Barriers to City and Technology Partnership
City/tech company partnerships are not a novel concept but, unfortunately, there have been far more failures than successes. Conversations at CityXChange Summit 2017 identified a number of common barriers that prevent cities and the tech community from building successful partnerships, as discussed below. These barriers are far from insurmountable, but before cities and startups can overcome them, they must first recognize them.
City Leaders and tech startups have negative stereotypes of each other. While all acknowledged that there are exceptions, tech leaders tend to view cities as bureaucratic and slow, while city leaders think that startups want something for nothing. Tech leaders view the political process with suspicion, while city leaders see startups as reckless and politically naive. These stereotypes often lead the tech community to avoid working with cities, instead opting to find pathways around government. This only deepens city leaders’ reflexive sense that tech companies are troublemakers.
Cities and startups have very different perspectives, informed by their different social roles and constituencies. These differences arise from the different sets of stakeholders they serve and different ways they address their missions. Startup founders are, by their very nature, risk takers. Starting a business from the ground up is necessarily a risky proposition, and many in the tech industry believe that there is no better teacher than failure. City leaders, on the other hand, are often resistant to taking even small risks. There are good reasons for this: voters can be very unforgiving of missteps. Witness, for example, the technical issues that plagued the United States’ federal Healthcare.gov web portal in the early weeks following its launch. These issues threatened to derail the entire American health care reform program and subsequently played an important role in the 2016 election. Beyond public opinion considerations, failures can result in serious impacts on the life and livelihood of citizens. Furthermore, providing incentives or adjusting rules to accommodate startups may expose city leaders to accusations of cronyism or corruption. To partner successfully with cities, startups need to understand and appreciate this dynamic.
Governments tend to favor the status quo even if it costs untold time and money. — Startup participant
Cities and startups speak different languages. Startups tend to think governments are overly focused on the trivial, whereas cities worry startups haven’t considered the implications of their actions. These communications differences only contribute to negative stereotypes. Governments rely on memos, reports, and long-term analysis, designed to encapsulate all the complexities and subtleties of government programs with multiple stakeholders and significant consequences on the broader civic fabric. Tech companies, however, rely on the pitch: a succinct, high-level presentation designed to demonstrate a conceptually simple, technically-sophisticated approach to solving a specific problem. Pitches don’t dwell on complexity: the goal is to show how technology can turn the complex into simple. However different these communication styles are, cities and startups fundamentally share goals — the tech community wants and needs vibrant urban life.
City procurement processes discourage innovation. It is accepted fact among both cities and startups that procurement and partnership policies stand in the way of successful partnerships. And for good reason: city procurement policies are designed to prevent contracting scandals, not to encourage innovation. Procurements tend to happen through Requests for Proposal (RFP), which are confusing for first-time bidders and rarely written to solicit innovative solutions. Many RFPs even include requirements that bidders have a minimum number of years in the market, excluding startups before they even have a chance to bid. These procurements also can also take years to materialize, further discouraging startups that need to quickly demonstrate results to ensure next-round funding.
[The] never-ending procurement process…hinders city execs from using innovative solutions even when they want to — Startup participant
Partnerships can take too long to develop. Because of the complexities of the city stakeholder and contracting processes, startups find that partnerships, even once launched, often take months or years longer to come to fruition than expected. Those kinds of delays can be the difference between success and failure for a young startup, and further discourage partnership.
We are currently deploying [our product] at private sector buildings in New York City under a grant from the New York City Economic Development Corporation. It has taken a year longer than anticipated to get to the point where NYCEDC could release the funds. — Startup participant
City solutions don’t easily scale. Cities themselves have a difficult time sharing best practices, and often implement wildly different solutions to the same problems. This diversity can be a strength, as cities can adopt best practices from peers around the globe. But it can also make it difficult for startups to scale, as they need to adapt their technologies and engagement approaches to different circumstances. The impact of this is striking: CityMart, a global consultancy that helps cities transform their procurement processes and a 100RC partner, estimates that it takes 40 years for a civic technology to go from its first success to reaching just 1% of global cities.
Cities lack the know-how to understand what tech they need. City governments often house deep repositories of subject matter expertise about their operations and the challenges they face. Those same experts, however, may be unsophisticated about and resistant towards technology change. City workforces are often older and lack the comfort with technology that millennials take for granted. They may also view new technologies as shiny distractions, rather than key tools for achieving their goals. Many would prefer to focus on delivering services, not rethinking how they do their daily work. Cities try to overcome this lack of sophistication through Requests for Information (RFI), in which companies can describe their solutions and influence a final RFP, but RFIs are generally a poor tool for building successful engagements.
Figuring out who to get to [in a city] is hard. Oftentimes, the person responsible for the area has insufficient knowledge and it frustrates entrepreneurs. Feeling is that you need to be an insider to get a contract.- VC Participant
Tech lacks the expertise to understand how to engage with cities. Startups are generally made up of people with specific skills needed to drive product development and expand their user base — the critical factors that can make or break their business. They do not have in-house public affairs expertise to navigate public contracting and RFP processes or to advise about political implications for their actions, and usually cannot afford lobbyists or outside advisors to fill the void.
Cities fear negative repercussions to partnerships with startups. Cities are typically happy to be the second customers for a new technology, but fear being the first. Citizens have low risk-tolerances for public-sector projects, which means that cities often spend far more than is necessary to invest in sometimes outdated, but proven, solutions. Cities further worry that projects with startups will become white elephants that will cost a ton of money and generate bad press. Cities also worry about startups’ permanence. Cities make generation-long investment decisions, and fear working with a startup that may disappear overnight. Lastly, citizens may also have concerns about outsourcing critical civic infrastructure to private companies. Startups can overcome these issues by taking city leaders’ concerns seriously, and committing to working with the City to address citizens’ concerns. Once startups get over those hurdles, pathways open.
Cities and startups need a partnership playbook. Startups think in terms of playbooks, or specific tactics they can use to solve problems, acquire customers, and grow their businesses. Uber, for example, faced a challenge in quickly building up deep networks of passengers and drivers in dozens of cities globally; it famously used referral codes to give individual users an incentive to share the app with their friends. Startups across industries now routinely use referral codes, copying Uber’s playbook for customer growth. Cities and startups today lack a playbook they can follow when they contemplate working together. This makes it hard for either side to take the first step.
