This article is written by Mikk Vainik, Head of Accelerate Estonia.

Imagine a country where entrepreneurs can call out the government and redesign a really bad national image in money-laundering issues into an exciting market for new fintech companies.

Or where the government will challenge the private sector to develop the country into a centre of gravity for digital nomads. Or where the economy is accelerated into adopting a circular model faster than anyone else.

That is the reality we are building in Estonia.

So what is happening here?

Democratic governments often find themselves in a paradox — we are supposed to tackle complex issues that the private sector can’t solve, but we are usually only equipped to solve issues within our silos.

One policymaker may want to pave the way for flying cars, but all she can do is regulate for flying drones. A policymaker in another department might yearn for more technology in healthcare, but he has no say over startup policies. And I may want to reduce the gender pay gap, but I can only use the tools I already know. And so forth.

Take a moment to think about it — the expectation from the public is to get quality public services, but governments have little or no preparation to tackle problems that cross institutional lines. No wonder that trust in government and satisfaction with public services is at a historic low.

At Accelerate Estonia we are trying to break the tide. Accelerate Estonia, established at the beginning of 2019, is an innovation unit within the Estonian government. Our goal is to solve wicked problems and turn them into new ideas that better serve the citizens and create economic value.

Our own experience and that of other policy labs and accelerators show that the most crucial step is finding the right team — a policy owner that seriously embraces change in their domain and a motivated entrepreneur-in-residence

As part of our mandate, we only go after only the complex issues. We believe smaller issues are often symptoms of something more complex, but that complexity is very difficult to grasp or change. But we must try because we know from the past that this is possible. Consider the Apollo mission to the Moon, which empowered the whole public and R&D system to work towards a common goal. Or, more recently, consider how South Korea redesigned its poor performance in food waste into a totally new value chain with opportunities for dozens of new companies. Well done, I say!

What both these cases have in common are that they weren’t attractive to the private sector until the government stepped in.

I believe it is the core task of the governments to take sub-commercial market conditions and redesign them into economic opportunities for the private sector. That is the essence of the public sector — find solutions to complex issues where the risk is too high for the private sector and then absorb the risks before the private sector is ready to step in and take lead.

This is where Accelerate Estonia steps in with a curated multi-step process.

Driving value

First, we identify which policymakers are truthfully interested in radical innovation. Then we identify what complex problems they are aware of within their field, or across the public domain.

Then we recruit the private sector to propose solutions in those domains only. Then policymakers need to show which ideas they would actually commit to. Then a board of private and public sector top-level players will choose the most ambitious ones. For those, we provide an incubation programme in which they need to validate: what is the value proposition for the private and public sector, how to implement it, and how that leads to market-creation. We only pick problems where the first steps need to be done by the government.

We currently have eight ideas in incubation, but we expect to find at least twice as many more in the second half of the year

As a result of absorbing the risks, governments should provide public services or recreate the market conditions so the private sector is motivated to provide solutions. Recreating the market is much more difficult because government capacities or mindset usually does not involve thinking about market-creation. With Accelerate Estonia, we aim for market-creating initiatives only.

The philosophy of Accelerate Estonia is that we achieve more by doing less. We cannot tackle all of the problems with a market-creating mindset, but getting a few bets right can accelerate our growth meaningfully. Therefore it is crucial to pick "the right fights", or the low-hanging fruit.

Our own experience and that of other policy labs and accelerators show that the most crucial step is finding the right team — a policy owner that seriously embraces change in their domain and a motivated entrepreneur-in-residence.

Incubating a better public sector

The Estonian government already has a bit of track record in identifying complex problems or opportunities and turning them into new revenue streams.

One of the brightest examples is the eResidency project, which has turned a few bold steps on behalf of the government of Estonia into a marketplace for 10000+ companies and a steady stream of extra tax income. The essence of the service is opening up the Estonian government digital services to anyone in the world who either likes Estonia or wants to have a fully online business in the EU. It was launched in late 2014 and has gained momentum as a "governmental startup" which is finally benefiting the society at large.

Accelerate Estonia is building on that experience to take the edge of government even further.

The goal is twofold: create new markets by tackling complex public problems. The crucial element is focusing on where society, the economy or the environment is hurting a lot or where the innovation opportunity is too big to miss. There are many beneficiaries:

  1. the public bodies in charge of finding solutions to the issues;
  2. the subsets of society, the economy or the environment where the problems find relief;
  3. the enterprises that are bold enough to take advantage of the new market;
  4. the government by finding new sources of revenue.

We currently have eight ideas in incubation, but we expect to find at least twice as many more in the second half of the year. In the long run, turning wicked problems into new markets should become the norm where the appetite for innovation exists. In the short run, we want to show that circular economy, a modern KYC (know your customer) solution, digitalised logistics, and social services for digital nomads are crazy ideas that can be validated if the government is willing. And some of these public-private partnerships will change the world. — Mikk Vainik

Accelerate Estonia has just announced an online hackathon to help government respond to the ongoing coronavirus crisis. Click here to read more and see how you can participate.

(Picture credit: Unsplash)