Chopra is not a true venture capitalist in a get-rich, Silicon Valley sort of way. Rather, he's the mastermind of a small but intriguing experiment in Virginia that aims to bring the high-risk, high-reward ethic of venture investing to state government. Chopra, who is Virginia's Secretary of Technology, asks agencies to pitch ideas for small tech projects with potential to pay big returns in terms of productivity. More important, and more unusual for the bureaucrats, he gives them permission to fail. You can't innovate, Chopra tells them, without taking a gamble every now and then.
One plan that recently caught Chopra's eye came from the Department of Motor Vehicles. Long lines are a common sight at the DMV, of course, but in Virginia the problem was that wait times could vary substantially. At one location in Norfolk, the daily averages over one week last year swung from 23 minutes to roughly an hour. This was because the department lacked tools to evaluate staffing levels, peak customer-demand periods, and complications such as sick leave and absences. DMV came to Chopra with an idea for a $200,000 workforce-management sys-tem, and he OK'd it. If it works, it will allocate staff time more efficiently and reduce overtime, paying a five-year net benefit of $4.6 million -- almost a 1,700 percent return on investment.
Another promising idea came from the Department of Mines, Minerals and Energy. The department has traditionally done most of its mapping on paper, creating enormous field maps for its engineers to haul with them on the road. Printing alone is roughly a half-million-dollar annual expense for the state. So when the department put together a $100,000 business case for a computerized mapping system for use in the field, Chopra figured there was a good chance it would pay off in the end.
Many people, both in Virginia and in other states, are interested to see if Chopra's venture-capital-like approach works. The question, in a slumping economy, is whether Chopra's principal investor -- the state budget -- can support him long enough to find out. This year, the legislature cut Chopra's program by about one-third. "We are so early in this," Chopra says of the program begun in January 2007. "I don't have home-run results yet."
A Tech Coach
Virginia isn't the first state to try securing funds for unproven, boutique IT projects with great potential. Several states, including Kentucky, had similar but smaller programs in the 1990s. They largely died out in the early 2000s when states slashed spending during the last economic downturn. That may not bode well for Chopra's program, but then again, Chopra's fund is structured a little differently from the others.Typically in government, grants for small tech projects are set up like a competitive procurement. Agency applications go into a black box, and "blind" judges decide winners and losers. "There are good reasons for that," Chopra acknowledges. "No undue influence, no lobbying. There are a lot of cultural reasons why government is very strict about how it distributes money."
Chopra's program, called the Productivity Investment Fund, does more handholding with the applicants. An oversight board, consisting of numerous cabinet-level officials, helps agencies develop their ideas. The board is looking for at least one of three things: cost savings, easier transactions for citizens or progress toward a particular performance-measurement goal. It's also looking for a clear path to implementation and a project team that seems capable of delivering results.
What's more, Chopra isn't pitting agencies against each other. Rather, he brings them together to discuss their ideas and learn from each other. He's more likely to look favorably upon an idea that can work across many agencies rather than just one. Because the fund tends to work more collaboratively than competitively, Chopra is more inclined to liken it to a research-and-development lab than a venture-capital operation. "We are a coach," Chopra says. "We support them by connecting the dots, sharing with other agencies and sharing examples of other successful grants."
If there's a guiding principle to Chopra's fund, it's that small investments in technology can make a big difference. That runs counter to the way the political process typically handles tech deals. Todd Richardson, information systems manager for the mining department, says ideas such as replacing oversized mine maps with technology are just too small to fill a line item in a $70 billion biennial state budget. Or, as Chopra puts it, "If I'm an agency head, I'm lobbying for a $10- to $15-million project. I'm more likely to ask for something big because it's my one chance in six years where I'm in the spotlight."
Even if appropriations could precision-fund these small, innovative projects, the long duration of the budgeting process would remain an obstacle. Technological change simply outpaces legislative action. Moore's Law suggests that computing power doubles every 18 to 24 months. In Virginia's biennial budget process, that's about how long it takes for an idea to go from inception to authorization to release of funds. "We need to fundamentally change the culture of government in which change is measured in budget cycles to one in which change is measured in weeks or months," Chopra says.
In order to make that change happen, the ability to fund projects quickly is crucial. According to Stephen Goldsmith, director of the Innovations in American Government Program at Harvard University's Kennedy School of Government, "If you really want to incent innovation, you have to be able to dip into capital." And in a way that isn't unduly slowed or dulled by bureaucratic channels, he adds. "The budget process tends to squeeze out innovation."
An Easy Target
Now, it seems, the budget process may squeeze Chopra's fund itself. Governor Tim Kaine requested $3.4 million for the Productivity Investment Fund this year, but the legislature cut that to $1.8 million. Delegate Chris Saxman, a member of Virginia's Cost Cutting Caucus and a supporter of the PIF approach, notes the Catch-22: Precisely because the fund is geared to change quickly it became an easier target for reductions than larger, more bureaucratically entrenched programs.Over time, the fund is supposed to replenish itself with the savings yielded by its investments. It hasn't been in business long enough to prove whether that's possible. According to Don Jean, who worked with Chopra on the first round of investments before leaving for the private sector, "for the Productivity Investment Fund to ultimately work, it has to be self-funding."
Chopra hasn't hit any home runs yet, but he also hasn't had any strikeouts. It's the latter scenario that will be most interesting to watch as Chopra's investments play out. Like any investment, tech ideas in government often sound promising at first. But as anyone in the business knows, pilots can go bust and even projects that could be considered successful sometimes don't pay off much in savings. For his part, Chopra is ready for the risk. "Some of these may fail," he cautions, "but several of these will actually make a difference."
