How a Small Group of Entrepreneurs Transformed Government Services

Presidential administrations since Roosevelt have faced varied and vexing challenges, domestic and abroad, that forced them to recognize the need to venture outside their comfortable circles of party loyalists, campaign volunteers and policy advisers to tap into the expertise of those not already working in government. 

President Obama started with his own White House, recruiting Internet-savvy entrepreneurs to serve as chief technology officer (me), chief performance officer (Jeff Zients), chief information officer (Vivek Kundra) and director for social innovation (Sonal Shah), among other senior positions. And he directed his Cabinet to do the same. More than 50 other entrepreneurs would fill senior roles, reporting directly to department and agency heads, and tasked with applying technology and innovation to advance that agency’s mission. 

The participants brought a wide range of experience. Jim Shelton, the co- founder of the school management company LearnNow and the educational manager for the Bill & Melinda Gates Foundation, joined the Department of Education to design the Investing in Innovation competitive grant program. That vehicle would provide seed capital for promising ideas and provide scaling capital for those, like Diplomas Now, already proven viable. 

Maura O’Neill, who had started companies in electricity efficiency, customer information systems, e-commerce and digital education, joined the U.S. Agency for International Development. There, she founded Development Innovation Ventures with a similar, staggered model to Shelton’s program for education, allocating more funding to the best defined, developed and tested projects. 

Alec Ross, who had co-founded the global nonprofit One Economy to close the digital divide for the poor, joined the State Department under Secretary Hillary Clinton to lead her 21st Century Statecraft initiative, designed to take advantage of this “Internet Moment” in foreign policy. His team intervened to delay Twitter’s planned network maintenance in June 2009 to keep the social media platform open to Iranians during their uprising, allowing them to communicate with each other and the rest of the world. 

The entrepreneurs who joined the government brought more than their respective skill sets. Many also brought a different way of working, one with its roots in Silicon Valley and its fertile field of technology startup companies. Eric Ries, an entrepreneur, adviser and author who had moved to that area in 2001, called that philosophy and methodology “lean startup.”

The ‘Lean Startup’

When I first met Ries on my first official trip to Silicon Valley as the nation’s CTO in the summer of 2009, he had little experience with established organizations, and had given little thought to applying his lean startup principles to government. In defining a startup as “a human institution designed to create something new, under conditions of extreme uncertainty,” he had always left the identity of that institution open-ended, whether for-profit or nonprofit, private or public sector. 

“People talk about the 20th century being the management century, and I really think that’s true,” Ries said. “We’ve become so good at general management, you think about the global supply chain to keep us all alive, you think about the government programs that have lasted decades and really provided for the welfare of a large number of people, that’s a real accomplishment to be celebrated. But those tools are really based in planning and forecasting, which makes it work well under conditions of nice, stable environments. Nothing changes too fast. So those tools are not really the best for situations of disruptive innovation, technological turmoil and change—the new paradigms.”

He believes his lean startup strategies are better suited to handle uncertainty by leaders in all walks of life: “What we want to do is grow a management discipline that can be just as good as general management has been in the 20th century, but with some tools that are more appropriate for the 21st.”

What we wanted, in the wake of Wall Street reform and the 2010 passage of the Dodd-Frank Act, was a new agency that stood up for the American consumer in the increasingly cloudy and confusing financial marketplace, protecting citizens from predatory lending by financial service companies. President Obama tapped Elizabeth Warren to help establish and organize the agency, which would be called the Consumer Financial Protection Bureau. She requested the assistance of my deputy, Eugene Huang, himself a successful tech entrepreneur, in modeling the agency more after nimble Internet startups than plodding government bureaucracies—leveraging technology, data and innovation to maximize efficiency and impact. In August 2010, Huang and I attended a small dinner in Silicon Valley, where technology leaders offered suggestions about how the CFPB should operate. Ries later recalled his advice in The Lean Startup, his 2011 book: “Treat the CFPB as an experiment, identify the elements of the plan that are assumptions rather than facts, and figure out ways to test them.” 

With Huang acting as an advocate, CFPB adapted Ries’ experimental, incremental approach in a slightly different way, by initially rolling out the call center (and Web) complaint service for credit card issues only, so that it could be used as a test bed and training ground for other financial services issues, such as those related to student loans, vehicle loans, mortgages and debt collection. But it played an even greater role in an initiative mandated by the Dodd-Frank Act, one aimed at removing complexity and confusion from the mortgage process. As Warren said: “With a clear simple form, consumers can better answer two basic questions: Can I afford this mortgage, and can I get a better deal someplace else?”

The agency engaged those who would use the new forms—consumers, lenders, mortgage brokers and settlement agents—through a website called Know Before You Owe, posting two prototype loan estimates for review and input. Then it took the testing on a nationwide tour, meeting with small businesses, adding elements and posting the revised products for further feedback. In sifting through more than 25,000 comments over 10 months, the agency was able to hear, and then heed, requests for clearer language and cleaner design, to make cost comparisons easier. 

The CFPB officially got the lean startup seal of approval during one of Ries’ trips to Washington as an informal adviser. As he sat in the bureau’s offices, the environment reminded him of Silicon Valley, in the manner that people worked and spoke, obsessed with experimentation and rapid iteration. He was amazed by the integration of his philosophy in other agencies as well, even by those employees who didn’t know his name—people who had come from entrepreneurial backgrounds or longtime government employees whose entrepreneurial instincts had been awoken. 

“I was really skeptical,” Ries said. “I didn’t believe it when people would tell me that government is innovative. But there are honest-to-god real-life entrepreneurs working in the federal government.” 

Entrepreneurs in Residence

We had seen the Ries philosophy, experimental and incremental, planting itself in what he would call “a green field opportunity,” an agency starting from scratch. But what about more established agencies and departments, those defined by entrenched bureaucracy? It was easier to turn something on than to turn it around.

