Innovation State - Global Innovative Perspective by Bret Gladfelty

Innovative Global Perspective

2016

InnovationState.org

Innovation State - Global Perspective

Introduction Bringing Innovative Government Solutions from Finland & Estonia 1

On October 4, 2015, Innovation State began a week-long fact-finding mission to determine why Finland and Estonia ranked as the top innovative countries in the world. Through meetings with private sector funding organizations, governmental entities and academic institutions, the Innovation State team found that each country lived up to its innovative reputation. However, each developed differently based on their history. Finland for example, in the last century, has never been occupied by a foreign country and excels at longrun strategic planning, educational development and reinvesting in its future.

Innovation State 2016 Profile

Contents 01

Intro d u c t i o n

A bo u t I n n ovat i on S tate

E sto nia

F in l a n d

e- Governm ent

T h i n ki n g L on g

Dig ital Ro adm ap

W ic ked P ro b l em s

e- S er v ice s

E m e rg i n g Ecosystem s

C alifo rnia Takeaway 2

Estonia on the other hand, was occupied by the USSR in 1941 and gained independence in 1991. After the occupation, Estonia had no government infrastructure, which led to taking a fresh look at available resources. This allowed for a focus on human capital and technology. Estonia has a very transparent digital system of government that includes e-Identity and access to e-Government services. Through these services, Estonia has transformed its government into the most digitized governance system in the world.

Innovation State - Global Perspective

About Innovation State

Much attention has been given to climate change by California’s elected leadership; and for good reason. The warning signs are on the horizon, letting us know that we, as a society, must take action now to protect our future. The same can be said of California’s economic viability as a world innovation leader and economic super power. We need a strategy; a sustainable economic future that goes beyond 2020 and focuses on what we can achieve in the next decade.

To ensure California’s future long-run economic growth, our next generation must have educational opportunities in preparation for jobs in the Innovation Economy. We must establish long-run policies that promote the growth in the innovation sector, innovate government in ways that reduce regulatory red tape and provide for greater transparency utilizing open data. Ultimately, we need to create more opportunities for future generations.

OUR MISSION We are a non-profit organization with a goal to develop a network of elected officials, academic leaders, business leaders and organizations committed to framing important policy initiatives that will grow California’s Innovation Economy.

Innovation State 2016 Profile

Our Policy Initiatives ABOUT US Paul Gladfelty, Founder

Double California’s Primary and Basic Research Tax Credit California’s current research and development (R&D) tax credit allocates 15 percent tax credit for qualified research and 24 percent tax credit for basic research. Our first step is to increase this tax credit for both categories by 15 percent in 3 percent increments over 5 years. One of California’s greatest strengths is its historic position as an innovator among states and nations. Our top rated academic institutions, geographically concentrated industries that form industry clusters and diverse population set us apart as a worldwide innovation hub. The best way to grow a business environment conducive to innovation is to think differently about the future. Innovation State’s agenda involves advancing an affirmative path to attract and grow innovationbased businesses. California is at a crossroads, where collaboration is needed to increase opportunities and create jobs. The way to break through the status quo is to have a plan for California’s long-run economic strategy. Our efforts will concentrate on identifying, building and bringing together communities of interest throughout the state and providing a platform to work with like-minded policy leaders at both the state and local levels of government. California’s future lies in building a roadmap for expanding its Innovation Economy. Innovation State is strategically positioned to provide leadership based on a sound economic plan supported by evidence-based research.

California Open Data Act (CODA) CODA would make data.ca.gov a central repository for all state agencies to submit data sets and grant reports. CODA would create the position of a California Chief Data Officer and establish a Data Working Group to ensure proper implementation and standardized data reporting.

e-Gov & e-ID for California Residents California needs to develop a secure e-ID for all California residents, which will allow for streamlining of all government services.

Innovation State - Global Perspective

Finland

The most well-functioning and highly-transparent public institutions in the world are located in Finland. Finland has a rich history of developing its society to be geared toward a knowledge-based economy. Similar to other citizens in the region, Finns benefit from being globally ranked 1st for well-functioning and highly transparent public institutions by the World Economic Forum in 2015. Finnish private institutions rank 3rd for transparency and are among the best run and most ethical in the world.

