Imagining a ‘better normal’ for PHL innovation

By Santiago J. Arnaiz, Mariel Alison L. Aguinaldo,
and Patricia B. Mirasol

THE FIRST CALLS for volunteers went out in early March. As local government units scrambled to respond to the spread of COVID-19 in their municipalities, nonprofit Developers Connect (DevCon) decided to mine its nearly 40,000 Facebook followers for tech developers willing to help it “hack the pandemic.”

March 15 saw President Rodrigo R. Duterte formalizing a partial lockdown for Metro Manila. Classes were suspended. Non-essential businesses were asked to close shop. Checkpoints quickly became chokepoints, throttling the government’s ability to mobilize resources through the capital. On March 16, DevCon announced that its thousand-strong global army of volunteers was hacking together four initiatives. The flagship project was RapidPass, a QR code-based mobile system for quickly processing frontliners moving through Metro Manila’s checkpoints, enabling the distribution of vital goods to those who need it.

RapidPass was formally launched on April 3, backed by the Department of Science and Technology (DoST), as well as by the Inter- Agency Task Force Against Emerging Infectious Diseases (IATF). “Hundreds of DevCon volunteers made this possible just three weeks after the quarantine,” said Information and Communications Technology Secretary Gregorio B. Honasan during the platform’s launch. “This proves to the world the triumph of the indomitable Filipino spirit.”

The system had over 300,000 users in less than a month, streamlining movement through Metro Manila’s 48 quarantine control points so effectively that Defense Secretary Delfin N. Lorenzana said he expects the security forces to deploy the system even beyond the pandemic.

RapidPass is one of the tech solutions that cropped up across the country these last few months. Another IATF-backed system, StaySafe.ph, was developed by software engineering solutions firm Multisys as the nation’s official app-based contact tracing platform. Futuristic Aviation and Maritime Entreprise, or FAME, received funding from the DoST to fabricate specimen collection booths, producing and distributing 132 units in Department of Health (DoH)-designated facilities. Thinking Machines, a data science consultancy firm, was similarly tapped by both the DoH and DoST to “deliver quality insights to government agencies and the public to best respond to the pandemic.”

These collaborations don’t stop at the national level. Medical imaging firm Lifetrack Medical Systems has begun working with local government units, offering its CT scan analysis services for free, promising to expedite the process of identifying potential COVID cases. As pressure mounts on the education sector to digitize, startups like DCLA, a gamified e-learning platform, have begun offering their digital solutions for struggling schools — allowing them to manage enrollment and payment systems online, digitize their curricula, and even access comprehensive training and certification programs on online teaching for their staff.

Across industries, startups and tech firms have taken the initiative to address the nation’s most pressing issues. The glaring gaps that COVID-19 has exposed span not only our healthcare systems, but also our infrastructure, logistics, and financial systems. In response, the innovation community has mobilized, partnering with the public sector to plug the gaps and reconnect a socially distanced nation. While the long-term impact of these initiatives remains to be seen, some experts believe that, should the embracing of these tech community-led efforts be sustained, it may trigger an innovation renaissance.

INNOVATING THROUGH CRISIS
In its Global Ecosystem Report 2020, research center StartupBlink analyzed the startup ecosystems of 1,000 cities across 100 countries, and found that in the efforts to develop innovative solutions around COVID-19, Manila ranked 64th. Among the hundred countries analyzed, the Philippines ranked 29th. While cross-sectoral projects like RapidPass, StaySafe.ph, and the like contributed greatly to those rankings, the study highlights a number of factors that make the Philippines such a hotbed for innovation — many of which predate the pandemic.

Whether it’s embracing fintechs like PearlPay or UnionBank to raise financial inclusivity, or looking to digital platforms like PayMaya to streamline LGU operations, the Philippines has a long track record of turning to the innovation community for tech-driven solutions. But it isn’t only partnership opportunities being extended to these startups. Over the years, government agencies have built a robust support system to help them grow.

“The first thing is just the formal recognition that startups need to be nurtured, prioritized, and separated from the traditional MSME,” said Katrina Chan, executive director of QBO Innovation Hub. “They’ve put in resources, funding, mentorship — all of these activities are very much supported by the government.”

QBO itself was one of the first examples of collaboration between the government and the private sector, being one among a number of groups supported by the DoST’s Technology Business Incubation (TBI) program. Since 2009, 30 of these industry-based TBIs have been established all over the country. Through collaborations with higher learning institutions and global startup incubators, the DoST has directly invested over P413 million in the innovation community, helping the 556 startups it has incubated create a total of 1,960 jobs, secure P506 million in private investment, and generate P423 million in revenue.

According to Ms. Chan, even through the current crisis, the government has continued to bank on this community. “Across-the-board, in order to be able to fund the coronavirus (response), the government has had to cut its budget on literally everything,” she said. “But even in IATF meetings, it’s been recognized… that supporting startups and our innovative technology companies are going to be a priority, and so the funding for these programs wasn’t touched.”

Rowena L. Guevara, Science and Technology undersecretary for research and development, affirmed this policy, saying, “the startup community will be the main movers in the new normal since they are agile and fast. Startups may provide solutions to problems in logistics, supply chains, work-from-home challenges, etc. and they are assured of government support through the implementation of the Innovative Startup Act where the DoST, the Department of Trade and Industry (DTI), and the Department of Information and Communications Technology (DICT) were tasked to provide programs, benefits, and incentives for startups.”

