Open innovation in the Public Sector: The Argentinean case

While governments have to deal with many of the most pressing issues of our era, their organizations are often not prepared to nurture innovation and implement disruptive solutions. To make things worse, most governments are not able to pay competitive salaries. In this article we will explore how the Argentinean government leverages open innovation processes to improve policy making

Open innovation in the Public Sector: The Argentinean case

Relevance of open innovation for the public sector

“No matter who you are, most of the smartest people work for someone else” (Lakhani and Panetta, 2006).

While governments have to deal with many of the most pressing issues of our era, their organizations are often not prepared to nurture innovation and implement disruptive solutions. To make things worse, most governments are not able to pay competitive salaries (i.e.: the CIO of the $54bi National Pension Fund of Argentina receives a before tax salary of ~$42.000 per year) and career advancement is impeded by “political cycles” (i.e.: every four to six years a new president is elected, forcing most of the officers to leave).

Also, open innovation processes help organizations reach people and resources beyond their usual area of influence and align their own decision makers. This is especially true in governments, which are intrinsically heterogeneous and are concentrated in a small part of their areas of influence (i.e.: capital cities).

That is why open innovation is critical to overcome the limitations of the public administration when it comes to improve processes and develop new policies.

How Argentina is dealing with this opportunity

In a context of severe constrains, the new national authorities are working hard to help Argentina converge and close the technological gap that the country suffers after more than 12 years of protectionism.

In this spirit, President Macri formed the Ministry of Modernization under the leadership of Minister Ibarra.

Minister Ibarra created the Office of the Undersecretary of Public Innovation and Open Government to foster cross collaboration and nurture open innovation as a source and a resource for policy makers.

This office is in charge of four main policies:

  • gob.ar: it is a “laboratory to design public policies” that helps the governments of the provinces and the national ministries organize open innovation processes such as challenges and contests. It also helps the selected teams to pursue their ideas by providing resources and networking across the whole country and the region.
  • Public Policy Design Academy: it is an institute that seeks to develop entrepreneurial and innovative public servants and prepare them to interact with the broader population through trainings, “innovation marathons”, research, executive programs and the participation of experts and leaders in several subject matters.
  • Open Government Partnership: it is the interface of the government with civil society organizations to foster transparency and public-private collaboration.
  • Open Data: they generate datasets and analytical tools for the scientific community and the broader society. Entrepreneurs greatly benefit from open data and many companies use this information to develop their products (for instance, transportation start-ups use data on public transportation to develop their models).

In the short term, they are working on “quick wins” on those four areas. For instance, Lab.gob.ar is organizing “INNOVA”, open innovation challenges to solve problems that the governments face. They are constantly reforming the format and dynamics of those events based on their learnings (for instance, at the very beginning they organized hackathons but now they organize longer processes where the participants offer deeper solutions to the problems at hand).

In the long term, they are working on the “Argentina 2030” plan. However, most of what they do has a rather short-term focus. The main underlying reason is that the “planning horizon” is four years (i.e.: the presidential term) so officers place a premium on short-term impact. Even though this might be sub-optimal, the reality is that usually presidential successions many initiatives and policies end up being terminated.

Improvement opportunities

Open innovation is a priority for the national government and it is making bold progress. However, there is still a long way to go. For instance, the Innova challenges do not receive support from private companies, they take a long bureaucratic process (~6 months to be approved) and they have problems recruiting relevant external subject matter experts to collaborate. Also, budget and human resources constraint the number of initiatives that are pursued by the Ministry.

The short political cycle also impedes longer-term initiatives (such as developing longer-term relationships with other stakeholders like universities and NGOs)

To address those issues, I think that the ministry could develop many more relationships with key stakeholders in the private and the non-for-profit sectors. For instance, NGOs such as EMPREAR have deep expertise when organizing open innovation processes. They have organized many hackathons in partnership with municipal governments of the Buenos Aires area, attracting the sponsorship of leading companies such as Microsoft.

Open questions

Looking forward, I wonder how they might nurture meaningful relationships with other stakeholders to overcome their limitations. Also, it would be interesting to know more about what incentive structures could be put in place so that the Ministry can start working on longer-term initiatives, regardless of the political cycle.

(799 words)

Sources

  1. B. Bergvall-Kareborn and D. Howcroft. Crowdsourcing and open innovation: A study of Amazon Mechanical Turk and Apple iOS. Presented at the 6th ISPIM Innovation Symposium – Innovation in the Asian Century, Melbourne, Australia (December 2013).
  2. K. Boudreau and K. Lakhani. How to manage outside. MIT Sloan Management Review 50, no. 4 (Summer 2009): 68–76.
  3. K. Boudreau and K. Lakhani. Using the crowd as an innovation partner. Harvard Business Review 91, no. 4 (April 2013): 61–69.
  4. J. Howe. The rise of crowdsourcing. Wired (June 2006).
  5. A. King and K. Lakhani. Using open innovation to identify the best ideas. MIT Sloan Management Review 55, no. 1 (Fall 2013): 41–48.
  6. K. Lakhani and J. Panetta. The principles of distributed innovation. Innovations: Technology, Governance, Globalization 2, no. 3 (Summer 2007): 97–112.
  7. https://www.argentina.gob.ar/modernizacion (last access: 11/10/2018)
  8. https://www.argentina.gob.ar/modernizacion/gobiernoabierto (last access: 11/10/2018)
  9. Image: verdict.co.uk (last access: 11/10/2018)

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9 thoughts on “Open innovation in the Public Sector: The Argentinean case

  1. Modernization of states is a process that involves both changes in the structure of the government organizations and adjustments in the talent acquisition process. Although I believe that the proposal of develop more relationships with key stakeholders could help to maintain a culture of open innovation despite having changes of president every 4 to 6 years, I disagree that it is a sustainable initiative.

