A problem-focused approach to innovation will necessarily drive investment in the sectors that will solve them

To solve specific problems that catalyse investment and collaboration between many different people and organizations, we need policy instruments that focus on outcomes and foster experimentation. Procurement contracts, grants, loans and prize schemes should reward innovators for taking risks to solve public problems, whether the aim is to develop a vaccine or a new way to help hospitals share data. This means putting less emphasis on the need to support specific types of firms (such as SMEs and start-ups), less on specific technologies (such as ‘high-tech’, artificial intelligence, quantum computing), and less on specific sectors to promote (such as life sciences or the creative sector). At the same time, it means putting more emphasis on the big problems facing society and how all types of organizations, technologies and sectors can play a role in solving them.

Prize schemes, in particular, are useful for driving cross-sector innovation – and have been for hundreds of years. In 1675, the Royal Observatory was founded at Greenwich, on the River Thames to the east of London, to carry out astronomical observations. Part of the Observatory’s mission was to help with the thorny problem of how to measure longitude – the distance east or west of the prime meridian which runs north to south through the Observatory and girdles the globe. Determining longitude was becoming critical for commercial and naval reasons. Britain was locked in competition with rival powers, notably France and Holland. Ships were being lost, or their voyages were taking longer than necessary, because they could not accurately establish their position at sea. Being able to work out longitude would give a country a commercial and naval advantage.

Impressively, the announcement of the Longitude Prize eventually led to two solutions being developed simultaneously. John Harrison, a self-taught working-class clockmaker, used his great mechanical talent and determination to build a series of marine timekeepers, culminating in the model called H4. After years of wrangling with the Board of Longitude, he eventually won a total of £23,065, more than £3 million in today’s money. The H4 later became known as the marine chronometer and can still be seen in the Greenwich Observatory. In addition, the British mathematician John Hadley and the German astronomer Tobias Mayer improved and perfected the mechanisms and tables necessary to use the lunar distance method effectively. The work of the Astronomer Royal, Nevil Maskelyne, at the Royal Observatory proved how timekeeping methods and astronomical observations can complement each other and lead to successful determination of longitude. Today, the Longitude Prize is structured as a £10 million prize fund, with an £8 million pay-out, that will reward a team of researchers who develop a point-of-care diagnostic test which will conserve antibiotics for future generations and revolutionize the delivery of global health care. The test must be accurate, rapid, affordable and easy to use anywhere in the world.

Along with new policy instruments, missions need a new approach to governance. New kinds of governance include financing operations differently so that public finance is seen as an investor of first resort, not just a lender of last resort. The public sector can crowd in private investment and increase the ‘multiplier effect’ (i.e. how much activity is stimulated by each dollar or euro of government investment) by shaping perceptions of future opportunities. But it requires building new capabilities in public institutions – including redesigning procurement contracts to foster new ideas for solving problems – and changing government culture so it is less risk-averse and more open to portfolios containing a wide array of ambitious projects.6 Financial institutions themselves can become more mission-oriented by directing public finance towards societal goals – be they public banks or sovereign wealth funds. Too often such funds end up simply doling out money to pet projects or firms seen as particularly in need of support, such as small and mid-size enterprises. It is crucial instead to demonstrate more ambition and provide patient, long-term finance to organizations willing and able to help steer an economy towards meeting its challenges.