In August 2013, as polio-virus particles were detected in the sewers of southern Israel and the government launched a vaccination campaign, the Health Ministry asked for an exemption from the requirement to publish a tender. The contract was for a company to develop an app that could locate nearby well-baby clinics, and the exemption was granted on the grounds of “urgency to prevent material harm.” In the end, the ministry signed a four-month deal with the IT company Matrix for 118,000 shekels ($31,400).
Meanwhile, the nonprofit group Hasadna put out a similar app, developed in two business days, at no cost other than the volunteer programmers' time. And it’s better than the government’s app. The Health Ministry paid a decent chunk of taxpayer money for work that could have been done in a fraction of the time without the hefty outlay.
This case shows that when information is made public, entrepreneurs and developers innovate faster, better and more cheaply than the government can. But the government rarely publishes such information voluntarily, and the current policy of tenders blocks it from contracting with startups, which usually don’t meet the conditions for working with the government.
It’s hard to gauge how much this approach costs the people and the state. Some of the lag in Israel’s GDP per capita lies in red tape, outdated technological infrastructure and the government’s slowness in giving the people access to databases. Some bureaucrats seem to view information as power; its mass distribution would cost them their relative advantage and expose them to criticism.
It doesn’t have to be that way. A study by Deloitte financed by Google shows that allowing access to databases and clever use of the data can be a great way to boost productivity and narrow the productivity gap between Israel and the United States – currently at about 45%. And it could add 54 billion shekels a year to Israel’s gross domestic product.
Deloitte analyzed the way 150 companies, representing the entire Israeli economy, obtain and process information, and the innovative applications arising from these processes. The researchers developed a unique gauge for such “data-driven innovation” – DDI – and checked how success under this metric buoyed the companies’ profits. The researchers found a positive correlation between DDI and a company’s success.
Deloitte concluded that if Israeli companies climbed on the DDI index, overall productivity could improve by about 5%. In other words, that could lift the value of goods and services produced in Israel in one hour to $39 from the current $37.
Energy, crime and road accidents
According to Shally Tshuva, high-tech chief at Deloitte, traditional industries could benefit more from data-driven innovation than high-tech – but they’ll need government intervention if they’re to change their hidebound outlook.
The research included a survey on the economic benefit of opening up databases in various countries. Deloitte said that for Israel this could mean hundreds of millions of shekels a year. The databases could include, for instance, information on road and construction-site accidents, energy consumption, crime and government spending.
Israel has things to be proud of in this sphere. For example, the chapter on pricing transparency in Israel’s Food Law, which came into force at the start of the year, requires supermarket chains to disclose pricing by store. Private companies like MySupermarket and Prices have developed technologies that can read this information and make it accessible to the consumer.
Another example is the Finance Ministry’s capital-market reform of 2012 to reveal the information held by institutional investors. That reform created a clearing house for pensions covering all savings at insurance companies, pension funds and provident funds.
The clearing house opened the door to new ventures that use the information to make the traditionally opaque pension industry clearer. The company Wobi, for instance, developed a system that accesses the clearing-house data; it can see if a client is paying higher management fees than the norm and suggest cheaper alternatives.
But Israel lags other OECD countries in data accessibility to the public. While some countries put hundreds of thousands of databases on data.gov websites, Israel provides access to only 300. Moreover, only 50% of the databases are “machine-readable” by a computer.
In contrast, 90% of the databases in the United States are accessible; 95% in Britain.
Three weeks ago, Prime Minister Benjamin Netanyahu released a statement on database accessibility; he said Israel was contributing to the tremendous revolutions in software and artificial intelligence.
“You see it on the roads with navigation systems, and in medicine, agriculture, water. But there is one place where you don’t see it – government services to the citizens. It’s time for Startup Nation to become Startup Government.”
Ministries will be required to share information, Netanyahu said. People won’t have to drag themselves from counter to counter – everything will be doable at one stop.
Don’t hold your breath. Seven years ago the government decided to open databases with economic value to the public, and in 2012 Israel even joined a global open-government initiative.
But the government basically remains shut. A 2014 study that gauged the government’s ability to meet its open-government commitments found that of 13 commitments, where the goals were modest to begin with, Israel fully met only two and significantly met only three more.
Israeli law doesn’t address voluntary publication of information by government agencies, other than the obligation to publish annual reports. And those contain little relevant information and aren’t sent out online.
In fact, the government has no clear policy on collating and saving information efficiently. And the main grounds the state cites when rejecting freedom-of-information requests is that its system can’t recreate or retrieve the information.
We’re missing out on a revolution happening in many other places. Proper collation, storage and retrieval of digital information as a routine part of decision-making could render government programs more efficient, reduce public-sector fraud, diminish abuse of state subsidies and benefits, and make tax collection more efficient.
Deloitte’s research suggests that scanty government involvement is impairing private investment in data-driven innovation. “The way to realize the economic potential is by formulating a policy that creates an environment conducive to innovation and the consumption of information,” Deloitte says.
“The assumption is that public funding to support integration of DDI is significantly smaller than the economic benefits likely to ensue from this investment.” Government support, Deloitte says, could come via grants or tax breaks.
Another method the report cites is granting technological services like the government cloud online. “The state has an advanced, secure server ranch with a great deal of storage space,” Deloitte says.
“Allowing small businesses to use them could let them implement innovative technologies they need to integrate DDI in the business, almost cost-free.”
Deloitte also suggests that the state support small businesses by distributing demo versions of select software enabling use and processing of data for DDI integration.
Finally, Deloitte touches on a sore point: the shortfall of people with experience in data sciences. The whole world suffers from this problem. McKinsey projects that by 2018, the world will need anywhere from 140,000 to 190,000 more information experts.
This dearth of information management and analytical skills are a barrier to adopting data-driven innovation in science, health care and the public sector. Deloitte’s advice to the government is to start providing training. Australia, Britain and North Carolina already are.
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