Public-private partnerships offer industry more than bottom-line benefits
July 24, 2012
By Dan Ovsey
"When we look at recruitment and retention of top talent, when we engage our employees in these kinds of projects, we've been able to document that it improves our retention rates for our top talent, so that economic return comes back to you in a one-year basis."
For the past 18 months, Stan Litow, president of IBM International Foundation, has been travelling the globe as part of his company’s Smarter Cities Challenge to help municipalities — including Canadian cities like Edmonton, Surrey, B.C., and soon Ottawa — overcome serious urban obstacles. The three-year pilot program, now at its halfway point, will see $50-million worth of consulting services distributed to 100 cities by 600 IBM employees. Mr. Litow recently spoke with the Financial Post’s Dan Ovsey about the program’s discoveries, the private-sector benefits of public-private partnerships, and the role of data analytics in improving bureaucratic operations. Following is an edited transcript of their conversation.
Q: What is one of the most common problems you’re requested to help solve by municipalities through this program?
A: Because of such a large population in cities, downtown businesses need to get access to goods and services, but traffic becomes a significant problem. In Boston, we just completed our Smarter Cities Challenge grant. The team looked at the data and the amount of data the City had, the ways in which it could be used, and presented to the mayor a strategy to create an app that could be available on a hand-held device that would give people the ability to be able to move their way around the city in a more effective way by avoiding areas where there was a significant amount of congestion I think this is a common problem that cities are facing in the area of traffic. By being able to utilize data and data analytics you can affect things like traffic safety, as we did in Edmonton; traffic flow and patterns, in some instances; you can do things about projections of revenue by being able to come up with road-charging systems. So there are a variety of things around traffic where technology can be a critical player in coming up with a solution.
Q: At the risk of sounding cynical, $400,000 doesn’t tend to go very far within a government bureaucracy. How can a municipality achieve substantial improvements with the grant?
A: If we were sending a cheque of $400,000 to a city, I would agree. The difference here is that the thing we’re doing is something cities really can’t go out to build on. It’s difficult for cities to get access to quick opportunities to do a planning study and to be able to encompass all the subject-matter expertise in a particular area with a company that can reach out more broadly and get it own experts to help solve this problem. If you look at the results of it, I think it bears that out. In St. Louis they looked at public safety. They were the number one most dangerous city in the United States and one year later, the mayor got on television to say they dropped from number one to number seven and attributed it to the implementation of some of the strategies that we recommended. It wasn’t something that they could have used public money through the bidding process to get at. And they probably wouldn’t have been able to find the multiple subject-matter experts and talent to be able to solve it quickly.
Q: Public-private partnerships are becoming increasingly popular in Canada and are promoted by the public sector as a means to resolve some of the core issues governments face, but these partnerships are often not particularly lucrative for the private-sector partner. What’s the benefit for a private company to work with government or public agencies?
A: If you’re looking to define a recoverable benefit in the short-term, I would agree. However, if you look at it in a long-range way, the return on investment can be considerable, and I would break it down into three distinct areas. Number one is that the problems that cities are facing are problems for business as well. So, if we want to be a successful business, we have to do business in these cities, and if we can resolve traffic issues, issues to education, etc., while it benefits the cities and its citizens, it benefits businesses as well.
The second thing is that through the public-private partnerships, especially when it involves sharing talent and expertise, you can improve your people’s skills and ability to solve problems in a very transferable way. For example, at the end of the Smarter Cities program, we will have given 600 people within our company a shared understanding about cities’ issues and we will build the skills and talent of our workforce. We’ll help them learn problem solving better. We’ll help them learn the interdisciplinary nature of problem solving; help them expand their teamwork skills and listening skills.
The third thing is, this kind of collaborative problem solving winds up helping build your technical understanding about things like data analytics and cloud computing. We had a team that went into China in the city of Chengdu and they looked at the ability to create a shared data model across a variety of different areas hosted on a cloud, and it created intellectual capital for the company.
Q: Can you quantify what you mean by a long-term benefit? Are we talking one year or 10 years?
A: It depends on the collaboration. When we look at recruitment and retention of top talent, when we engage our employees in these kinds of projects, we’ve been able to document that it improves our retention rates for our top talent, so that economic return comes back to you on a one-year basis. By featuring these programs in our recruitment efforts, we found it’s a major decider for people who come to work at IBM because they like the opportunity to participate in these large-scale efforts to work collaboratively to solve societal problems. Those benefits come to you in the short term. In some instances, you end up with new patents or new intellectual development that you can productize in some way.
Q: Government and industry work at different paces. Government tends to be sluggish while industry tends to be fast paced. How do you successfully merge those operational processes in a manner that will be mutually agreeable?
A: It’s not easy. People are operating from different perspectives. On the other hand, you have important lessons to learn by listening and you can get a different perspective. We did a survey of about 1,200 of our people who had participated in public-private efforts through our Corporate Service Corps, and in the evaluation nine out of 10 said it helped them improve their listening skills and, as a result, helped them to better do their day jobs.
Q: How could municipalities leverage data to improve the speed and efficiency of its operations models to provide better service to citizens?
A: I think the way that government has operated vis-a-vis the private sector has been more about how the government has money and the private sector is a vendor. The private sector wants to sell goods or services to the public sector, so let’s look at it from the contracting or bidding process and let’s get the lowest price and best deal. That’s the relationship that develops between the public and private sectors – the vendor relationship. Now that we look at collaboration and partnerships and problem solving, we have to stretch it a bit. I think the area of data and analytics is a classic example of where you need that expertise; you need to learn it together; you need to work it together; you need to build value together; you might actually build value where there’s a shared economic return and that’s asking people to operate in new and different ways, but I would say this would be a good thing for us to learn to be able to do.