Finland’s exceptional education system is a fully subsidized program from kindergarten to post-secondary universities, with no tuition fees for fulltime students. Finland’s educational system is designed for students to be able to compete on a global level. In 2015 the World Economic Forum (WEF) ranked Finland’s primary and secondary education as the best in the world.

Finland’s top position both in health and primary education sectors, as well as the higher education and training sector, is the result of a strong focus on education over recent decades. This focus has provided the workforce with the skills needed to adapt rapidly to a changing environment and has laid the groundwork for high levels of innovation, allowing Finland to become a highlyinnovative economy. The country’s ability to adopt the latest technologies ranks 18th globally, leading to important synergies that reinforce the country’s competitive position going forward. Finland’s macroeconomic environment has weakened slightly due in part to rising inflation which is above 3 percent; however, Finland fares comparatively well when contrasted with other Euro-zone economies.

More than 30 percent of tertiary graduates are in science-related fields. The majority of children in Finland do not attend school until 7 years old. Finland ranks 2nd in the world for government R&D spending per capita at 3.54 percent, behind Israel at 3.93 percent.

Innovation State 2016 Profile

FutureOriented Economy In the early 1980’s, the Finnish Funding Agency for Technology and Innovation (Tekes) was established. The purpose of Tekes is to drive the advancement of technology within Finland and fund research stage ideas into viable businesses. In 2015, Tekes reported receiving €575 million for 3,080 funding applications, of which 2,600 were approved for funding. Of these, 702 were startup companies. This resulted in 1,500 products, 1,300 patents and 1,090 academic theses. Rovio Entertainment received over €2 million from Tekes over several years. Ultimately, this funding supported the successful development of “Angry Birds,” arguably the most popular gaming app brand in the world. Finland, the highest ranked on the Global Innovation Index, allocated roughly 3.6 percent of its budget for research and development. Finland has established itself as a global economic innovator and will continue to lead the world with clean and sustainable technology. Decades of a strong focus on innovative policies have placed Finland in the top ranking for health and primary education in the world. With a total country population of roughly half the size of Los Angeles, Finland’s economy is remarkably diverse and innovative. To see a full breakdown of Tekes funding projects, visit http://hankegalleria.fi (click the world icon in the upper right hand corner to switch to English). This site provides a visual representation of all funded projects by Tekes with the capability to filter by project stage.

Tekes Key Figures - 2015 For a population of 5.5 million and a budget of over

€575 million, the funding impact is instrumental in promoting Finland’s economy.

702

2,600

Startups

Positive Funding Decisions

1,560

Companies

Days of Average

R&D Funded

Application Process

Innovation State - Global Perspective

Thinking Long SITRA

Danish Wind Turbine Market

The Finnish Innovation Fund - SITRA is a future oriented organization that promotes Finland’s competitiveness and the wellbeing of Finns. They anticipate societal change, explore new operating models and accelerate business activities aimed at creating sustainable well-being.

Tekes collaborates with another Finnish government organization called SITRA. Unlike Tekes, SITRA is Finland’s premier economic think tank that “anticipates social change and its effect on people, along with developing new operating models which stimulate businesses that aim for a sustainable well-being.” Looking more deeply at SITRA, there are relevant lessons for California policymakers. During Innovation State’s visit to Finland, the Innovation State team met with Timo Hämäläinen, Senior Strategic Research Fellow of SITRA, primarily to discuss current projects. One of the most covered topics was the idea of Wicked Problems, which is the increasing specialization, interdependence, complexity, uncertainty and copious data-points on economic and social activities that have challenged both the market forces and organizational hierarchies (e.g. climate change, structural unemployment, persistent fiscal deficits and lifestylerelated diseases). These Wicked Problems are a recurring issue for governments on all levels. SITRA’s recent paper on Wicked Problems reviewed government solutions to these types of issues and can easily be applied to California’s Wicked Problems, such as maintaining sustainable water supplies, the disappearing middle class and above-average high school dropouts.

