Author: Marwan bin Jassim Al Sarkal, Executive Chairman, Sharjah Investment and Development Authority (Shurooq)
15 Jan 2019
The conventional approach to running the public or private sector is to consider competition a zero-sum game, where one participant’s gain or loss of utility is exactly balanced by the losses or gains of the other participant. This has resulted in monopolies, price wars, format wars, risks to sustainability and a lack of interoperability.
This model is outdated. Private and public partnerships (PPPs) should be based on the identification of complementary expertise and shared commercial and development interests. Along this vein, former Harvard professor Adam Brandenburger and Yale business professor Barry Nalebuff developed a concept of ‘coopetition’ – a model that combines the ideas of cooperation and competition.
Value can be created through cooperation, and I believe that as nations, businesses and individuals, we need to move from a zero-sum game to a plus-sum game – a scenario that leads both parties to high effectiveness, functionality and profitability. Our world is changing at an unbelievable rate; what once took months now takes mere minutes.
The cycle of building, breaking, adapting and learning from experience has gathered pace. If we want to work efficiently and give people a sustainable environment to work and live in, we need to think in terms of milliseconds. We must consider the lives we’re impacting, the time needed and the difficulty in making something scale – not just for monetary gain, but for the betterment of the world.
It’s important to start small. Let’s take the very simple example of road safety, which is still a key problem facing the world. It is not simply an issue for legislation or law enforcement; it is also influenced by good infrastructure, high vehicle standards and cooperation between various road safety entities. We have been at this crossroad for a while, and only by working together in a multi-stakeholder approach will we be able to significantly improve road safety standards worldwide.
PPPs should be based on the identification of complementary expertise and shared commercial and development interests
Of course, I realise that it is a complex endeavour to have the public and private sectors working together, as their interests aren’t immediately aligned. In most scenarios, the public sector is under the impression that the private sector is willing to reap the rewards without taking any risk, and vice versa. In every situation, it is important to put people around the table: it’s no longer the case that a government or an international organisation can make the decisions and then ask the private sector to join and fill in the gaps. All parties need to be consulted from the outset in order for everyone to work together effectively.
On the flipside, rarely has a country developed without harnessing PPPs. The UAE, for example, is lucky to have one of the most advanced and knowledge-intensive public sectors in the world. I have no doubt that this is a contributing factor behind some of the collaborations and interactions between the public and private sectors. Whether it’s a short or long-term goal, the value of investing in PPPs creates a network of information and shared knowledge, which becomes the key pathway to success.
Times are changing
Both sectors are currently facing radical and ongoing change: the centre of economic activity is shifting; demands on both sectors are increasing; new consumer groups with new needs are developing; and technology is transforming the way we live. Smart devices can now record our location, preferences, sleep patterns and productivity. Technology is rapidly influencing not only business models and consumer habits, but also even the human genome.
On top of that, there is a rising tide of people who are constantly on the move. The social trade-offs of the free market are under great scrutiny, and demands for natural resources are growing as the strain on the environment increases. Both sectors are adopting data-driven techniques and mindsets that are changing the economics of knowledge. These trends are impacting public and private sectors alike. We will therefore need to collate forces and reshape the way we work – we need to do more and do it better.
To achieve substantial change, both sectors need to reform their strategic centres, have fewer organisational layers and pursue more effective governance. If you look at the online retailer Zappos, its CEO Tony Hsieh has pushed flat organisational layers to a whole new level by applying the principles of ‘holacracy’. A new way of structuring and running organisations, holacracy replaces the conventional management hierarchy: instead of a top-down approach, power is distributed throughout the organisation by giving individuals and teams more freedom to self-manage.
Conducted by the University of Sydney Business School in 2017, a study of more than 300 executives from around the world found that the greater the number of organisational layers, the slower new products and services reached customers. Operating environments need to be reformed to provide the right mix of pressure and support required to transform performance.
PPPs will provide better infrastructure solutions than initiatives that are wholly public or private
The need for public-private collaboration is not new, but it is now extending beyond its original remit to include collaborative policymaking and service delivery. Examples include sewage management plants, microfinance and low-emission technologies.
This collaborative method of working requires both sectors to adopt a new mindset with a greater focus on long-term planning, using data to inform decisions and taking a more systematic approach to information management. Well-managed information and knowledge lead to sustainable innovation, and the use of knowledge is as important as the production of knowledge. Innovation should be comprehensive and broad-based.
PPPs are increasingly essential. In the past 25 years, more than 5,000 infrastructure projects in 121 low and middle-income economies were delivered through these partnerships, representing investment commitments of $1.5trn (€1.3trn), according to a 2017 report by the World Bank. The connection between infrastructure and economic growth is undeniable.
PPPs will provide better infrastructure solutions than initiatives that are wholly public or wholly private. Each sector does what it does best; this will result in faster project completions, reduced delays, higher returns on investment and better cost containment. In addition, higher standards will be maintained throughout the life cycle of a project. Overall, it is a much more effective method where each sector’s financial leverage and skills are combined.
Such partnerships will provoke a period of innovation and transformation that will make the world an even more exciting environment to live in. Public and private workers should, therefore, expect to operate in a context of radical, ongoing and accelerating change, which will require strong and courageous leadership, as well as clear and persuasive communication.
Experimentation and fresh thinking will be required, as well as increased collaboration across departments, the elimination of workplace silos and the creation of agile structures. Training will need to be worker-centric, education will need to be learner-centric and services from both the public and private sector will need to be citizen-centric.
Both the public and private sector are fundamental parts of the ecosystem of a city and we should recognise that they need one another to be healthy and strong. The most basic instinct of any living thing is that of survival and, like any living ecosystem, both sectors must evolve over time to sustain their existence. This should result in public and private sectors that are aligned at the most fundamental level.