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Yukonomist: The Power of Spend

Innovation is a buzzword heard in economic development meetings from Whitehorse to Warsaw.
Yukonomist Keith Halliday

Innovation is a buzzword heard in economic development meetings from Whitehorse to Warsaw.

Knowledge economy. Value add. Innovation sprints. Agile scrums. Intellectual property strategies. Internet of things. Venture finance. If buzzwords alone could invigorate growth, the problem would have been solved and a lot of officials, consultants and innovation gurus would be looking for other work.

Governments try hard to re-create the magic of Silicon Valley in their jurisdictions. But it’s easier put in a vision statement than done, whether that is for Silicon Fen (Cambridge, England), Silicon Cape (South Africa), Silicon Wadi (Israel) or Silicon Taiga here.

Governments aiming to create Silicon Whatever often staff up innovation agencies, fund incubators, provide juicy tax breaks and even invest tax dollars in promising startups. This is helpful.

But they often neglect one of their most powerful tools: their spend. Many governments are the single biggest purchaser in their region. For innovators trying to move their idea from pre-revenue potential to demonstrated commercial traction, an early government contract can be a godsend.

Plus, an early client can help fine tune the product. And it’s embarrassing at sales meetings with other potential clients if you’ve invented a new widget and your local Department of Widgets keeps buying from IBM.

The most famous examples of the spend effect on innovation are the U.S. space program and Defense Advanced Research Projects Agency (DARPA) back in the 1960s. The purpose of one was to put a man on the moon (yes, that’s how they described it back in the day) and the other to procure innovative weapons for the Cold War.

But the massive spend on those programs supported innovation that we still enjoy today. NASA agency historians have tallied up over 2,000 inventions from camera phones and water-purification systems to thinner, warmer underwear. DARPA has left us with the internet, flat-screen displays and GPS geo-location technology.

More recently, governments such as Singapore’s have also used their spend to support local innovators while at the same time helping government agencies be more effective and efficient. Singapore puts out “Calls for Solutions” where a government agency specifies a broad problem and asks for innovative solutions. Firms that come up with one can get an early government contract to help refine their idea, implement it and (hopefully) sell it successfully elsewhere. One recent example was a call for ideas to improve the energy efficiency of government buildings by 50 per cent by 2030. Another is looking for ways to identify land boundaries and encroachments in real time.

There are also examples of government projects jumpstarting innovation closer to home. In Alaska, the state government is using drones to inspect bridges. In Fairbanks, the highways department uses a network of internet-of-things sensors on its roads and vehicles, combined with advanced analytics, to improve the efficiency and effectiveness of snow clearing. Using real-time data and better predictive software beats both looking up at the sky and relying on the regional weather forecast. This can improve safety and cut costs.

Scrambling a gravel truck onto a distant road that isn’t actually icy is a waste of money. But if the weather is good at headquarters while they’ve got freezing rain in the next valley over, not scrambling one is dangerous.

Microsoft, whose Azure cloud-computing platform is part of the solution, highlights the Fairbanks project as an example of government innovation.

Here in the Yukon, the territorial government’s billion-dollar spend dwarfs the next biggest budget of any company or government.

I did a quick scan of the Yukon government’s contract database to see how a selection of award-winning Yukon startups were doing with their biggest potential local client. Apprendo, which offers digital learning platforms to organizations, had 17 contracts worth $667,476 since 2018 from the Public Service Commission and Highways and Public Works. Proof Data Technology had 14 contracts worth $484,750 since 2018 from the Yukon Legislative Assembly, Highways and Public Works and Community Services. Kryotek, which creates drilling technologies and climate sensors, had 11 contracts worth $310,169 from 2014 to 2017, but none since it won a 2018 Arctic Innovation Award and Arctic Kicker Prize from the University of Alaska Fairbanks. Phylo Technologies, which won the 2019 Yukon Innovation Prize, does not appear in the contract registry.

Those contracts were surely invaluable to these young companies. But I suspect a top official from the Singapore government would observe that the total is a tiny sliver of total departmental spend, and might ask how many Yukon government departments have tried as hard as they might to bring innovative solutions to the core of their mandates. How many departments have issued Singapore-style Calls for Solutions to local innovators around their biggest problems? If you google Microsoft and the Yukon government you don’t get innovation case studies, just time zone updates for Windows and a link to an Xbox computer game called The Hunter: Call of the Wild - Yukon Valley (where players apparently “hunt gray wolves, grizzly bears, and more as you trek through burned down forests.”)

It can’t be the case that just starting a new company with the word ‘innovation’ on its website entitles you automatically to a chunk of our transfer payment. There are good reasons why most government procurement has strict processes in place to make sure government gets products that work at reasonable prices. But, kind of like you might take a small fraction of your retirement savings and invest them in riskier technology stocks, the Yukon government should think about how to steal a few ideas from Singapore.

One idea would be to put a few million dollars into a central fund. Enterprising assistant deputy ministers with a hairy problem could be empowered to draft a problem statement and put out a Call for Solution. If Yukon innovators come forward, it could be the start of something big for both officials and entrepreneurs. If not, the government can simply go back to doing whatever it was doing before.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He is a Ma Murray award-winner for best columnist and received the bronze for Outstanding Columnist in the 2019 Canadian Community Newspaper Awards.