Government as catalyst

Cybersecurity. Cybercrime incidents cost the global economy more than US$1 trillion.³ Beyond dollars, cybercrime also represents a threat to infrastructure and intellectual property. To address this threat, collaborators in multiple sectors are furthering advances in cybersecurity.

New York City’s new Cyber NYC initiative has three objectives—developing the city’s cyber workforce, catalyzing cyber innovation, and establishing New York as the global cybersecurity capital. With US$100 million in public and private funding, Cyber NYC collaborates with the city’s unique cybersecurity ecosystem, including universities, venture capitalists, and tech firms, and aims to create 10,000 cybersecurity jobs in the New York area. Its multipronged approach includes a City University masters’ program with reduced tuition, a startup accelerator to connect venture capital with cybersecurity startups, and a US$1 million prize for solutions that protect the city’s small and midsized companies from cyberattacks.⁴

Or consider the US Cybersecurity and Infrastructure Security Agency (CISA), which set up the Joint Cyber Defense Collaborative (JCDC), a dedicated public-private collaborative to ramp up cyber defense operations in August 2021. The collaborative seeks to integrate cyber capabilities sitting across industry and government agencies (federal, state, and local). Through JCDC, CISA is drawing up a comprehensive whole-of-nation cyber defense plan. Prominent industry partners in this initiative include Amazon Web Services, Google Cloud, Microsoft, and Verizon.⁵

Health care. The Accelerated Access Collaborative (AAC) of the United Kingdom’s National Health Service (NHS) brings together patients, industry representatives, regulators, and various NHS entities to develop and accelerate innovative health solutions.⁶ AAC provides an online “single front door” that offers information and support to innovators, informs the market of NHS research needs, creates a conducive regulatory environment, and fast-tracks clinical development. These efforts have speeded up the adoption of successful innovations such as software that identifies coronary artery disease without invasive surgery and a test for preeclampsia, a pregnancy complication.⁷ With added priorities arising from the pandemic, by early 2021, the AAC had supported more than 2,700 innovations.⁸

Climate action. Governments are investing in jumpstarting cleaner technologies, with global warming being recognized as an existential challenge for the planet.⁹ The European Clean Hydrogen Alliance, launched in March 2020, is uniting industries with various public entities to develop and scale the use of low-carbon hydrogen energy in Europe. Member states are committing to directly invest €430 billion by 2030 to achieve specific project goals.¹⁰

Another multinational effort, Mission Innovation, is driving investment in clean energy technologies. The project’s 23 member governments, including the United States, India, Saudi Arabia, Canada, Australia, Austria, the Netherlands, and the European Commission, expect to invest more than US$250 billion in clean energy research to reduce global emissions. The project’s goals include developing 50 large-scale urban experiments in green living, funding research in carbon dioxide removal, and investing in low-emission equipment for heavy industries. Different countries spearhead each mission—India and the Netherlands, for instance, are leading the Integrated Biorefineries Mission, which aims to develop alternative fuels for the transportation and chemical sectors. Investments to date have supported nearly 1,500 innovations that could avoid emissions of more than 21 gigatons of carbon dioxide annually by 2030.¹¹

Leveraging external innovation to drive mission delivery

The commercial sector has developed many technologies that can be useful in addressing complex societal problems. Governments are exploring ways to harness these capabilities to improve mission delivery in ways that go beyond contracting, to build a wider set of partners and solutions.

Adapting such technologies in the public sector isn’t always easy. Unlike commercial entities that have access to legal and financial structures, such as joint ventures and mergers and acquisitions, governments must find more creative ways to capitalize on external innovation, based on mutual interest and advantage across sectors.¹³

Spinning in commercial capabilities. Since 2015, the US Department of Defense’s Defense Innovation Unit has accelerated the adoption of commercial technologies for the military.¹⁴ Other agencies are implementing similar initiatives—both to take advantage of existing/mature solutions more effectively (lowering barriers to entry), and by seeding/shaping the development of nascent solutions.

In fact, public procurement can play an important role in private-sector innovation by driving demand, especially in the precommercialization stage.¹⁵ One analysis suggests that 81% of Organization for Economic Co-operation and Development (OECD) nations have launched initiatives to bolster innovation through public procurement.¹⁶ The US National Aeronautics and Space Administration (NASA), for instance, uses its procurements to help scale and sustain companies that can help the agency’s missions. By offering grants through the federal Small Business Innovation Research (SBIR) program to companies that may be rich in new ideas but short on resources, NASA has helped catalyze the commercial space economy, which is expected to grow to more than US$1 trillion in value during the next two decades.¹⁷

In 2021, the Indian national government established its City Innovation Exchange, a digital marketplace that facilitates the public procurement of innovative technological solutions to address municipal challenges. By simplifying the procurement process and enabling innovators to design, test, and validate solutions through sandboxes—controlled environments allowing innovators to test products, services, or new business models without having to follow all the standard regulations—the platform is designed to accelerate lab-to-market transfers and provide a boost to Indian startup companies.¹⁸

In addition to these specialized partnerships, governments should stay abreast of the latest developments in the external landscape. To do so, some governments have established sensing and scouting units.¹⁹ From the US Homeland Security’s Technology Scouting program to the Australian Department of Defense’s Emerging Futures initiative, more and more government agencies have dedicated teams scanning for emerging technologies that could affect their missions.²⁰

Seeding critical areas of innovation

Governments have historically played a major role in commercial innovation by reducing the market risks of emerging technologies through R&D grants, tax credits, and other tools. Today, governments are increasingly setting up specialized investment structures to promote experimentation in areas where private investment may be scarce.²¹

This approach was pioneered by the US Defense Advanced Research Projects Agency (DARPA) in the late 1950s. Its fail-fast, fail-forward approach intentionally gives innovators room to experiment.²² While not new, investment in derisking and accelerating next-generation technologies is growing. DARPA-like approaches are mushrooming across the globe to catalyze solutions to megachallenges. And with technologies advancing rapidly, traditional R&D methods relying on long gestation periods are making way for more agile approaches.

Inspired by DARPA, Italy established ENEA Tech and Biomedical with an endowment of €500 million. This entity is designed to advance innovative technologies of national interest, with an initial focus on health care and biomedical innovation and technology transfer.²³ ENEA Tech provides support along the entire innovation value chain, including long-term finance, production scaling, and market uptake of technologies.²⁴

In 2021, the UK government announced the creation of an Advanced Research and Invention Agency (ARIA), with a four-year budget of £800 million. Like DARPA, ARIA will remove multiple layers of approvals across the R&D lifecycle. While DARPA’s objectives are tied to defense, ARIA will serve multiple government departments to address cross-cutting societal challenges.²⁵

Moving forward

• Evaluate in-house capabilities to determine if they’re adequate for the project or mission. If not, assess existing capabilities in the market and consider whether they can be used to meet mission needs.
• Create dedicated sensing and scouting units to identify emerging technologies and capabilities in the market. Without this ability, government agencies risk finding themselves perpetually trying to catch up with changing citizen expectations, new business models, and innovative technologies. Sensing and horizon-scanning capabilities can help leaders stay ahead of the game, allowing them to better anticipate future risks and developments and think about new policies that may be needed.²⁷
• Establish an optimal partnership structure for public-private collaboration. Identify the best owner for each phase of the partnership; for instance, decide which entity will fund the project and which one will be responsible for execution. The optimal structure of any partnership will vary according to the goal or mission. A project with a large degree of uncertainty may call for greater public involvement.
• Follow an agile governance model for innovation. Establish government-industry sandboxes to prototype and test new approaches and encourage a culture of experimentation.