What is Government Relations Strategy and Why is It Important for Startups and SMEs
I am a technologist who recently spent a year and a half working as a Ministerial Adviser in State Government. I was the Senior Adviser for Innovation and the Digital Economy in Victoria and was recruited into the role from a position in developer evangelism in the fintech sector. During that time, I was the primary point of contact in the office for a range of stakeholders in the ICT and startup/innovation sectors. I gained a huge amount of insight into the machinations of government. I also learned a lot about the way that various organisations interact with government. I was struck by the disparity in the level of sophistication of these interactions. Startups and SMEs in the innovation/technology sectors of Australia are, with a few exceptions, hugely underselling themselves with regards to Government Relations.
What is Government Relations?
Large firms typically have a Corporate Affairs function. In many cases, this explicitly includes a Government Relations function, particularly when the firm operates in a highly regulated industry (such as financial services, or the Not-For-Profit sector). This function maintains relationships with external stakeholders, shareholders and the government. It can be serviced by both in-house and external talent/contractors.
Government Relations is something that companies/organisations don’t typically start thinking about in any real strategic way until they reach a certain size and scale. There are a few main reasons for this:
- If you’re a small business or a startup founder you’re doing everything yourself. If you don’t have the skillset or are unable to find it in early employees doing other functions, it simply doesn’t exist in the organisation.
- There is a general attitude that startups and innovation sector organisations are there to challenge governments as a function of ‘disruption’. The assumption appears to be that governments will eventually capitulate or the organisation will be able to scale so rapidly that it will be able to deal with the end result of legislative changes.
By not thinking about it, startups and SMEs who are at the cutting edge of technology are 1. missing out on opportunities, and 2. creating problems for their future selves. The following are the reasons I think that you should have a government relations strategy:
1. Opportunity Cost of Funding and Grants
It’s a HUGE pie. In recent years, governments of all levels and political leanings in Australia have shown an increased interest in supporting the ‘Digital Economy’. Somewhere along the line, the policy wonks cottoned on to the economic growth potential of the startup and innovation sector and it has subsequently featured in government budgets ever since.
Some governments have injected tens of millions or even hundreds of millions into supporting growth in innovation, sometimes in ways that the sector is confused about or disagrees with. As with anything that doesn’t fit nicely into constitutionally defined responsibilities, this is a complex landscape in which federal, state and local government all play, sometimes seemingly doing the same things.
- Entrepreneurs Programme– includes;
- $23 million Incubator Support initiative
- MVP Grants
- Building Partnerships Grants
- The Sydney Startup Hub
- $650 million Advance QLD — this is a suite of programs loosely categorised as innovation support
- LaunchVic $60M
- Future Industries Fund
- Victorian Fintech and Innovation Hub
- ICT sector events and grants available within various departments
- Lot Fourteen
- Venture Dorm
- New Industries Fund: $16.7M over 4 years
- $278,000 per year for another year to the end of the next term of Government — this was an election policy and is a very new government — full grants program yet to be announced.
- Business Innovation Support Initiatives (BISI)
- Innovation Connect
- CBR Innovation Development Fund
The above are all just things that I know of, off the top of my head, in what I refer to as the ‘innovation infrastructure support’ space. In some cases, I’ve put a high-level figure indicative of the total cost of a suite of programs. It is by no means an exhaustive list of grants that are accessible to startups or SMEs or that the end benefit of reaches to startups and innovative SMEs.
2. Opportunity Cost of Procurement
Alongside the growth in sector support initiatives, governments have been trying to bring themselves into the twenty-first century. As those governments increasingly become consumers of the solutions created by the innovation and tech sector, startups want to know why they aren’t getting those big government contracts and how they can get a foot in the door.