    In other countries the governments have created a “Top public management system” [1], in which the managers of strategic public organizations do not depend on the political party of an elected president. In contrast, the managers are appointed for long-term periods and depend depend on their performance evaluations and therefore can develop long-term initiatives. By creating this type of mechanism in Argentina, the key strategic public managers could foster the open innovation and develop long-term initiatives based on both internal and external crowdsourcing.

    [1] Ministerio de Hacienda de Chile. “Sistema de Alta Dirección Pública”. https://www.serviciocivil.cl/sistema-de-alta-direccion-publica-2/, accessed on November 2018.

    1. Hey Andres! Chile usually provides with great examples of public policy making and management. Argentina also has a “top public management system” based on the French public administration model. Unfortunately it is not working well for many reasons.
      I believe that we should appoint stable offices to overview many important policies, but as we like to say, “lo urgente mata a lo importante” (the urgent issues prevail over the important ones)

  2. I think the budget and resource limitation on open innovation initiative that the Argentinian government push can be resolved with the right level of partnership between the public and private sector. One way to nurture the meaningful relationship as posed in the open question would be to guarantee the private sector the right to profit from the future economic benefits/cash flow stream of the projects they invest in. Successful example of this is an airport modernization project in Cebu, Philippines [1]. By giving assurance for the GMR-Megawide private sector consortium to reap the future commercial benefit, in return, the government is able to foster great degree of architectural & efficient facilities innovation and built the “most modern airport” in the country.

    [1] Cebu Daily News, November 11, 2018. “https://cebudailynews.inquirer.net/203146/poe-public-private-partnership-vital-in-airport-modernization”, accessed on November 2018

  3. Very interesting post. I agree with the limitations of driving innovation in the public sector which is faced with more challenges everyday with an increasingly tighter budget. I also recognize the limitations of incentivizing long-term initiatives when administrations change every four years leaving little room (if at all) to approve the idea, execute it and realize its value. I would try to delegate the decision-making and partner-selection process of each open innovation initiative to the country’s legislative branch or local government business subcommittees which tend to have a more long-term focus, more business sense and generally input from a more diverse set of parties.

    So, how to incentivize long-term thinking on these ideas amid short political cycles? My suggestion would be to defer implementation of projects (where applicable) to the private sector while providing them with an economic incentive to succeed. Open innovation in the private sector is generally known for driving financial performance while in the public sector for driving citizen engagement[1]. If the Argentine government is able to strike a balance between the benefits of citizen engagement with the value of getting a company’s best practices and technical knowledge towards the same goal, I believe the government can institute a system for long-term value creation for Argentine citizens.

    [1] Baba, Jonathan. 2018. “Deloitte”. The Value Of Crowdsourcing: A Public Sector Guide To Harnessing The Crowd. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/public-sector/us-fed-a-public-sector-guide-to-harnessing-the-crowd.pdf.

    1. Dear Reed,

      Honoured to have one of my most admired businessmen commenting on my post.

      From my experience dealing with the issue you mention (public-private collaboration), the main challenge is to deal with very ambiguous legal frameworks.

      These legal frameworks are often used by the opposing political parties to prosecute officers (a kind of an attrition war). Therefore, officers do not engage with the private sector as much as they would like, because they do not want to go to jail.

  4. When considering the dynamics of politics and its importance to the economic dynamic of a nation, corporations almost always benefit from having strong relationships with the government in the regions in which they are operating. Although the government currently does not have the financial capability to fund impactful innovation, it does have the opportunity to incentives individuals as well as private corporations with other levers such as tax breaks. If the government can break down the barriers that currently prevent the brightest and most passionate individuals to aid implement changes or work for the government through partnerships, they will ultimately be able to launch projects that will help the people of their nation.

    1. Dear Anonymous,

      tax breaks are very desirable in a country where 45% of the GDP is actually public spending (42% is taxes and 3%, budget and financial deficit). The problem is that, given those constraints, the timing is never great. Latin America in general has very pro-cyclical policy makers that over-spend in the good times and adjust the economy during the crisis (usually when commodity prices are low).

      In other words, implementing tax breaks right now is not feasible and in three years now, when the crisis is over, there will be no incentives to do that because the more “traditional” industries will be providing for lots of resources.

  5. It’s great to see Argentina push for greater innovation despite the many challenges faced by the public sector. I think the open data initiative could be particularly impactful, but it also presents some challenges. As mentioned in the article, open data allows private companies to innovate and develop products based without significant cost to the government itself, since private companies can use the data to create applications that appeal to consumers directly. With that said, there are two risks that accompany making data widely available.

    1. There could be issues with privacy, even if the data is only presented in aggregate or anonymized. I’m not sure what the typical Argentinian stance is on data privacy, but I know that people in many other countries are concerned with making their data public, even if it is impossible to identify individuals in that data.

    2. Open data can drive government accountability because external parties are able to examine the government’s performance across a variety of metrics, but this can generate “noise” if the public focuses on high visibility, low value add, issues instead of those that are harder to discern from the data, but have a much more significant impact.

  6. I am very pleased to read such great initiatives from the Argentinian government. It is also worth highlighting that the questions posed by you are very adequate and address challenges that are particularly difficult in Latin American countries due to the vastly inefficient government institutions.

    I would dare to propose that designing the right fiscal incentives to private companies to co-invest (PPP) in the start-ups/innovative projects emerging from the Secretary for Public Innovation & Open Government may be a feasible short-term solution to guarantee the sustainability of the selected initiatives.

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