Why companies should care about getting stuff done in cities

Why companies should care about getting stuff done in cities

start-up city and public-private sector innovation
The cities of the future will rely on the public and private sectors (finally) getting along.

The following is an excerpt from "Start-Up City."

Today’s city leaders and managers face a complex web of regulatory hurdles, struggles for disparate stakeholder buy-in, risk-averse management (or politics) and funding shortages.

Local governments often get the short end of the stick when budgets are slashed, even as they bear the brunt of the blame when local constituents see their services cut and their infrastructure crumble.

More than ever, cities are charged with carrying out national-level policies and are expected to be at the forefront of our response to climate change, housing inequality and public health. At the same time, most city government agencies are perennially understaffed and impeded by cumbersome, often counterproductive regulations.

Seemingly insurmountable frustrations are everywhere, but you can make change in spite of these realities. If you are willing to go against the tide and follow some basic lessons in goal setting, experimentation, change management, financial innovation and communication, you can get sh*t done in cities.

Whether in a startup or a complex government agency, the same basic rules of management and communication apply.

Start-Up City/Island Press
The public sector needs to function much like a midsize, successful start-up, embracing the concept of cost-benefit analysis. And private companies need to use their resources and innovation skills to work for the greater good, rather than just for profit.

If both sides can work toward a triple-bottom-line approach within their organizations, focusing on the new P3 — people, planet, profit — then the private and public spheres can meet in the middle.

I believe that this is how the public-private partnerships of the future will succeed.

The combative, unproductive working relationships that often characterize current government-business dynamics are anathema to building great cities and communities. Whether you are in the public, private or nonprofit sector, you need to understand the value the other sides bring.

Managers and change makers today theoretically understand what needs to be done to make our cities more livable, sustainable and economically viable, but have trouble practically putting together a vision and then translating that vision into implementation, never mind doing it within a one- to three-year, politically feasible time frame. As the pace of change increases, managers need to respond and lead or miss opportunities.

Technology is dramatically changing the way our work is done, how we communicate information, and the business models that serve our residents.

Governments need to evolve beyond the insular, silo-based cultures that are rapidly becoming outmoded in an era of exponential technological change. Otherwise, they risk reducing their own influence and relevance to serve as public policy makers and consumer advocates in a world where aggressive private industries and disruptive, consumer-savvy startups are innovating at lightning speed.

I have written this book to inspire the next generation of "public entrepreneurship," a start-up-paced energy within the public sector, brought about by leveraging the immense resources at its disposal. At the same time, we need corporate America, and start-up America, to embrace "social enterprise," working for the common good, as their primary objective versus external shareholder wealth.

Combining both of these into "social entrepreneurship" allows us to move beyond public and private silos and focus on using our collective energy to solve the world’s problems, regardless of your vantage point or chosen profession at the moment.

To be successful in business in cities today, you need to align your goals and values as much as possible with those of city government and citizens, as opposed to with profit alone. Such entrepreneurship has the potential to engender the next level of public-private partnership and give rise to new models of shared financial reward working in the interest of the greater good.

How I learned about local government the hard way

Transportation directors typically come into their positions in one of three ways.

  1. They move up the civil service ladder, often starting as civil engineers, and over time, assume managerial responsibilities and make major policy decisions, despite often having little formal policy background.
  2. They emerge through political allegiances, often starting in the mayor’s office or some other field of expertise such as public administration, and emerge in the transportation field by being well connected and politically astute.
  3. They worked for a private consulting firm, often in engineering, and come in via the revolving door between the public sector and the private-sector firms, such as AECOM or CH2M Hill.

There is absolutely nothing wrong with any of these paths, but I do want to point out that immediately prior to assuming the directorship at the District of Columbia Department of Transportation (DDOT), I was a food-truck entrepreneur.

Of course, at that time, there were no food trucks in most cities or in D.C., just hot-dog trailers selling "dirty dogs" from steam trays with cloudy water. Food trucks, much like taxis, were subject to a kind of labyrinthine regulatory and licensing structure that preserves the status quo and ignores what consumers actually want.

The public and the politicians mutually supported the idea of selling something beyond just hot dogs and sugar-laden soda on street corners, but the city agencies that regulated the industry had set themselves up to fail, propping up ubiquitous but low-quality services, rather than seeding entrepreneurship, creativity and risk taking.

