5 steps to implement GovTech Open Innovation in cities
This publication was originally published at the Sustainable Cities Blog from the Inter-American Development Bank
In our two previous publications we explained how the GovTech space brings non-traditional digital providers closer to public institutions. In this third publication, we will talk about how open innovation allows for the innovative solutions of these providers to be incorporated into government operations. This strategy known as open innovation, is an innovation management model based on collaboration with agents that are external to the institution. It was coined by Professor Henry Chesbrough in 2003 and now in addition to being used for the transformation of private companies, it is also being applied in the public sector.
The methodology consists of five phases: challenge identification, call for solutions, exchange of knowledge, experimentation and piloting, and the dissemination and scaling of solutions that work.
Since open innovation is a new approach to the digital transformation of the public sector, understanding the peculiarities and differences from its application in the private sector is crucial to success.
GovTech laboratories such as the IE PublicTech Lab have carried out extensive work in this field and have gathered key aspects of the process, which should be considered by cities that want to incorporate the methodology:
1. Challenge identification:
The process must start with an initial phase of problem identification. The goal is to start with an analysis of the problem instead of rushing into suggesting potential solutions. This approach to problems is not common in the public sector. The process is facilitated through design methodologies, so that the institution defines “good problems”, differentiating causes and effects. It should involve transversal teams that would otherwise not be in contact due to the administration’s operational structure, since it is key that different actors who know the context (officials who provide the service or users of that service) participate, to guarantee a good investigation and analysis of the problem. After the analysis, a clear and concise challenge is articulated, with enough information to be able to communicate it to the entrepreneurial community, to inspire good solutions and to attract non-traditional innovative suppliers. Therefore, communicating in an actionable way — so that the innovative community understands the needs of the administration in their own language — and making all information on a problem transparent is essential to receive a wide range of diverse solutions.
2. Call for solutions:
As opposed to what is usual, the administration must be proactive when looking for new, non-traditional suppliers. Open calls are launched to approach the entrepreneurial and innovative ecosystem of the territory, leveraging the networks of accelerators, incubators, technology centers, universities, and investors. But for the entrepreneurial ecosystem to be responsive to the calls of the administration, it is necessary for public institutions to maintain constant investment and close relationship with the ecosystem. A nurtured relationship means that when the public sector faces specific challenges, the entrepreneurial networks are both informed and capable of reacting agilely and identifying the highest quality solutions for the institution within their needs and requirements. In addition, the effort must be complemented with market studies of innovative companies to call them directly to compete. The objective of this phase is to generate a more diverse and competitive supply of solutions to public challenges than usual. Similar efforts in the region include the Govtech Venture Day, organised by the Inter-American Development Bank, together with the IDB Lab and the IE PublicTech Lab. The institution launched a call for GovTech startups to participate in the Govtech Venture Day, an event and virtual competition aimed at articulating the GovTech offer in the region and bringing it closer to the IDB Cities’ Network. This first edition gathered startups solving challenges around data-based decision-making. Thirty semifinalist startups participated in a bootcamp and five finalists pitched to the IDB Cities’ Network of around two hundred cities.
3. Knowledge exchange:
This phase is essential for both worlds to set the pillars of their collaborative work. Given the differences in their operations, culture, and ways of working, it is recommended that both actors receive training on how to work together. On the one hand, institutions are taught how to work with agile methodologies, how to incorporate data evaluation in pilots, how to strengthen their relationship with the innovation ecosystem, and how to use public procurement laws to source solutions from startups and digital SMEs. On the other, innovative companies are trained in the “public market”, including commercial strategies, sales cycles, public procurement, or collaboration with corporations in large tenders. In addition, collaboration spaces and dynamics must be created to bring together public sector and startup teams interested in solving the challenge: semi-structured meetings such as pitches, discussion rounds and informal chats. This way, institutions familiarize themselves with the proposed innovative solutions and innovative companies gather much more information on the problem and its context.
4. Experimentation and piloting:
When a solution is of interest to the public institution, the piloting process begins. One of the differential aspects of GovTech open innovation is that GovTech pilots’ evaluation goes beyond the technological performance of the solution. It involves an analysis of many other impacts in the context of the specific public service such as: the way officials work, the confidence generated in the user, the sustainability of the process, and so on. For this reason, it is important for the institution and the startup to jointly define a solution evaluation framework, a process to compile evidence and learnings, and the pilot’s evaluation indicators. This kind of data allows to systematically evaluate the impacts of a given solution on a specific public process or service. Pilots are ultimately the experimental application of a GovTech solution to understand the opportunities and impacts posed by the use of a technology in a specific context and on a specific problem.
5. Dissemination and scaling:
The GovTech pilot and case provide evidence and data on what works. In GovTech open innovation, these are used primarily to inform future tenders or internal technological developments. In addition, it gives visibility to the startup and their solution helping them in their commercial process with other institutions, as well as contributing to strengthening the institution’s relationship with the entrepreneurial ecosystem.
Successful GovTech open innovation programs are successful not because of technology, but rather because of how they adapt the open innovation methodology to the given institutional and regulatory context, and their ecosystem of entrepreneurs.
In short, they are developed around the specific transformation needs of each public entity and offer a clear structure for their development. Thanks to this, they successfully manage the following barriers to the digital transformation of public administrations:
- The traditional cultural and political logics of public administrations that generate friction with innovative companies
- The lack of internal capacities necessary to integrate these new methodologies in the daily operations of the institution
- And the different operating models and capacities of these actors
As a result, on the one hand public administrations expand their market of digital providers to new, small, agile and innovative companies (and that in many cases are already working for other industries) and on the other, the programs generate sufficient incentives for startups, scale-ups and digital SMEs to present their proposals to the public sector.
The implementation of this methodology by national, regional, or local governments usually signals a clear commitment to their digital and cultural transformation; and a desire to improve services to citizens and to make their operational processes more efficient and transparent.
Initiatives involving open innovation generate transformation, as positively shown in international indices. Countries that occupy the top four positions of the OECD Digital Government Index (South Korea, United Kingdom, Colombia, Denmark) have extensive experience in promoting GovTech ecosystems at all levels of government through government projects and public policies; and Spain, Poland, Australia, and Israel, are other examples of governments that more recently have begun to use open innovation to identify innovative solutions to their challenges, test them and scale them.
Is it feasible to implement such methodology in cities in Latin America and the Caribbean?
In the region some have already come up with interesting solutions using this open innovation methodology.
- The city of Abangares, in Guanacaste, collaborated with Munidigital for an exhaustive diagnosis of the city’s needs, which was fundamental to frame new government strategies and to optimize resources.
- In the case of the city of Córdoba, GovTech is already a reality. The Argentinian city has been investing in its govtech ecosystem for some time with the CORLab initiative and the pandemic has accelerated its work in this field.
- At the national strategy level, the Digital Government of Chile is putting GovTech at the service of people’s needs, with the creation of the Digital Government division, with which they seek to contribute to the creation of efficient and inclusive services, incorporating digital technologies at all levels of management and public policies.
- And on a more distant yet Iberoamerican scenario, in Spain Madrid’s City Council has experimented with a GovTech startup, undergoing the process of discovering a new solution and learning an agile and open methodology of work.