Two agencies would represent this truer test of the latter (turning around) because they had a reputation for constraining the innovation economy: the Food and Drug Administration and U.S. Citizenship and Immigration Services. That’s why we targeted those two agencies with our Entrepreneurs in Residence program, which married external and internal talent, and asked them to apply lean startup principles to a clearly defined mission over a six- to nine-month period.

The administration did not discriminate based on attitudes toward government. Otherwise, Dean Kamen never would have become one of the 20 people chosen for the EIR program in the FDA. The inventor of the Segway and numerous medical device products had been among the most vocal critics of the painstaking approval process for new medical devices, claiming that the continuation of business as usual would result in more innovation occurring outside the country.

At the TEDMED 2011 conference, he mocked the FDA’s intransigence in green-lighting an advanced prosthetic arm he had designed for veterans who had lost limbs in combat. His acerbic commentary illustrated the serious rift between the regulatory agency and the innovators under its watch and, in reality, thumb.

Fully aware of this division, and determined to engage rather than enrage experts in the field, Dr. Peggy Hamburg set out to redefine the relationship. The agency sent out a signal for Kamen and 19 other leaders of industry, academia, venture capital and research—including embolectomy catheter inventor Dr. Thomas Fogarty and retired Medtronic CEO William Hawkins—to work with the best and brightest in the FDA’s Center for Devices and Radiological Health. They were tasked with designing a better process for regulators to evaluate the risks and benefits of approving medical devices, a process that was more mindful of the innovator’s perspective and could get patients faster access to safe, state-of-the-art products. The team targeted one ailment, end-stage renal disease (ESRD), which afflicts more than half a million Americans, and for which patients have few options other than dialysis or kidney transplant. The team then zeroed in on specific parts of the process that were counterproductive.

“What if we had the same examiner who reviewed the initial application also review the follow-up application?” Ries asked. “That examiner wouldn’t have to get up to speed—brand new—every time the new application came in. That’s pretty common sense, an obvious thing to do. But just having a commonsense idea is not enough. You’ve got to have a team that can pilot it, test it and see if it will work. So the key parts are a cross-functional team with a limited mandate, six months not just to write a report or come up with new ideas but to implement the new solution, iterate it, prove that it works.”

In April 2012, the FDA announced that three ESRD technologies had emerged from a competitive pool of 32 and would get the opportunity to earn regulatory approval through the new pathway. In announcing the selections, the Center for Devices and Radiological Health’s director, Dr. Jeff Shuren, highlighted the overwhelming response, arguing that it “demonstrates that there is a desire from developers of innovative technologies for earlier and more collaborative agency interaction.”

To initiate its EIR program, USCIS would also turn to an agitator. Brad Feld, an early-stage investor and prolific blogger, had become exasperated when officers of two promising startups under his watch were forced to return to their home countries because they couldn’t secure visas. He shared their story on a blog, attracting the attention of other entrepreneurs, including Ries, who couldn’t understand why there was no visa category for an entrepreneur with American investors and employees. In lieu of that category, many entrepreneurs were at the mercy of visa examiners who didn’t understand how they operated. At the point of visa application, many startups had not hired many employees or generated much revenue. This confused traditional visa examiners, who would then ask odd and irrelevant questions, often before a denial. To give just one example, it’s been years since AOL required a compact disc to use its service. And yet, visa examiners were demanding proof of a warehouse, where software startups would store their CD inventory for shipping to customers.

As Feld’s idea of a “startup visa” became intertwined with, and paralyzed by, the broader debate on comprehensive immigration reform, the USCIS, with White House support, sought to accomplish something administratively within the existing law. 

Like the team at the FDA, the EIR team enlisted entrepreneurs familiar with the obstacles, including SoftLayer senior executive Paul Ford, to work alongside the USCIS personnel committed to removing or clearing them. “You get fresh thinking, you get a very low-cost way of trying to impact the situation because the people doing this are committed to try to find what’s not working and propose solutions, rather than take a partisan or political or hierarchical or structural view to the environment,” Feld said. 

In the spring of 2012, the team began building a prototype of an alternative application process for entrepreneurs and by fall had achieved a significant breakthrough: the launch of the Entrepreneurship Pathways Web portal, designed to close the information gap between USCIS and those in the entrepreneurial community, by letting them know which visa may be most appropriate—including the O-1—for their situation. 

One case study was unquestionably positive. Fabien Beckers was born in France, where he, as a physicist, tried unsuccessfully to build a company for seven years. Convinced of grander opportunity in America, he enrolled at Stanford University, graduated with a master’s in business and, with a partner, started Morpheus Medical Inc. to build cloud-based software for noninvasive diagnosis of cardiac defects in babies. His work visa, however, was set to expire on Dec. 13, 2012, and, in attempting to extend his stay, he was denied an H1-B visa because he did not have an employer.

“It was hell,” he said.

With other options exhausted, he applied for the O-1 visa that the Entrepreneurship Pathways portal had included as one of the viable possibilities for someone with his “extraordinary ability.” One week prior to his deportation date, and likely aided by the education that visa examiners had received, he was approved. With Beckers’ status assured for at least the next three years, investors felt comfortable contributing to his cause, and he quickly secured nearly $2 million and hired four employees.

“It’s really, really amazing,” Beckers said. “We’re so happy now.”

Yet he was not satisfied. He became a visible proponent of the passage of the aforementioned startup visa, hoping to make it easier for others than it had been for him to contribute something meaningful in, and for, America.

Aneesh Chopra is the former federal chief technology officer. This piece was excerpted from his book “Innovative State: How New Technologies Can Transform Government,” (Atlantic Monthly Press, 2014). It was reprinted with the permission of the publisher.