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Promises and Challenges of Digital Disruption

Jonathan Ortmans | August 02, 2016
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One of the great drivers of innovation today is the promise of digital disruption of complex and regulated industries. Digital disruption is not only behind the public sector’s move toward open government and open data, but is also the rise of civic-centered startups that are changing the rules of the game for traditional industries. It is time for a new wave of policymaking that anticipates a whole new set of issues for policymakers.

A new sense of urgency is called for as policymaking for the digital economy accelerates in response to what entrepreneur Steve Case calls “The Third Wave” of the Internet revolution.

As 1776 co-founder Donna Harris explains, “as digitization moves from basic applications like social media and e-commerce to more complex industries like education and healthcare, entrepreneurs tackle harder and harder problems. And that means government is more involved and that legacy institutions will inevitably play key roles … Frameworks established decades ago no longer apply, and leaders at all levels need to be proactive in understanding and regulating for a digital economy.”

Beyond close attention to data security and cybersecurity measures, policymakers need to anticipate new issues as new technologies emerge and pick up the pace on both the infrastructure and education fronts. In yesterday’s Washington Post for example, reporters Ashley Halsey and Michael Laris broached the subject of who has regulation jurisdiction on driving – states or the federal government – in the absence of a human driver, referring of course to the fast approaching era of driverless cars and variations in state law around safe driving distances.

This on top of the ones already raised years ago like the digital divide. In Kansas City for example, a 2012 study by Google showed that still too many low-income individuals, senior citizens, and students and minorities do not have Internet access in their neighborhood or home. If everyday life rapidly becomes more dependent on digital conveniences and efficiencies, digital inclusion and attitudes toward the digital economy become crucial for effective policymaking in this new era. Government has much work to do to keep up.

Creating new regulatory frameworks for the digital workforce is a challenge. As I discussed recently, a Princeton/NBER survey found that the share of workers engaged in alternative work arrangements (e.g. independent contractors and freelancers) was 15.8 percent in 2015, up from 10.1 percent in 2005. Beyond the safety net challenges posed by the so-called “gig economy,” the impact of the broader digital economy reminds policymakers that they need to write new rules for an era where digital disruptions are giving individuals greater power and freedom to write their own destinies. The possibilities of the digital age include new remote, flexible and on-demand work opportunities – and a clear shift of power from institutions to individuals as transparency increases.

At the public administration level alone, cities “replete with successful startups and data-driven advancements in government operations,” need to re-think and adjust to new ways of interacting with the civil society and business sectors, as technology renders old ways of government insufficient and even obsolete. As Harvard’s Data-Smart City Solutions platform exposed, Chicago’s Department of Innovation and Technology (DoIT) now relies entirely on open data to identify which restaurants were most likely to be in violation of city health codes. Across the country, there are several other nascent “digital government organizations” pioneering completely new ways of providing public services.

Yet most cities, let alone the federal government, are not ready to leverage digital disruption. Innovation That Matters, a pioneer report in understanding digital disruption in the United States, ranks 25 American cities’ readiness to capitalize on the inevitable shift to a digital economy, and provides metrics that city leaders can use to evaluate their progress in developing their digital economies.

The public sector across the globe is awakening to this reality. For example, a European Digital City Index (EDCi)has been established to monitor how well different European cities support digital entrepreneurship and Europe's Research Alliance for a Digital Economy (Readie) is working to empower policymakers with robust evidence to help shape the digital agenda, and unearth talent for the equivalent to a Keynes or Smith for the digital economy. Even the European Commission itself is defining new parameters for a Digital Single Market (DSM).

The Global Entrepreneurship Research Network (GERN) will meet later this month in South Korea to define new collaborations that dissect digital disruption into bite-size pieces for policymakers and decision-makers, so we may all better understand the environment in which digital disruption takes place and augment the data chest on the topic via an exclusive digital economy section in the Startup Nations Atlas of Policies (SNAP). SNAP provides policymakers with a repository of the leading policy interventions aimed at developing digital entrepreneurship around the world.

The greatest policy risk of all in digital disruption is ultimately policymakers reacting too slowly or providing what Harris calls a mediocre legacy of a “patchwork of laws and tensions.” There are some exceptions to follow from smaller nations that are leveraging the fact that small is beautiful and also more doable. Nations like Estonia for example, have their top authorities leading their countries digital economies, through initiatives in digital infrastructure and even an e-residency program for global entrepreneurs.

As reported in Wired Magazine, Estonia’s position as the world’s leading digital society is no accident but rather a result of decisive policy action over the past two decades. This has included granting Internet access to every school in 1998, making cabinet meetings paperless, and successive investments in digital government technologies, like e-voting and cybersecurity. This kind of thinking is fast becoming essential for every economy in the world preparing for the next wave.

Getting the public sector up to speed with the digital revolution is not an easy process. Internal capacity and cybersecurity are two large roadblocks. And it will take many intra-preneurs in government to make the necessary changes, as well as increased rapprochement to civic entrepreneurs who can help one of society’s most traditional sectors – government – react responsibly and responsively to digital disruption. Let the work begin.

This post originally appeared on the Kauffman Foundation Policy Dialogue on Entrepreneurship.  Photo Credit: Flickr

Jonathan Ortmans
Jonathan Ortmans serves as president of the Global Entrepreneurship Network (GEN), a year-round platform of global programs and initiatives created... About the Author