Signed on Nov. 22, the implementing rules and regulations of the Innovative Startup Act promise to incentivize and empower the proliferation of innovative tech firms across the country, with a goal of generating 1,000 startups by 2022.

As with most developing nations, the Philippines suffers from a wealth of interlocking problems. But these present opportunities for innovative companies to enter the fray.

In Rwanda, a lack of infrastructure (e.g. power lines, airspace control, commercial flights) has made the nation a hotspot for the global drone industry. A Red Cross study published by Cambridge University Press in 2017 described African airspace as “less cluttered with flights that have slowed the adoption of commercial drones in North America and Europe.” There, drones are deployed not only as a means for monitoring and data collection, but also as the primary logistics channels for humanitarian efforts, bridging the last mile to bring blood and other medical supplies to remote communities.

By leveraging this relationship between humanitarian crises and solution-driven innovation, Rwanda has managed to establish itself as Africa’s drone capital, incentivizing the adoption of these technologies through legislation and tech-friendly regulations.

Keller Rinaudo, CEO and founder of Zipline, one of the firms spearheading drone-based logistics to solve Rwanda’s health gaps, told BusinessWorld that “it is precisely the countries that embrace innovation that will end up leapfrogging even developed nations.” Looking to find new applications for its innovations, Zipline has recently expanded into the Philippines, recognizing its potential as a base of operations for Southeast Asia.

CO-CREATING A ‘BETTER NORMAL’
But adopting new technologies simply for the sake of innovation poses its own set of risks as well. The “fail fast, fail early, and fail often” mentality that drives much of the global tech community stands in direct contrast to the slow, deliberate pace of governance. Where failure might present opportunities to learn for a lean startup, it takes on a different weight when it comes to government projects.

In a lengthy post shared on his personal Facebook page, former DICT undersecretary for operations Eliseo M. Rio, Jr. warned of the wasted resources and potential harm the IATF’s adoption of StaySafe.ph might cause. Echoing IT experts wary of the data privacy concerns surrounding the contact tracing platform, he said that in their haste to put out and endorse a tech solution to the pandemic, the task force failed to allot enough time to complete the comprehensive tests needed to ensure its security and compliance with data-privacy regulations.

Mr. Rio said it was this stance on the StaySafe.ph project that ultimately lost him his post at DICT, though these allegations have been denied.

For all the traction and support structures already in place, the innovation community is still young by global standards. Just as COVID-19 has revealed the glaring gaps in our nation’s infrastructure, so has it revealed the gaps in its ability to support the firms innovating at the grassroots.

According to James Lette, executive director of the Manila Angel Investors Network (MAIN), these gaps are most evident in the funding opportunities currently available to our nation’s startups. On the long list of priorities the government needs to address in its COVID-19 response, Mr. Lette says that startups rightfully trail behind the health and livelihoods of the Filipino people. But that doesn’t mean that startups are going to keel over and die.

“I’ve been told of one startup that had an annualized revenue of over $1 million per year, but following lockdown, it saw revenue collapse to almost zero overnight,” Mr. Lette said. “This global health crisis that this pandemic has wrought is now not simply a health crisis, it’s become this economic calamity.”

Mr. Lette said these kinds of dramatic crashes not only lead to staff layoffs, but also flow-on effects throughout the ecosystem, such as other companies reliant on them no longer being able to use their services. While the IATF has outlined at least 19 public-sector programs tailored towards assisting MSMEs through COVID-19, Mr. Lette believes that they just don’t meet the needs of startups.

“Startups take large risks with new and experimental business models,” he said, pointing out that there simply is no way for programs designed for traditional MSMEs to properly service them. “These 19 programs provide fantastic and much-needed assistance to the backbone of the Philippine economy, but through their targeting, they exclude the majority of startups.”

While the government has recognized this and begun taking strides towards plugging these gaps through legislation like the Innovative Startup Act, the clock is ticking for grassroots innovators. Immediate action is needed, and the slow, deliberate pace of the public sector may not get the job done in time.

As the executive director of MAIN, Mr. Lette has proposed establishing a government-partnered facility to issue bridge financing for tech startups. In these high-risk times, he argues that the government can do a lot to help mitigate those risks and allow private investors to step in where they can’t towards supporting the nation’s fledgling startups.

“People know that startups have a high chance of failure under normal conditions, so it’s a fair question to ask why we should save them, and why we shouldn’t just let them fail,” he said. “But startups are more than just businesses. They are a driver of economic innovation. If nothing is done and the startups are left to fend themselves, our greatest concern is that the startup economy of the Philippines will be severely weakened. The number of years and the level of investment that has gone into building the community to the point where it is now is going to be lost.”

Times of crisis are a powerful motivator for innovation, and these last few months have seen the local community rising to meet the pandemic head-on.

“You can look back at the last global financial crisis and see that there’s opportunity in this moment,” Mr. Lette said. “It was during the last recession that some of the world’s unicorns (companies valued at over $1 billion) were founded. What survives through this process proves the grit of its founders.”

While the government has shown a clear interest in embracing these initiatives, only time will tell if these firms will live long enough to see the fruit of their efforts. Today, the innovation community stands at a crossroads. Will COVID-19 be the final curtain call on a generation of startup enterprises, or will it be the dawn of a new era for innovative entrepreneurship?