During the second oil crisis in 1979, the Danish government realized that dependence on foreign oil for energy production was a long-run systemic problem, described by SITRA as a Wicked Problem. During the oil crisis, the collaboration between the Danish Wind Turbine Test and Research Center (TRC) and the wind turbine industry was greatly encouraged by the government’s decision to grant a 30 percent subsidy. This subsidy would later increase to 50 percent when the initial rate was proven ineffective. In 1918, there were 250 electricity-producing windmills and by 1979 there were 150 wind turbines producing 240 Megawatt-hours (MWh). The Danes realized that, in order to overcome this Wicked Problem, collaboration was necessary and accomplished by creating meetings 4 to 8 times a year to discuss both technical and regulatory problems in the wind turbine industry.

Innovation State 2016 Profile

Industry participants formed a community of practitioners that developed a shared understanding of technological problems, solutions and research agendas.

Innovation State - Global Perspective

Wicked Problems Case Study Industry participants formed a “community of practitioners” that developed a shared understanding of technological problems, solutions and research agendas. For example, engineers of key manufacturers communicated informally or “had a barter economy” about solutions for different, yet mutually beneficial technical problems.

As SITRA’s report states, “the multiplicity of actors and different frames involved created interpretive asymmetries and tensions which required rich face-to-face communication and created opportunities for creative syntheses.” The industry participants built on emerging local entrepreneurship and knowledge about wind turbines and created an attractive niche for further experimentation and innovation (variation). Participants involved strategic choices, system steering and orchestration (selection), as well as policy learning and adaptation at different phases of the industry development. These participants supported collective learning, codevelopment and coordination of activities among the industry’s multiple stakeholders (growth). Government representatives did not pick specific firms or technologies as winners, but facilitated a market-friendly and cumulative co-development process for the emerging business ecosystem where Denmark had a potential competitive advantage. SITRA’s conceptual and empirical analyses suggested a new stewardship role for the government. This role involved an evolutionary and systemic policy approach along with a proactive, collaborative and facilitating government role towards key stakeholders of complex policy problems. In 2015, Danish wind turbines produced 11.3 million MWh or 48 percent of the Danish energy supply. Policymakers should encourage diversification and attract investments, both domestic and foreign, into related areas and higher value-added business activities in order to diversify, renew and upgrade existing economic structures. The process of variation, selection and growth is a simple framework for California policymakers to use for resolving some of California’s Wicked Problems.

Innovation State 2016 Profile

Finnish Economic Perspective A Return to Industrial Policy What is industrial policy? Although the nature of industrial policy has changed over the years, it aims to influence the economic structure of a nation, or in this case, a state. The main purpose of industrial policy is to speed up a nation’s or state’s structural change toward higher productivity activities. The market-oriented, neoclassical Washington consensus, whose proponents believed that governments could only create costly failures with active industrial policies, were challenged by the rapid economic development of the emerging East Asian countries in the 1970’s and 1980’s, and more recently, by the rise of China as the world’s manufacturing hub. Policymakers should make maximum use of industrial policy tactics and context-specific knowledge in identifying the most important markets and system failures, best business opportunities and the most effective interventions to support industry practitioners. These close private-public collaborations can be supported with decentralized implementation agencies that operate at different systemic levels and locations. A poor policy decision can also be avoided by focusing the industrial policy incentives on new business activities instead of established sectors. This requires strong political support. Successful industrial diversification initiatives have typically had a cabinet-level, political champion. By creating a community of practitioners, the knowledge, capabilities and assets of existing practitioners can be used as a springboard to related new business activities that can utilize similar resources. Some researchers have used the metaphor of a “monkey jumping to a new tree” to describe this process. It cannot jump too far, and often lands a bit lower with regards to progress in a specific field of knowledge. As such, the “jump” creates new activities that pose special challenges in the beginning. This underlines the policymaker’s need to identify and understand their country’s (or region’s) existing and latent competitive endowments and capabilities. Policymakers’ Strengths, Weaknesses, Opportunities and Threats analysis (SWOT-analysis) must be complemented with tacit and context-specific knowledge from local “entrepreneurial discovery” processes. Emerging entrepreneurial activity, even if nascent, provides important complementary information and validation for a policymaker’s analysis of the potentially competitively advantaged industries to be established. Policymakers can also consider setting up incubation programs to catalyze entry of domestic firms, or try to attract foreign investors and new ventures by allocating physical space.

