Exclusive: How Israel’s smart cities will work with startups

By Medha Basu Nurfilzah Rohaidi

Dror Margalit, Chief Technology Officer of Digital Israel, is leading a new programme to boost local government.

“Would you fly a plane that was invented by government employees?” Dror Margalit, Chief Technology Officer of the Digital Israel Bureau, asks me. I pause, confused by his line of questioning.

“You are thinking. Okay, you answered my question,” he adds, being intentionally provocative, but with a laugh. He believes that government is often not able to compete with the private sector to attract the best minds.

“Government does not attract the top ten percent of the scientists,” Margalit says.

As a workaround, the Israeli government is looking to collaborate with the country’s vibrant startup scene to boost service delivery. “There’s a chance that you will get the best ideas from the market,” he adds.

Two months ago, Israel launched a new smart cities programme, and put Margalit in charge of it. “The residents of Israel, wherever they reside, will get basic digital services within his or her municipality,” he says is its goal.

GovInsider caught up with him to find out how Israel will work with startups to bring digital services across 260 municipalities.

Challenging startups to innovate

Israel is looking to ensure that startups and companies, no matter their size, are able to bid for smart cities tenders. “We are trying to switch to what we refer as challenge-style tenders,” Margalit says.

Rather than put up a tender for a predefined solution, the government will challenge tech startups to find ways to address the cities’ problems, he explains.

The government will select the top startups to come in and pitch their ideas, which may be selected for trials. Only once the trial proves successful, will the government go ahead with scaling the implementation, according to Margalit.

“This is the way to inject innovative and creative solutions, even from startups and not just from the traditional big companies, into government,” Margalit says.

To build new technologies, startups are willing to take the kinds of risks that governments are not, Margalit believes, having led four startups himself following his retirement from the military.

“If you are in a startup, you maximise risk. You want to change the world,” he says. In government, on the other hand, failure comes with “a huge downside”, Margalit adds. “If you are in a startup, you maximise risk. You want to change the world.”

Building standards and skills

To ensure that these risks are balanced, Margalit is developing procurement standards for startups to sell to the smart cities.

“We set the standards of what needs to be included, and they’ll offer the services with a predefined price” to the cities, he says.

“At the end of the day, it’s going to be engagement between the private sector and municipalities, [which is] monitored or guided by us,” he adds.

As a start, these will include “basic solutions” such as providing and maintaining a website and its services; social networks; customer relationship management systems; and apps.

The Digital Israel Bureau will set service standards for these which all cities should be able to implement, he says. The Bureau will also support cities with funding to buy and deliver these services. “We’ll match the fund or subsidise the cost of the solution,” Margalit says.

Across all cities, basic funding would be about US$25-30 million for the first year. However, “I don’t believe all of them will approach [us] to be funded,” he notes, as the most developed cities would not need it, while the the least developed “don’t know what to do with it”.

Digital skills are another challenge for the cities when it comes to procurement, and another area where the Bureau will provide support.

Some small municipalities don’t have technical staff, for instance. “They serve 2,000 residents. They don’t have an IT guy, and they will not hire an IT guy,” he says.

“We need to build and be able to provide municipalities with know-how, accessibility to advisors, and consultants.”

Israel’s two-phase approach

Broadly, the vision for Israel’s smart cities is to help boost economic growth across the board, close gaps in living standards between the cities, and provide citizen-centric services.

Margalit plans to do this in two phases. The first is to “set the minimum standard” for what a smart city is, he says. This will help boost the cities that are lagging behind economically to the same level. In the next phase, he plans to “boost all of them upward”.

At this stage, cities will each “gain their own momentum”, with the Bureau providing strategic direction. “We need to create the environment that encourages cities and municipalities to start moving forward,” he explains.

Ultimately, Israel also hopes to create communities of local government officials who will learn from each other and engage in some healthy competition.

“We want someone to run the community, and I think this will be Digital Israel, to push the community forward,” he says. Already, the Bureau is starting to seed these communities by sending executives and project managers from municipalities for overseas training.

They had recently sent C-suite individuals from cities of varying levels of economic and digital development for a week of training at Harvard Business School. “They all develop a hunger,” he says, “to provide better services for the citizens”. “We need to create the environment that encourages cities and municipalities to start moving forward.”

Cybersecurity for smart cities

With all of these big plans in place for Israel’s smart cities, it must ensure that they are secure.

“We are working with the Cyber Authority to define the standards or the best approach to answer for the needs, but in a secured manner that will assure business continuity,” Margalit says.

“That will assure that yes, you become smart, you are more digitised, you are more dependent on technologies—but you are not more vulnerable.” Cybersecurity will be a key element of the programme for Margalit given his military career.

He is a retired colonel of the Israel Defence Force, where he led the computer unit of an elite intelligence force. He then went on to become an entrepreneur in the private sector—“as far away from government as I could,” he jokes.

Well, he’s back now, and hopes to “change the ecosystem of the government”. Israel’s smart cities are still in their infancy, but with Margalit leading with military precision, it will be interesting to watch the country’s digital transformation journey.

Dror Margalit was in Singapore to speak at the Digital Government Exchange, an annual gathering of digital officials hosted by the Government Technology Agency.