Procurement is probably the most misunderstood area of Government Relations strategy. It is often assumed that procurement consists of purely responding to ‘request for proposal (RFP)’ listings or that an organisation needs to be on a mysterious ‘panel’ of suppliers, comprised exclusively of massive corporations. There are actually several tiers of procurement and multiple different policies, ranging from digital products that require no more than a simple sign-off to full-on ‘state purchasing contracts’. These are all opportunities for you to sell goods or services to the government that you are potentially missing out on. While attempts have been made at a state, federal and local government level to consolidate procurement systems and processes, interested parties still need a working knowledge of where these consolidated procurement applications can be accessed.
Very recently governments have been experimenting with policies that enable them to use procurement as a lever for driving innovation growth, in de-risked ways. Two examples of this are the Victorian Government’s CivVic Labs Accelerator and the New South Wales Government’s Pitch to Pilot initiative. These initiatives present a different model of procurement and even further opportunity cost for startups without a Government Relation strategy.
3. Avoid Regulatory Inertia and Proactively Work with Governments
In certain industries, the relationship between business success and government policy is more obvious. Companies in these industries are used to working with government and they have created things like industry bodies to advocate on behalf of the sector for regulatory change. Working proactively with the government can create positive outcomes when startups are represented in this way. Fintech Australia’s advocacy for the fintech industry is a notable example.
The other side of this is that in some industries the incumbents are dominating the conversation with government about relevant policy and they have industry bodies that represent their own interests, such as in property, labour hire, etc. Since those industry bodies are controlled by incumbents they are unlikely to represent the interests of innovative startups and will advocate for a regressive policy or status quo. In the absence of deliberate effort to include startups in these conversations, the innovation sector has its work cut out for it in terms of advocating for their own inclusion.
4. Your Competitors are Thinking about it!
Quite simply, your competitors, the incumbents, have the money and organisational sophistication to be strategically thinking about Government Relations strategy. They either have full-time GR managers representing their organisation, or they outsource the function to lobbyists. During my time in the office, I maintained stakeholder relationships with Government Relations representatives and interacted with contracted representatives from a number of different organisations across the tech sector.
GR managers are full-time employed in maintaining positive relationships with all of the people across government their organisation could possibly require access to. If someone in the tech team at X-organisation has built a solution that they want to trial with a government department, the GR manager will know exactly who to call to get the level of sponsorship and organisational understanding required to run a trial. They will most likely have a positive relationship with that person. The GR manager has a working knowledge of the procurement hurdles the organisation will need to be able to jump. GR Managers will travel across Australia helping the executives of their organisation to have the conversations they need to have with the Government and the Public Service.
Lobbyists are essentially consultants who offer the outsourced version of an internal Government Relations function. The term ‘lobbyist’ is often used as a sort of pejorative in the media, which I think is, for the most part, unfair. Some of them do specialise in certain ethically dubious industries, but they are highly qualified and talented people who are very good at what they do.
GR managers and lobbyists can charge a lot of money and for a very good reason. They have a very niche skill set, a broad understanding of political issues, and significant relationships they’ve built over many many years of their career. They were often political staffers themselves so they’ve done the hard yards in a political office and know what the staffers and other decision-makers will care about. When you consider that level of expertise is at the disposal of your much larger competitors, it can be daunting.
What should you do about it?
Fortunately, Government Relations strategy is a business function that founders and business owners can learn and do themselves. Many of you in the sector are probably executing Government Relations functions on an ad hoc basis as the need arises. There are very exceptional examples of innovation sector founders who have proactively thought about what their forward-looking strategy is and have positively engaged with governments in ways that will create opportunities for them in the future. If you have any stories about ways that you have implemented this in your organisation I would love to hear from you! It is absolutely possible to learn how to compete with the Government Relations sophistication of your larger corporate competitors.
Each of these topics warrants individual blog posts/series of blog posts. I’ve been working on ways to simplify my knowledge on this and similar topics. Subscribe to my mailing list for more on this in the future and let me know via contact page or socials if you have any requests.
Originally published at coderbec.com on October 6, 2018.