Innovation State - Global Perspective

Supporting Emerging Business Ecosystems

1 Analyze the Complexity and Uncertainty of Emerging Business Ecosystems Different business environments require different governance approaches for developing ecosystems. An easy way to understand the main differences are by creating two categories, orderly and the un-orderly. Some business environments, such as the paper industry, have an orderly business environment with specific activities including cutting the trees, transportation of raw materials, creation of paper rolls, cutting and product distribution. Contrasted with new technology ecosystems that have unorderly environments, the relationships among private entities are complex with unpredictable outcomes, which altogether create a chaotic system. These environments need more

decentralized and evolutionary governance approaches. Any emerging technologies such as Artificial Intelligence, Hyperloop Technology, Biomechanics or Nanotechnology are the unorderly, innovative sectors California should be focused on developing. A successful process takes a facilitated, yet decentralized decisionmaking process, open knowledge-sharing, rich dialogue and standardized interfaces between activities, while creating a flexible resource and regulatory environment needed for emerging industries. In other words, the first step for policymakers is gathering necessary data to select an emerging industry or multiple industries that have high growth potential, while keeping in mind the strengths and weaknesses of general demographics, infrastructure and the current workforce.

Innovation State 2016 Profile

Exploring, Comprehending and Creating Strategic Emerging Industries When framing new emerging industries, it is important to understand the changing nature of the new economy. There is growing specialization, mobility and geographical spread of knowledge assets, as well as increased knowledge diversity in the innovation process. Educational diversity paired with a collective learning process can create new business activities and related fields of expertise. This process is called combinatory innovations that create the potential for new business activities and ecosystems emerging from environments where experts from related fields of activity and knowledge can engage in intensive dialogue. The most fertile ground for radical innovations are the ones in which knowledge backgrounds of the collaborators is intermediately diverse (not quite similar, but not completely different either). An example would be matching an aerospace engineer with a drone designer. Both are technically specific, but not the same.

< Design Rooms in Mektory Center - Tallinn Estonia

Diversity propels innovation with experimentation, rational logic and selective processes in emerging business ecosystems. At the individual level, the cognitive diversity can be increased with diverse life and work experiences, broad education background and participation in different knowledge communities. From an ecosystem perspective, cognitive diversity can be supported with shared spaces, platforms and processes that bring together organizations, experts and stakeholders from related knowledge and business domains. Beyond conferences, universities, colleges and industry groups; creating a specific space with the ability for students, practitioners, experts and enthusiasts to utilize, can create radical innovation simply by pure proximity. This phase is focused on creating more than a space, but a shared agenda, that provides direction and focus for decentralized sense making, decisionmaking and development activities in the ecosystem. This shared agenda can be implemented by a leader or a specific group of staff called the Orchestrator(s) or Emerging Industry Facilitator (EIF). These EIFs

manage and support the shared agenda or initiative with ongoing facilitation, coordination, relationshipbrokering, new participant selection, market and technology knowledge, data collection and reporting of investment promotion. In addition, business attraction, international branding and marketing, social events, skills development and the ability to lobby for favorable standards and specialized regulatory environment, can also be critical components. An adaptive EIF needs to focus on the following:

Building trust among participants

Facilitating, motivating and participating in collective learning processes

Providing key collaborative activities

Protecting dissident voices from lower levels of organizations

Challenging unproductive norms and orienting people to new behavior and roles

Refreshing the dialogue with new information and participants Not having an Emerging Energizing the collaboration by highlighting tension between the shared goals and current state of affairs

Innovation State - Global Perspective

EIFS KEEP THE MOMENTUM GOING WHEN ENTHUSIASM WANES

Not having an Emerging Industry Facilitator (EIF), is when most collaboration fails. EIFs are crucial to keeping the momentum going when enthusiasm wanes.

