Unlocking Digital Innovation in Public Organizations: Digital Journey of Asian Development Bank

Banks are rapidly pivoting to digital, changing the way customers transact and disrupting many industries. Yet, commercial banks and multilateral development banks differ in their approach to digital innovation. While many commercial banks thrive by constantly adopting new technologies, some development banks still struggle to embrace innovation and create more possibilities. The existing operating models and capabilities of traditional public organizations often hinder a quick-delivery approach in a fast-changing world. 

Asian Development Bank (ADB) is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific. To this end, it has already started embedding innovation in its core operations. To understand the scope and approach to digital innovation by public organizations, Ozzeir Khan, Director of ADB’s Digital Innovation and Architecture Division, shares valuable insights into how digital technology and new mindsets can better serve the public. In this first section of a two-part interview, we focus on how organizations innovate, what drives them, and the facets of innovation that public organizations can leverage.

MEDICI: Thank you for taking some time out and connecting with us, Ozzeir. We have been working closely with ADB for the past few months to understand and spread valuable insights from its innovation themes and methodologies. ADB is a large multilateral development bank, which means ‘innovating within’ needs a different approach. As the Director of the Digital Innovation and Architecture Division of Asian Development Bank, can you help us understand your idea of the need and direction for digital innovation in public organizations and ADB?

Ozzeir: International organizations are beginning to understand the role of technology and digital in their work. Most UN organizations and multinational banks have realized the importance of digital technologies for setting sustainable development goals (SDGs). In the case of ADB, the role of digital is becoming crucial for setting development-oriented SDGs. We have had decades of financial assistance programs given to countries for development (loans and grants). 

As Asia moves into more middle-income countries, the kind of assistance required is different. Even in public sector organizations, we have to see how we can add more value-added services (the way the private sector did over the past few decades) to their core offerings. So, we are now at a point where we have to decide, structure, and adopt digital into our core—what we call the ‘core financial DNA’ or ‘development DNA’ of ADB. In doing so, we have made it clear that a pillar of our 2030 strategy will be our focus on digital and how it plays a role in climate change. What can digital provide in terms of supporting development when it comes to sectors such as agriculture, transport, commerce, and trade. In the past, that was pretty much left to the private sector. However, with public sector organizations embarking on large infrastructure projects, such as building roads and highways, the elements of digital are now becoming essential. For example, when ADB finances, let’s say, a railway system or metro system, we have to introduce IoT right at the concept stage. We have to think through how we will use satellite data for monitoring; we have to think through how a consumer will use services in a digital manner. Efforts are being made by governments and national entities for massive digital transformation programs; products and services and assistance programs are infused with the digital elements of progress. 

It's not an easy shift for organizations, as traditional organizations are more supply-based, i.e., based on the capital that ADB provides, there’s enough demand out there in terms of countries seeking assistance, especially in the time of COVID-19. During this pandemic, any country, city, or town that asks for assistance asks not just for financial assistance but also how to incorporate it. For example, look at the health sector that is fighting COVID-19. Say, you have to set up a temporary hospital. It's not just enough that we provide $100 million to set up temporary hospitals; we should also ask the government to set up a particular number of hospitals, identify places where these hospitals should be put up, and delineate features or services that these hospitals should offer. So, we have to do a lot more. With just an example, you can think of so many different elements of digital. These are our digital innovations. Especially in times of the pandemic, it’s not about copy-paste but more about innovation (almost to the extent that it borders on what's happening today with developing a new normal).

Digital innovation is crucial for the success of public organizations in the future, especially for the creation of a new normal. In Asia, I think it takes another different dimension because of fast-developing economies. Most of them are Greenfields; Europe, the US, and Japan are Brownfields (in terms of country-wide, region-wide technology infrastructure already in). Thus, it’s tough to dismantle and leapfrog courses in Asia. What you see in China, what you see in Indonesia, and what you see in other countries—these countries are looking from the ambition side of the thing rather than the requirement side. Those are the things that differentiate public sector innovations from private sector innovations. 

The last element that I would want to add is that the supply side of digital innovations for the public sector is challenging. The entire startup ecosystem and venture capital that back startups and push them in their product development journeys are very profit-centric. Startups for SDGs and startups for an impact have a minimal market. For example, you have 10,000 cities worldwide and you have X number of countries. If your market focuses on about 200 countries and you have 10,000 cities, in some cases, they will not become unicorns—they will not have multi-billion-dollar IPOs. How can we develop a model for the supply side for startups to support this innovation required for the public good or common good for progress through the elimination of poverty or improving some of the sectors for development—that's another key area that we're trying to address. It’s not just the buyer side but also the supply side of digital innovation, which is challenging for organizations such as ADB.

MEDICI: That was really helpful, Ozzeir. My next question is along similar lines. When we talk about digital innovation diffusions, there are two angles that we look at—one is the policy side and the other is technical or technological innovations. The policy side and technological innovations diffuse in public organizations. From your past observations and current understanding, where does the main challenge lie? Is it the policy or the innovation framework that public organizations struggle with the most or the resistance to the adoption of new technologies?

Ozzeir: In a way, policy vs. adoption/development is a chicken and egg situation. Even though both of them go hand in hand, my experience tells me that it's about innovation in the public sector. In many cases, policies follow innovations. I remember, when we looked at the Aadhaar project in India, privacy policy issues came in later to manage the innovation that was already in place. There are numerous cases around digital innovation in many countries, for example, M-Pesa in Africa. Innovations dictate what to do with policy. We are working on central bank-backed digital currencies. When you look at the future of money—things such as programmable money or designer money—we can think through. Firstly, determining the policy for designer money that's issued by a central bank. It (designer money) becomes different when it's in the hands of different people. It’s tough to tackle the policy side before you've gone through the cycle of innovation. Designer money, for example, goes through a few iterations before any kind of policy is formed. It takes time, and I've always seen that policies follow innovations.

Note: This is the first part of the interview with Ozzeir Khan, Director of the Digital Innovation and Architecture Division of ADB, which was conducted on October 19, 2020.