Are government-focused small businesses innovating?

Looking at Washington Technology's Fast 50 list, Steve Kelman wonders whether true creativity can be found in small government contractors.

light bulb

I recently was reading two magazines at around the same time. One was a hard-copy issue of FCW, and the other a recent issue of Boston magazine, our local city magazine, analogous to The Washingtonian in DC. (Yes, I still read hard copy magazines, and yes I am a notorious multitasker, always reading several different things at one time.)

FCW featured the annual "Fast 50," the 50 fastest-growing federal government contractors. (Actually, the list is produced by FCW's sister publication Washington Technology, and the weblink is at their site.) Boston had two articles that caught my eye. One was about a small organization in the Office of the Mayor called the Mayor's Office of New Urban Mechanics, which works on citizen-centered IT applications. The other, perhaps seemingly even more far afield, was an article on the burgeoning trend of new IT applications that involve people sharing their possessions with others for a fee. A company called Airbnb, which allows people to rent out rooms in their homes on a periodic basis,  apparently led this trend.

What common thread struck me as I was reading about the Fast 50, the Boston New Mechanics, and Airbnb?

Washington Technology ran stories about three of the Fast 50 winners -- Markon, DRT, and OBX. All three companies are, broadly speaking, in the program management/IT infrastructure management/IT services space.  Reading their stories, you have to assume that they have grown because they do a good job serving their government customers and meeting their needs. (I hope that, as small firms with less overhead, they are less expensive than the large-business competitors who seem to do the same things they do.)

There was, however, no evidence that any of these companies have innovated. Yet the great American small business success story, at least in the private sector, is the entrepreneur who builds a "better mousetrap," or – even more dramatically – builds a brand new way of dealing with the mouse problem altogether.  This is why success stories such as Apple and Google are so iconic in American culture.

Compare this with the two articles in Boston. The "rent out your possessions" founders came up with a whole new business idea. Even the new firms discussed in the article that in some sense are the spiritual children of Airbnb – such as RelayRides (which allows people to rent privately owned cars convenient to where the user lives) or ParkatmyHouse (which allows people to rent parking spaces in a person's driveway) – have thought up something new, even if not quite as dramatically new as the original idea. This is an industry based on new ideas.

Even the government office in the city of Boston, frankly, seems to be doing better in terms of innovation. Doing some work in-house and some collaborating with the private-sector creativity experts Ideo (and with Innocentive, the Massachusetts company that is the market leader in procurement contests), they have developed creative new applications that include an ability to download photos of public hazards or eyesores to an app that will automatically locate the picture using GIS technology so city offices can act, and another app that will automatically send in information about potholes a car has encountered on the road.

I think the small-business community in government contracting has to challenge itself to do better. A danger with a set-aside environment, just like any tariff protection, is that it allows companies to succeed without being fully competitive. Government contracting small businesses bask in some of the glow attaching to Apple or Google even if no Apple or Google-like contributions are occurring.

Clearly, there are some areas – I am guessing cybersecurity – where innovative new ideas are coming from small firms. And of course not every small business in corporate America is Apple. Nonetheless, I believe there are differences in the pattern, and I believe this is an issue that the government contractor small business community and its friends need squarely to confront.

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