This agenda-setting and organizing phase takes anywhere from six months to three years depending upon the complexity of the goals established by the EIF. During this phase, prioritized development tasks are delegated to multi-functional working groups that include relevant stakeholders. Organizing the work in this way increases the likelihood that collaborative efforts will, “find emergent solutions that simultaneously meet the needs of all relevant constituents, resulting in a more effective feedback loop that enables different organizations to respond in a coordinated and immediate way to new information, enabling a more coordinated response” (Kania and Kramer 2013). This collaboration is most effective when building upon what already exists, honoring current collaborative institutions, including Chambers of Commerce and professional associations.

Establish Cognitive Frames and Economic Interests Including Social Ties

When establishing a new organization or EIF focused on developing an emerging industry, there can be some psychological traps that hamper the effectiveness of the group. The first trap that can be anticipated is the fear that any new technology will disrupt older industries. Secondly, the orderly industries may stand to lose from policymakers‘ focus on new business activities. Social rigidities can also be expected, caused by tight relationships, which prevent a key stakeholder contributions for fear of jeopardizing existing networks. This problem can be overcome through shared information and dialogue. Creating a sense of urgency and emphasizing the gap between a shared vision and current realities can bolster productivity within the group. Furthermore, the development of a new business ecosystem or industry is not a sprint, but a marathon. This process can last a decade or more. For example, in Finland the development of the Finnish information technology ecosystem began in the early 1980’s, but broke through as Nokia led the telecommunications cluster in the mid 1990’s. This evolutionary policy approach does not require a policy revolution; it requires policy boldness. By building a flat framework of participants and a collective space for entrepreneurship, new business ecosystems can emerge. These experimental activities can increase the potential for new business in areas that are related to the upcoming economy. By investing in creating EIFs and identifying emerging technologies now, economic potential can increase exponentially. Using this approach minimizes interference with individual choice and spontaneous order; but rather, it shapes economic choices and direction for an economic resiliency in an increasingly more complex civilization.

Estonia

One of the Worldâ&#x20AC;&#x2122;s Most Digitized Governments

Innovation State - Global Perspective

Estonian e-Government Estonia ranks among the most wired and technologically advanced countries in the world with a high web penetration rate, widespread e-Commerce and e-Government services embedded into the daily lives of individuals.

Estonia has an excellent educational system as well as a highly efficient and well-developed goods and financial market. Ranked 22nd in macroeconomic stability, Estonia demonstrates a strong commitment to advancing technological readiness and success in public finance management. The country’s leading margin ahead of the rest of the region is attributed to its flexible and efficient labor markets ranked 12th globally. These markets have proven to be rigid and less efficient in other countries throughout much of Europe. More so than any other country in Europe, Estonia

has taken public action to improve its future economic standing for citizens. From 2001 to 2011, Estonia increased its R&D funding by 239 percent, the largest increase out of any country in the world. Since 2001, Estonia has created a 6-year strategic plan through the Estonian R&D Council to determine the country’s direction for R&D and innovation. In the latest strategic plan, Estonia set out specific benchmarks to accomplish by 2020. These goals include increasing productivity per employed person to 80 percent of the European Union average, raising the level of investment in R&D to 3 percent of GDP and increasing the share of

The X-Road is Estonia’s Secure Data Sharing Network

160

Databases

Banks

400K Views

45K Views

550 Orgs

500

Databases

1.1M e - ID’s

Innovation State 2016 Profile

Estonian exports in world trade to 0.11 percent. Estonia has become a model for free web access as a development engine for the world. Every resident of Estonia now has an online identity and special passcode, which enables easy voting in elections, income tax return filing, legally binding contract signing, business registration and medical file access. In 2000, Estonia’s Parliament created e-Cabinet, which originally removed paper documents and replaced stationary computers. Now citizens can access all documents through personal computers or phones. The Estonian Parliament has also created the e-Consult system, which enables all government departments to consult directly with parliament representatives. Before e-Cabinet and e-Consult, parliamentary meetings took an average of 4.5 hours. Now meetings take just 30 minutes. Not only is Estonia’s economy more established in the 21st century, the government agencies themselves are adopting innovative practices. E-Estonia is the term commonly used to describe Estonia’s emergence as one of the

most advanced e-Societies in the world. Estonia is an incredible success story that grew out of the partnership between a forward- thinking government, a proactive Information Communication Technology (ICT) sector and an engaged, tech-savvy population. For the citizens of Estonia, e-Services have become routine: e-Elections, e-Taxes, e-Police, e-Healthcare, e-Banking and e-School. The “e” prefix for services has almost become trite in the sense that it is now the norm. Most Estonians would not even consider doing things the old fashioned way, like physically visiting an office when the process could easily be completed online. Almost any activity can be taken care of on the web in just a few clicks.

