Towards a Playbook: Rethinking Processes and Regulations to Encourage Innovation
Perhaps the biggest fundamental insight developed at CityXChange Summit 2017 was that tech companies and cities need a series of tactics and engagement models they can draw from as they look to partner. In the tech community, as in the sports world, these situational models are often referred to as a playbook. In this section, we will begin to build a CityXChange Playbook that cities and startups can learn from and build on as they seek to partner. We intend to expand this playbook over time, as we learn more about how to improve outcomes for city/tech partnerships.
Rethinking processes and regulations to encourage innovation
Cities have numerous regulatory levers beyond procurement that they can use to encourage innovation. With the following principles in mind, cities should consider taking the steps in this section to open themselves to innovation.
Cities should consider how to create markets, not just procure to them. If a service is valuable, there should be a way to make money from it. When cities think about technology, they tend to think in terms of direct procurement, but there are many different business models cities can use to solve procurement problems. Creating regulatory environments where innovators can thrive is just as important as directly procuring new technologies. Many problems can be addressed through a concession model, without requiring taxpayer spending. In other cases, well-crafted regulation can bring markets into existence where there were none before, creating opportunities for innovators to bring new products and services to market. By cooperating with startups, cities can coopt innovation and channel it towards fulfilling a public good.
Toronto has implemented a number of programs designed to generate new cleantech markets. The City’s Green Roof By-Law and Green Standard provide a policy framework through which private sector developers are encouraged to partner with startups to implement innovative green building projects. In the case of the Toronto Green Roof By-Law, the City closely collaborates with the University of Toronto’s Green Roof Innovation Testing Laboratory (GRIT Lab), further using its power as a convener to generate new technologies and new jobs.
In general, I think the most successful and easiest to deploy programs are where governments can inject resources into a process that is already happening, and use those resources to improve that thing. — Startup participant
Cities should explore innovative procurement structures. To innovate, cities must embrace different procurement structures that allow cities to set general goals for projects, then let startups fill in the gaps. These models include “Requests for Innovation,” “Problem-based Procurement” and structures like the 100 Resilient Cities Procurement Framework. Many city leaders believe that their procurement laws prohibit such innovative structures, but in fact, procurement codes are more flexible than many assume, and many cities have reformed procurement without needing legislation. These innovative models can help cities generate quick wins and shape longer-term reforms. Partnering with a third-party funder can also help bring an innovative idea to implementation quickly.
After the economic crisis, CityMart assisted Barcelona in launching an innovative procurement system designed to increase participation from local small businesses in the procurement process. The system successfully allowed Barcelona to reduce expenditures by 30% while increasing quality, and engaging an astounding 55,000 Barcelonans in the bid process. The system even enabled local entrepreneurship, by encouraging local citizens to look for solutions globally and build partnerships to bring them to Barcelona. This new model did not require vast changes to Barcelona’s procurement law, but instead simply depended on judicious changes to the City’s existing practices (and simplifying the City’s terms and conditions for contractors). CityMart has helped replicate this playbook in over 100 cities.
Similarly, Cape Town has also worked to tighten the City’s standard operating procedures around procurements, creating new rules to speed purchases and prevent bureaucrats from dragging their feet. This has shorted procurement times to an average of 120 days. These reforms happened without legislation. People now know that the City supports business development, rather than getting in its way.
Cities and startups should both partner to help local startups thrive. Many cities are actively investing in tech community infrastructure, funding programs like startup incubators in the hopes of jumpstarting their local tech communities. This engagement, however, typically stops at the infrastructure level. Cities should seek to work directly with resilience tech startups in their own communities to help make their technologies successful. If cities can help their local resilience-tech startups succeed through partnerships, pilots and mentoring, they can both offer new services to their citizens and create jobs.
Cities and startups should both enable phased projects to unleash innovation. Most governments still think in terms of large, complex, monolithic procurements that don’t match how today’s startups solve problems. Startups, on the other hand, focus on developing their “Minimum Viable Product,” or simplest product that meets the needs of users. They then look to add additional features and scale from there.
Similarly, city/tech collaborations benefit from starting small, focusing on a specific city and use case, limiting complexity, getting quick wins, building trust, then adding features and scaling. Once a technology has some momentum, cities can find ways to make them work across a variety of different environments. Creating special zones within cities where startups can experiment with technologies without the city’s full regulatory burden is another approach that can help bring innovation, though few cities have implemented this approach. Simple pilots alone are unsustainable, though. A more effective technique is to have a large-scale contract contingent on the success of an initial trial model.
