain level of patent protection, innovation activities are actually reduced. The paper concludes that while the patent system provides clear incentives for innovation in only a few sectors, firms and industries sometimes do respond to its presence by making use of the system as well as sometimes tailoring their innovative strategies to its presence. This argument however is used in the context of deciding whether the patent system ought to be wholly changed and revamped in order to induce innovation and not with respect to whether there could be a more efficient method to induce innovation within the current system. In the same vein is this article by Sakakibara and Branstetter which argues that the patent reforms in Japan were unable to induce innovation.
Philanthropy and innovation
The idea of businesses and philanthropic foundations providing grants to fund innovations instead of merely giving grants to pre-designed plans and outcomes is not novel, although there has been a depletion of such funding recent years according to Kasper and Marcoux. However, such funding is perhaps the best way possible to encourage innovation that wouldn’t otherwise be incentivized. A classic example of such a solution would be the national 911 system in the USA spawned by regional innovators as a result of the funding provided by the Robert Wood Johnson Foundation at a time when ambulance services were provided only by morticians. Kasper and Marcoux through their paper published in the Stanford Social Innovation Review notes eight specific steps that could be taken in order to inject innovation into grant making including hosting an innovation contest as the Mahindra group is presently doing.
One of the important themes built in this article and one that we personally would like to stress upon is that funding innovation should not be viewed as an alternative to strategic philanthropy and that on the contrary, it is essential to strategic philanthropy. This is because in exploration and experimentation lies the solution to society’s problems as well as the ability to be a part of important new opportunities and impact for businesses and philanthropic foundations. This is also reflected in Google’s executive chairman Eric Schmidt’s rule of 70/20/10 rule for managing innovation ie, 70% of the management’s time should be dedicated to core business activities, 20% to projects related to core business activities and 10% to unrelated but high-potential new businesses. While Google hopes to encourage innovation mainly for its own internal use and not aimed at any particular result, Mr. Mahindra’s challenge seeks two desired socially beneficially results. These are both different methods of encouraging innovation, both of which are desirable in the Indian context. Here’s hoping that Mr. Schmidt’s and Mr. Mahindra’s tribe increases!