Governments around the world are testing new ways to encourage public sector innovation, promote economic development, and catalyze civic problem-solving.
Governments face daunting civic challenges, from poverty, equity, and mobility to community health and the consequences of climate change. Government resources are limited, but governments are increasingly building the capacity to leverage private sector, academic, and other community resources to address complex challenges.
Unfortunately, there are multiple reasons why it is so difficult to connect governments and startups:
- The procurement culture within public organisations is typically risk-averse, with a bias towards market incumbents and tried-and-tested solutions.
- Large outsourcers have a great share of government work and established contracts.
- Procurement professionals themselves may not want to take a punt on a new firm, worried that it might not deliver or even go out of business during a contract.
- Frequently, there is an organisational separation between those who set a department’s strategic direction – such as to increase innovation or source from more small firms – and those who do the buying.
- Procurement processes can be long and resource intensive. Many procurements require three years of audited accounts, or a certain turnover, and they can involve a lengthy period between contract award and eventual payment. These conditions unintentionally deter startups from bidding for work. And hinder those that do.
Despite these structural constrains, there are multiple ways to engage local governments and entrepreneurs. Here are the three major types of programs that governments all over they world are engaging in:
Government as a customer: These kinds of programs focus on engaging non-traditional partners in solving for specific government needs. They tackle all or some of these major problems:
- Awareness: Unless they’ve spent time in government or experienced the problem themselves, entrepreneurs might not know there are problems to solve in government. Programs identify business problems and share these challenges with entrepreneurs.
- Opportunities for co-development: Building a new product requires access to users and iteration over time. Programs provide structure for solution co-development, where businesses can access government stakeholders and build solutions iteratively over a set timeline.
- Procurement: Traditional procurement pathways are barriers for governments and nontraditional vendors like startups to work together. The competitive bidding process can take 6–18 months and cost a business up to $1.5M to submit a bid. Some programs in this category provide a procurement pathway that allows the government to purchase a solution from a new vendor after a successful period of co-development and/or pilot.
Example: Startup in Residence, Netherlands: SIR features 20+ challenges and includes a handful of surrounding cities and national level organisations.
Government as an ideas exchange: This category of programs aims to help governments be more open and receptive to new ideas. Broadly, these programs aim to create new channels for engaging innovative companies and expose government staff to the burgeoning tech industry. They seek to promote:
- Receptivity to new ideas and partners: Unlike purchasing, regulations around pilots are more ad hoc, especially at the local level. Governments use these ideas exchange programs to increase their openness to testing new products or ideas with new kinds of partners.
- Public sector inspiration: Idea exchange programs seek to promote a flow of ideas and approaches across sectors and inspire governmental workers to engage in new ways of doing their job.
Example: Urban Challenge, West Midlands, UK: The program offers a cash reward up-front for participation and access to city agencies over 3 month pilot, although there is no clear pathway to procurement.
Government as a lab: Even if government is not the customer of a new product or solution, access to government resources — from city data to the public right of way — shape the success of a product’s development.
- Resources exchange platform: These programs seek to offer government resources as a platform for entrepreneurship. Since government is not necessarily the customer, while government may provide some stipend or grant to encourage participation, these programs typically do not include a new pathway for public purchasing.
Example: Oklahoma Innovation Portal: Citizens submit problems they encounter with government services, technologists present solutions, and government agencies work with both sides to turn the proposals into reality.