I had the opportunity last week to attend a private meeting of some of the top executives in the government contracting business. There were two parts to the meeting. First, we listened to presentations by various experts about the state of the business of government. The experts were from various domains—market research, legal and ethics, and congressional staffers. The content was well put together, thoughtful, and valuable for anyone doing business with the government. For example, it covered the state of the Administration’s insourcing initiatives or how IGs are currently interpreting regulations around small business contracting. Afterwards we had cocktails, crab cakes, and steak while we networked then broke up into various interesting conversations during dinner.
It was my first time hanging out with this particular group and the experience has sparked a number of observations. First, purely from a style standpoint, I was the only attendee in jeans. Most of my networking events are in downtown DC or New York or San Francisco or Seattle, where the dress code continues to become ever more casual. It didn’t occur to me that drinks after work with peers would find everyone in a suit and tie. And the ties were never loosened. Note to self: wear a suit next time I’m chilling with government contracting executives, even if I forgo the tie.
Second, I was struck that despite being in the business of government, there was also a genuine current of public interest and concern about broad government policies. Many of the executives had served as both public servants and leaders of government-related businesses, and you could see that they viewed the world through both lenses. It was heartening to see.
My major observation however was of stepping into a completely different world. At one point, I had a side conversation with another invited guest, a leader from the technology industry who had recently written a bestselling book on America’s sclerotic government policies and the urgent need for innovation in America. I talked about Synteractive and the things we do in the public sector, health care, financial services, and elsewhere. He leaned closer to me and in a half whisper goes, “Didn’t you think these guys would be talking about the much larger forces about to impact this business?” The comment captured exactly what I’d been sensing.
Prior to founding Synteractive, I worked in private equity. We did a lot of work in the global mortgage industry. I remember sitting around in 2004 and looking at statistics that showed the astronomical growth in all types of mortgage lending, in countries around the world. When I asked whether there might be a bubble, the answer from the analysts was that house prices were still rising and that house prices had never fallen for an extended period of time across a broad geographic area. In 2005, we had the same conversation, and the answer was the same: the fundamentals still look good and house prices always go up in the long-run. Once again, we had the same conversation in 2006. In late spring of 2007, I remember attending the Global Asset Backed Securities Conference in Barcelona. The experts acknowledged that defaults in certain asset classes had gone up a bit, and that risk premiums were starting to rise, but the consensus view was that once everyone took their vacations over the summer, did a bit of homework into the quality of their assets, and came back in September then business would resume as normal. After all, house prices always rise. And if they didn’t then it would mean a complete collapse of the global financial system. At that point, we all went to the next over the top party thrown by a cash rich global investment bank and enjoyed the jumbo shrimp.
Of course, in the first week of September 2007, I remember watching a stricken looking Hank Paulsen speaking in front of the White House while he tried to calm people in the face of exactly that global financial collapse.
I have this odd feeling that the business of government is experiencing the equivalent of what occurred in spring 2007. You can almost hear the self-reassuring thoughts going through the government contracting community. Yeah, the Obama Administration came in with grand talk of insourcing, transparency, cloud, and government 2.0. But all the Silicon Valley types who were going to turn government into a platform for citizen innovation have gone back to buy their next Tesla Roadster and the government contracting industry is safely re-defining the term cloud to mean the same old outsourced data centers that the big systems integrators have always managed for government, except with the label of “private cloud” slapped onto them. In the same way, sure, the Republicans took control of the House promising massive spending cuts and government shut downs and other draconian measures. But we’ve had a few continuing resolutions and there are rumors of a backroom deal on the budget that will soften the hard edges. After all, Senators and Congressmen have a vested industry in keeping the money flowing as well. The business of government will continue growing… after all, it always has.
As in the spring of 2007, the forces that will ultimately reshape the business of government are much more powerful than the short-term ebbs and flows of a particular policy or even the 112th Congress.
As consumers and business people, innovation has radically reshaped so many aspects of our lives in the last 10 years. On September 11, 2001, there was no Facebook or iPad, no Avatar or digital cable. When you went to the airport, you could barely use an electronic ticket, much less ignore check-in altogether as you waved your mobile phone at a scanner. Synteractive is the 64th fastest growing company in America. Yet since our corporate systems run in the cloud, we don’t have to maintain servers to host our email, our web site, or our intranet. We don’t pay for job fairs or Monster.com. Why would we? All of those expenses are now irrelevant for a technology aware entrepreneur. Servers are simply provided to us in the cloud. Our team self organizes around shared information. We find talent by surfing LinkedIn and Facebook.
Innovation has changed the world profoundly for consumers and business people. As a citizen, have you experiences the same innovation in government? Has the service you’ve received from your government improved while the costs have dropped significantly? Can you find anything related to your government at your fingertips? Do you feel safer? In so many other aspects of our lives the power of technology increases while the costs fall through the floor. And yet the federal technology budget over the past ten years has grown from around $30 billion per year to over $80 billion per year.