In 2007, after several years at Zipcar, I was ready for a change. I had long been interested in changing D.C.’s street-food scene, and like many in D.C., was frustrated at the lack of healthy and organic food options around some of D.C.’s most bustling Metro stops and public spaces. Having already built up a few public-sector relationships through Zipcar, I approached the D.C. government with an entirely new mobile food concept, which we called On the Fly.

My partners and I were eager to fund the development of a fleet of customized electric food trucks, hire a four-star chef and build a commissary for food preparation, if necessary. We wanted the government’s support, permits for spaces to operate and a regulatory climate that could foster these kinds of small businesses. After our initial meeting, the D.C. government agreed to not only explore the issue, but to make the necessary policy changes for us to operate. As a result, we invested our money and time in the business.

In certain ways, the regulations and resulting state of the street-food industry at the time mirrored the same rigid regulatory structures that we have observed in other industries ripe for disruption, such as taxis. DDOT controlled the public space in which food could be sold, the Department of Consumer and Regulatory Affairs (DCRA) controlled the licensing, and the Department of Health (DOH) regulated the food preparation.

DOH had only certified three commissaries for street-food preparation at that time, meaning that every single vendor on the street was linked to one of these three large warehouses. The DCRA limited the number of licenses for food vendors on the street and held a lottery for spaces. These spaces could be occupied by only one vendor at a time and for only a set number of hours. The result was "dirty dogs" for everyone. Two companies owned by a single family ran the whole enterprise because they owned the commissaries.

The commissaries were more like storage facilities for carts and food, with no prep happening, because we’re talking hot dogs and buns. Because they were certified by the DOH and all food prep was mandated off-cart in a commissary, any vendor basically had to work for them, and the whole business became vertically integrated, with little to no variety and a lack of true entrepreneurship.

Though many of the food vendors at the time claimed to be small business owners when the competition showed up, those jobs working for the commissary owner actually offered extremely low pay — often below minimum wage — and most of the money went to the family that controlled the government-sanctioned monopoly through cart rental, services and inflated wholesale food and drink prices.

When we entered the market, our business model was such that we wanted to follow demand — that is, the hungry masses. We balked at the idea that we would be tied to a single spot for only a few hours a day (as the current regulations insisted). Why shouldn’t we go where the people go? We wanted to have trucks in the downtown squares at lunchtime and then shift to the ballgame and the clubs at night.

When we explained what we were planning to the agencies in charge, their heads nearly exploded. DOH reverted to the mandated commissary model, which we were able to meet only with less-than-ideal large capital investments. DDOT and DCRA squabbled over who was in charge of what, and how to use the public space, and capitulated to the manipulation of the "hot dog mafia," as we’d come to call the family-owned commissary-vendor monopolies.

Meanwhile, our company, On the Fly, was caught in the middle, because we had already plunged our own money and resources into the venture. Our investment and hard work were compromised by the intractability of government and its inability to see beyond interagency turf wars and monopolistic regulations in the interest of the common good. We survived for a few years around the Downtown D.C. Business Improvement District, where the city rules were relaxed for a few blocks, and by serving tourists on the National Mall (yes, the federal government and their partners were easier to deal with than the city government).

We then had to find private space to set up our own commissary and additional private locations to operate our food trucks because so little public space was made available.

In the wake of the more recent food-truck revolution, DDOT and DCRA have developed a formal food-truck policy that mostly works. But that policy was implemented too late for us, and our venture ultimately wasn’t profitable under the regulations in place at the time.

Looking back on it now, especially having seen Uber and other "disruptive" businesses succeed, I think that we should have broken the rules and persevered for the public good. If we had won over consumers’ appetites while breaking the rules, the rules likely would have changed. In this case, it was the dirty dogs that prevailed again, but only for a while. Today, there are more than 200 food trucks in Washington, D.C., serving fare from every continent (along with a slew of novel fusions), as well as a food-truck association to represent the industry. This makes me happy.

My experience in the food-truck business and at Zipcar had earned me a reputation in the D.C. city administrative offices as sort of a rabble-rouser. As I learned more about the necessity of understanding and shaping government policy, I joined the Greater Washington Board of Trade Transportation Policy Group around 2004. It was there that I met then-director of the DDOT Dan Tangherlini, a regular speaker and presence in the group. I was the junior member of the group by at least 10 years, but like Dan (who was also young), I wanted to see positive change on our streets, and we formed a lasting relationship.