Estonian e-ID

90%

More than 90 percent of voting-age Estonians hold the secure e-ID, which provides access to over 3,000 government services.

Innovation State - Global Perspective

Estonian Digital Roadmap 25 YEARS OF MAKING ESTONIA FULLY DIGITAL After the collapse of the USSR in 1991, Estonia’s leaders had to reinvent the government. A small country with a small population and few resources, leaders had to establish a successful path to push the country forward.

1991-1996

1997-2000

Estonia Regains Independence

Data Protection Department Created

The “Tiger Leap Project” began in the early 1990’s which lead the Parliament to prioritization of information technology infrastructure. This allowed educational institutions access to computers with Internet. The efforts spawned a seed of techsavvy skills among Estonia’s citizens. The project is still active to this day, creating a sustainable and healthy lifecycle for the IT industry.

With the Internet having just arrived on the world stage, leaders made a conscious decision to use it to build an open e-Society – a cooperative project involving government, business and citizens that would mold the nation’s path to the future.

2001-2005

e-Estonia Begins to Take Shape

1999 - Data Protection Department Created 2000 - Digital Signatures Act

1994 - Information Policy Passed 2000 - e-Tax Filings Began

The digital services trend continued after the new millennium with more integrated e-Solutions added each year, earning the country a reputation as a forward-thinking hotbed of practical technology development for government. 2001 - Introduced X-Road 2001 - Population Registry Opens 2001 - Online Health Services Organization Act

1996 - Personal Data Protection Act 2000 - Mobile Parking Introduced

2002 - e-ID card Introduced

2000 - e-Cabinet Introduced

2002 - Law on e-Election Passed

1996 - First Internet Bank in Estonia 1996 - Tiger Leap Project Created 2005 - First I-voting Elections Online 2005 - e-Police System Introduced

Innovation State 2016 Profile

The goals for Estonia in the coming years have been established in the Estonian Information Society Development Plan 2020, which focuses on ensuring the environment remains ripe for easy use of information communication technology and the creation of smart solutions for decades to come. 2006-2010

2011-2015

2016-2020

First Nation to Successfully Defend Against Cyber Attack

Smart Grid and Countrywide Electric Vehicle (EV) Charging Network

Taking Over Digital Services for the European Union

By 2007, Estonia made more international headlines by becoming the first nation in history to successfully defend against a large-scale cyber attack. Since then, Tallinn has become the home of North Atlantic Treaty Organization’s (NATO) Cyber Defence Centre.

Smart-metering and billing management software was created for the use of utility providers. These systems allow the end user to monitor consumption in real time, compare various packages available to find the best deal, and choose how much consumed energy will come from renewable sources.

One of Estonia’s specific goals is to have 20 percent of the active population of the European Union use digital signatures by 2020, expediting business operations and personal affairs.

In addition, Mobil-ID was introduced, which allowed clients to use a mobile phone as a form of secure electronic ID. Like the e-ID card, it was designed to access secure e-Services and digitally sign documents, but it does not require a card reader. 2007 - First Mobile-ID System Launched 2008 - e-Health System Created

Facility Energy Management solutions enable large real estate owners, including seaports, airports and universities to manage their energy consumption in the most efficient way. These solutions predict when an area’s electricity supply is likely to be strained, and automatically forwards customers bonus offers for cutting consumption during peak times, thereby smoothing usage trends and troughs in the local grid.

2010 - e-Prescription Introduced

2011 - Smart Grid Implemented

2007 - e-Police System Launched

2012 - Country-Wide EV Quick Charging Network Developed 2014 - e-Residency Program Created

Heading into its third decade of e-Society development, Estonia is now the training ground for countries that want to introduce powerful solutions such as I-voting, e-Cabinet, e-Health systems and more. Over 40 countries around the world are using Estonian e-Solutions.