The solutions to improving the quality of government while reducing its cost aren’t incremental. They don’t involve insourcing versus outsourcing or tweaking procurement laws or giving every agency a Facebook site. Cloud computing, social collaboration, data analytics, mobile devices, and open standards, and other innovations will transform the very nature and structure of government. Everyone focuses on the fiscal deficit that government faces. Equally important is the innovation deficit, or the gap between what is and what’s possible for government, right now.
The combination of these two deficits—fiscal and innovation—is what’s about to cause the dam to break and inundate the business of government. Innovation occurs in the presence of constraints. The technologies exist. The constraints are about to be applied. Large systems integrators are wondering whether the next budget deal might cut some of their 500-person, 10-year contracts back by 10% while ignoring the possibility that there simply won’t be a need for many 500-person, 10-year contracts in a next generation government. Rather, small teams of creative thinkers will simply orchestrate secure services in the cloud to provide agile, effective solutions for citizens and the public interest, and at a fraction of the cost.
While my dinner this last week has caused me to focus my thinking on government, many other sectors are facing the same reality, whether health care, education, transportation, or non-profits, or what I often think of as the “regulated sector” that serves a public interest under sometimes complex legal and regulatory constraints. From our perspective at Synteractive, today is an incredibly exciting and inspiring time. There are big challenges out there. But the tools exist to achieve radical successes and the environment is becoming increasingly conducive to change. We remain committed to solving some of the really complex problems in the world through social and technological innovation.
4 comments
i’d offer a different paradigm for government…turbotax. i look at how many of the transformation initiatives that were on the path to what we now know as web services or cloud services have been shuttered by the Obama Administration. There seems to be a lot of talk about the wonders of cloud technology and technology, but no real understanding of how to align the trends with government performance breakthroughs. So, some of us are creating new models of governance that simplify government faster than government can do it for itself. Others are creating new governance structures that leverage technology and information for a 21st century version of the federalist papers.
I think that’s a great observation. Government is fractured into self-reinforcing “vertical” silos, while many of the problems that government seeks to solve are “horizontal” in nature. In fact, many of the most profound problems that government must solve are beyond horizontal and really “social” in nature, requiring coordinated activity across a complex and emergent ecosystem that spans the federal government, state and local governments, non-profits, universities and schools, businesses, and citizens. To your point, the governance structures required to solve “social” problems look almost nothing like the hierarchical, command-and-control silos of the 20th century.
Almost all the transformational social platforms (Facebook, Twitter, eBay, Craig’s List, and so forth) apply a similar governance approach: highly distributed, collaborative behavior around a particular domain can only occur in the presence of a central platform with a small number of tightly enforced rules. Facebook is an extreme example of distributed, collaborative behavior, but it is not at all unstructured. Rather, Facebook sets the basic rules and ensures that information sharing can occur within this construct. You see this meta-pattern repeat over and over again in modern social platforms. Distributive behavior actually requires some centralization.
The big problems of government over the past 15 years are all massively horizontal, social problems: counter-terrorism, intelligence analysis, nation building, disaster response, financial regulation, and so forth. You cannot point to any one government agency that was singularly responsible for a disaster. Rather it was the inability to effectively coordinate around unstructured problems that contributed to incredibly expensive failures. But it’s also worth realizing the costs of the everyday coordination failures that persist in government: obtaining and managing a grant, processing a visa, financial accountability, government-wide performance management, and on and on and on.
In theory, government should be able to fix itself, reorganize, and develop horizontal, social solutions to problems. Government should be able to evolve from silos to ecosystem. GSA should become the provider of limited but effective central platforms for distributed action. But it seems like it may actually be easier to reform government from without than within. In other words, it may be much faster for innovative entrepreneurs to offer the platforms that enable collaboration or that drive an efficient horizontal solution. To your point, one can only imagine how long it would have taken for the IRS to provide a simple, automated service in the cloud to enable citizens to prepare and file their taxes. If TurboTax hadn’t provided it before the IRS even contemplated it, then we’d probably still be waiting for some government SI in year 17 of their 25 year contract.
So here’s to all those “reformpreneurs” out there pioneering new governance structures and new technologies for a 21st century version of the Federalist Papers! But regardless of whether government reforms itself and demands new solutions, or “reformpreneurs” drive innovations that government is forced to accept, I’d hate to be one of the masters of the traditional government of business over the next three to five years.
Interesting article. I am not as optimistic as you are in terms of time-scale (3 – 5 years) for this type of change, but you are much better situated than I am to judge. I hope you are right – it could be very exciting.
I read your post last night, and this morning I came across this post: http://sloanreview.mit.edu/improvisations/2011/02/03/how-analytics-can-get-you-better-medical-treatment/
I think that what this article shows, along with the success of your work (on projects like recovery.gov), is that the impetus for real change will be driven by people who have access to good, easy to understand and actionable information.
When decision makers – whether politicians, business leaders, or citizens – have access to data and tools for analyzing and sharing information clearly, we will be on a new playing field with new set of rules.
Please feel free to link on your web site. I’m glad you liked it.