In 2008, the summer after Adrian Fenty’s election as mayor, I was e-mailing with Dan, who had by then taken over as D.C.’s city administrator, running day-to-day operations and guiding policy for the nation’s capital. We got to talking about his successor as DDOT director. The current director was going to our beleaguered Metro transit agency as chief administrative officer after a short stint at the helm.

He told me that they were in the midst of interviewing eight people from across the country to run the department, many of them typical players, but no one seemed quite right. He and Fenty wanted someone innovative, progressive and entrepreneurial to run the agency, so he asked me if I knew anyone who fit the bill.

Off the top of my head, I couldn’t think of anyone, because government really wasn’t my field. Three days later, I wrote Dan back and lamented that although I knew the type of combination he wanted, I could not think of a single individual that I knew of who would fit his description. Dan responded and said, “No, dummy! I was thinking of you!”

I was blown away. ... Me? Work in government? I had just run afoul of three city agencies, had a reputation as somewhat of an agitator in city hall and I wouldn’t be caught dead in a suit (at the time). I thought he was joking, but I had nothing to lose and walked into city hall for my first interview in my current uniform of jeans, a short-sleeved shirt, hiking jacket and sneakers. If I was going to work in government, I was going to do so on my own terms, and I wanted them to be aware of that from the start. I hadn’t bought a suit since the ’90s. Dan asked me, “Don’t you own a tie?”

To my shock and surprise, they invited me back for a second interview. So I wore a dress shirt. When Dan called me a few weeks later and said he wanted me to meet with Fenty the next day, I was beginning to get cold feet. Was I really cut out for government? Would I be happy coming into work every day? It didn’t feel like me, and the more I considered the reality that I had to actually buy (and wear) a new suit, the more nervous I became about the prospect of actually taking on this job. On the way to the interview, I stopped at Banana Republic and bought suit separates off the rack, ripped off the tags, and wore them out of the store to the interview a few blocks away. “I hope this was worth $300,” I remember saying to myself.

Dan was clearly relieved when he saw that I had elected to wear a suit and tie for the interview with the mayor. The Fenty administration wanted someone who could go against the grain, and when I shared some of my back story on the bike industry, Zipcar and food trucks, the mayor and I instantly started exchanging ideas as to how to make DDOT more proactive. As I left the interview, I shook the mayor’s hand and said, "I will see you this weekend, Mayor." He looked at me, surprised. "I’m catering your birthday party," I said. He smiled. As I walked out the door, I knew the job was mine if I wanted it.

During this process, President Obama had won the White House after eight years of President George W. Bush, and as an ardent follower of national politics, I started to realize the size of the opportunity before me to make change. The magnitude of the challenge and the potential to collaborate at the highest levels in the nation’s capital, combined with my respect for Dan and Mayor Fenty, made this a challenge I could not refuse if offered.

Fenty called me the day after Christmas in 2008 to offer me the position as director of DDOT. I took the job immediately. Hell, if it didn’t work out, or if I couldn’t push the envelope as much as I wanted, I would ultimately just do something else after giving it my all.

Making the jump from the private sector to the public sector was one of the hardest things I have ever done, but also one of the most fun and rewarding. It is something that a lot of people who are frustrated with bureaucracy would be loathe to do, and I understand that.

Working for an aggressive young mayor who was game to shake things up in an agency that had been independent for less than a decade made it more like working for a $1 billion, young company. We need more young entrepreneurs in government. Period.

It doesn’t matter that you may not have a master’s of public administration or a degree in urban planning and that you can’t tell the DCRA from the DOT from the DOH. It’s fine to be a tech start-up genius or a business school graduate working in Silicon Valley, see the myriad faults and imperfections of government and work from the outside to be a change agent.

In many cases, I actually think it’s the responsible thing to do, to persevere in the face of bad regulations and disrupt them. If that’s what it takes to have food trucks, better taxis or affordable accommodations, then that’s what the private sector should do. But what far too few of these change agents have done is shown the courage, or taken the opportunity, to disrupt and work with these cities from within. That is a primary theme of this book and, I believe, represents the foundation of the Start-Up City.