By taking a strategic approach in the early 1990’s, and with new systems constantly in development, Estonia is the most futureready country going into the next decade.

Innovation State - Global Perspective

Estonian e-Services Today, there are over 3,000 Estonian government services that can be accessed and completed online. This was made possible by establishing a solid foundation over 25 years ago and focusing on four principles. Decentralization - With no central database, stakeholders were able to choose a system and independent timeline.

Interconnectivity - All the elements in the system must be compatible with one another.

Open-ended Process - The program allows for the development of e-Services to be a never-ending reiteration of improvement.

Open Platform - Any institution can use the same public key infrastructure to access infrastructure and software.

e-ID Card

As of January 2012, more than 1.1 million people in Estonia (almost 90% of inhabitants) have e-ID cards. The Estonian e-ID card serves as an identity document, and within the European Union, a travel document. In addition to its physical use, the card is used as proof of ID when utilizing online services.

e-Elections Since 2005, residents in Estonia have had the opportunity to vote online. Using an e-ID card or mobile ID, a voter may cast a vote anywhere online. Held a few days before the paper balloting process, I-voting is the most comfortable way to vote. An e-ID card and PIN establish the voter’s identity, but the vote remains anonymous, since immediately after voting, the vote is separated from the voter’s connected digital signature.

e-Tax Board Estonian citizens can file income taxes online using Estonia’s e-Tax Board, which offers a pre-completed form that makes it easy and fast to submit a tax return. The system identifies a person with the help of an e-ID card or mobile ID. A citizen must only log into the e-Tax portal and check the information automatically assembled. The service has become so popular among Estonian residents that, in 2012, over 94 percent of income tax declarations were presented through the e-Tax system.

National Estonian e-ID Card Inside 16 Kb RSA crypto chip contain 2 private keys - Authentication certificate - Digital signature certificate with personal data file

Issuing Authority: Estonian-Citizenship and Migration Board Service Contractor: TRÜB Switzerland Start of Issuance: January 1st, 2002 Conformance with ICAO Doc. 9303 Part 3

Innovation State 2016 Profile

e-Estonia at a Glance •

80 percent of the population aged 16-74 years

use the Internet (Statistics Estonia, 2013).

•

There are more mobile phone contracts than

residents - 139 per 100 people (Estonian Competition Authority, 2011).

•

98 percent of households with children

have Internet capabilities (Statistics Estonia 2014).

•

98 percent of banking transactions in

Estonia are conducted through the Internet.

•

Estonia is completely covered by digital mobile

phone networks.

•

All Estonian schools are connected to the Internet.

NEW

e-Business An entrepreneur may create a company in Estonia through a completely bureaucracy-free process directly at a personal computer. The e-Business portal’s record for the set-up and registration of a company is 18 minutes. Creating a company via the Internet requires only an Estonian e-ID card. Citizens of other nations can also electronically register businesses in Estonia.

e-Residency A transnational digital identity is available to anyone in the world interested in administering a location-independent business online. E-Residency additionally enables secure and convenient digital services that facilitate credibility and trust online. Digital signatures and authentication are legally equivalent to handwritten signatures.

NEW

e-Gov Academy The e-Governance Academy is a non-profit information society, development and analysis center that aims to share Estonia’s experience in the areas of e-Government, e-Democracy and information technology education. More than 700 individuals from 36 nations have taken part. Estonian experience and knowledge have aided many nations in making the election process more transparent, Democratic and less encumbered by bureaucracy.

Innovation State - Global Perspective

California Takeaway There are three principal takeaways from Finland and Estonia that have application in California. Each takeaway is focused on Californiaâ&#x20AC;&#x2122;s government becoming a more economically strategic based entity, creating the fundamental building blocks for the 21st century.

Creat e a C ali forn i a I nn ovat io n Fun di n g A g en cy

California does not have an institution which directly invests in technology, startups or research projects. However, modeling a California innovation funding agency after the Tekes model would create more opportunities in economically depressed areas. With any Tekes funded project, funds must be raised from the private sector. Therefore, Tekes requires all projects to have additional parties financially involved to reduce overall risk. There are other ways to boost innovation within a region by creating additional economic and tax incentives for companies performing the necessary and r isky research and development needed for future products and services. One example of a similar program (created in 2000) under the leadership of Governor Gray Davis and the University of California (UC) are the Institutes for Science and Innovation . These Institutes are key programs for helping UC Graduate students bridge the gap between academia and market realities. Two of the centers are; California Institute for Quantitative Bioscience (QB3) and California Institute for Telecommunications and Information Technology (Calit2) - are directly connected to the UC campuses in UCSF, UCLA , UCSC and UC Berkeley. These institutes combine private and public entities into creating innovative products, with a very specific scientific focus. These organizations are a prime example of public and private partnerships t hat promote truly innovative products and services. A broader organization that takes into account a larger spectrum of innovations should be created. California has numerous long-run problems, and creating a Tekes like organization to focus and invest in these issues would pay huge societal dividends.

Create a Long-Run Planning Entity Entitled CalVision Based on an Endowment Funding System One organization that shapes Finland’s future is SITRA , the country’s premier economic think tank that entails “anticipating social change and its effects on people and develops new op erating models which stimulate business that aims at sustainabl e wellbeing,” while maintaining a specific scientific focus toward its economic future. SITRA’s focus not only encompasses the economy, but the well-being of its residents. It is an organization that takes into account the human factor of its citizens as it develops strategies for future growth. Established in the late 1960’s, SITRA was granted $20 million in Nokia stock to start the endowment. After 56 years, the endowment has reached over $700 million. Further information on SITRA can be found at sitra.fi/en. A major problem for California’s governance is that it consistently trails a decade behind current private sector practices. California should take a step further than Finland’s SITRA and create an organization that focuses on innovating California’s education, economy and society. CalVision would function as more than a think tank , proactively engaging all regions of California.

Innovation State - Global Perspective

2 T h e mi s s i o n of Ca lV is io n is to c r e at e a st ro ng co nnec tio n wit h th e p r i vat e s ec to r to develop a c t i o n a b le innovative strategie s 23

fo r

C a li fo r nia’s

Create an extremely secure e-ID program that allows the private and public sector to confirm online identities, thus building the fundamental base for all online government services to be accessed.

edu c atio nal

syst e m, b u s ines s develo p m e nt and

g ov er nm ent

innovation .

A fundamental step in making online

give

government services available is by

edge

creating online secure identities, or

and

e-ID; for all residents. Online identities

p ro g ra m s that will co ntinu e to

have been pioneered in Estonia since

s u st a i n

the late 1990’s. Now 90 percent of

H av i n g

C alV is io n

C a li fo r n i a on

d ev e lop ing

wo u ld

lea ding p o lic ies

C alifo r nia’s

r ep utation

a s a n i n n ovative wo r ld lea der.

the population in Estonia holds an e-ID card. The fundamental base for all government services has been it’s ability to create a secure identity card with very little data compromised. This e-ID program gives all residents an e-ID card with one public e-ID signature and secure RFID chip, along with a secondary private signature to

Innovation State 2016 Profile

3 sign contracts. In addition to its physical use, the card is used as proof of ID when utilizing online services. In other words, the e-ID card is the key to almost every innovative e-Service in Estonia. Inside the card is a chip that not only holds information about the cardâ&#x20AC;&#x2122;s owner, but also two certificates. The first certificate is used to authenticate identity and the second renders a digital signature. Internet banking, participation in e-Elections, buying public transportation tickets and much more can be accomplished using the e-ID card. The e-ID card is secure as PIN codes are required for the cardâ&#x20AC;&#x2122;s operation. In addition to the e-ID card, a resident can use a mobile phone as self identification for online services; thus eliminating the need for an e-ID card reader. A mobile phone can act as a card and a card reader at the same time. California residents can significantly benefit from utilizing an e-ID card to access government services more efficiently.

Innovation State - Global Perspective

NOTES

Innovation State 2016 Profile

1201 K Street, Suite 750 Sacramento, CA 95814

(916) 801-2162

bg@innovationstate.org

Innovation State is a 501(c)3 non-profit organization, focused on developing long-run economic strategies to advance Californiaâ&#x20AC;&#x2122;s Innovation Economy.