Developing e-Development Projects

Nagy Hanna has been a strong proponent of e-Development projects in the World Bank. Such a project is intended to provide donor agency support for the transition of a developing nation to an information society. To date, support for ICT by donor agencies has largely been parceled out in unrelated pieces, each project seeking to make a local improvement through a specific ICT innovation. Nagy has proposed a more integrated approach, combining a number of synergistic innovations to advance the entire process of institutionalization of ICT in the society. Such an institutionalization might be termed “e-development”. One of these Nagy type projects would therefore be termed an “e-development project”. There is, of course, no cookie-cutter pattern for such a project, and the Bank is exploring approaches to such project development.

A first example of such a project is the e-Sri Lanka project approved in September 2004. This project is still in the relatively early stages of implementation, and it would be premature to consider its overall success. Still, there are indications that the knowledge-based and collaborative process that went into its development has borne fruit. The project has already survived two changes of government, and the agency created by the project has not only survived but been upgraded administratively by the new governments. The project also proved sufficiently flexible to respond specifically to the December 2004 tsunami relief and restoration efforts, and the administration has been able to adapt the design to changing circumstances.

I agree with Nagy that developing nations will benefit more from the revolution in information technology with a holistic approach. To benefit most, a nation ought to simultaneously strengthen ICT infrastructure, build an ICT literate workforce, build an ICT industry and an ICT enabled industry, restructure economic systems to better utilize the potential of ICT, and reengineer organizations for that purpose. An appropriate policy environment and appropriate institutions would be necessary for all these things to happen, and perhaps even more importantly, a coalition of key interest groups must support that policy and its implementation.

However, donor agencies fund “projects”. Thus the e-development project designer is faced with the problem of developing a project that stimulates and fits within a nation-wide, multi-sectoral framework. The e-Sri Lanka project is a leading example of such an effort, and therein lies it importance for the development community. Indeed, the e-Sri Lanka project development process appears to have contributed to the development of institutions, policies and coalitions needed for the broader national effort as well as for the project approval and implementation.

Progress in the Real World

Some enthusiasts portray e-development as sure path to social and economic development. ICT expenditures constitute only a few percent of GDP in even the most advanced nations. Thus it asks a lot for an e-Development strategy to lead overall economic and social development.

Ideally, e-Development would take place in the context of an overall policy and institutional environment conducive to rapid national economic growth and development and in the context of strong pro-poor policies. Unfortunately, such environments are seldom found in developing nations. (Where they are, of course, a truly holistic e-Development strategy is possible.)

It is possible, however, to produce enclaves of development -- where the resources, policies, and institutions permit –- even in the absence of a policy and institutional environment optimally conducive to overall development. Indeed, there are important cases of economic development in which a set of policies and institutions existed that were barely adequate for the enclave at the beginning of a process, but were improved as the enclave developed.

So too, it is possible to produce e-development enclaves even when lacking an overall environment conducive to growth and poverty reduction. Thus, India has developed a software export industry and ICT enabled service export industry as enclaves, while there remain major development problems in other sectors. Indeed, India’s ICT and ICT-enabled industries appear to be serving as motors of more general development, generating not only investment and employment directly, but with significant spillovers to other sectors.

Similarly, e-government initiatives can be successful even when more extensive reforms of the government are not feasible. ICT innovations in the health and education sectors can yield significant benefits in reduction of aspects of poverty, even when overall improvements in those sectors prove recalcitrant. ICT innovations in rural development or the SME sector can be successful even in the absence of comprehensive strategies for rural or industrial development.

The issue in most countries is then to build a bundle of e-development initiatives sufficiently broad to realize synergies, and sufficiently important economically to contribute to overall growth and poverty reduction, while sufficiently narrow that the necessary resources and support are available for their successful implementation.

The Institutionalization of ICT

There is an extensive literature dealing with the introduction of ICT into large organizations which seems to show that most innovation projects fail. There is also a literature which indicates that ICT has rapidly transformed large organizations and resulted in the restructuring of industries. There is an apparent disconnect, but it can be bridged by understanding that the projects are linked in a process of organizational transformation. Even “failed” projects leave a legacy in a learning organization, and the sequence of projects has a cumulative transformational impact.

One implication of this situation is that it is difficult to do accurate cost-benefit calculations for e-development projects. Projects leave a residue of physical and human capital and of organizational and social capital which are seldom explicitly defined in their objectives, and which are difficult to measure. Because of these externalities cost-benefit estimates and project evaluations tend to significantly underestimate the benefits of ICT projects.

I would suggest that, considering ICT institutionalization as a process, there are important strategic and tactical elements in choosing and sequencing projects. Thus early projects in the transformation of an organization should be selected with high probability of success and high visibility (especially for key stakeholders). It is likely that some early projects will be seen by stakeholders as experiments, and not institutionalized even if technologically successful; this too should be taken into account in managing the institutionalization of ICT. E-development efforts should be planned with this in mind.

So too, the process of e-development is probably more important that the e-development project. The processes of building partnerships and coalitions, and of creating local capacity can leave a lasting legacy that has benefits far beyond the implementation of successful project loan activities.

E-development is a process of creative destruction. The entry point for poor nations into ICT exporting industries and ICT enabled industries has typically been based on factors such as low wages and enabling linkages with foreign centers of excellence and innovation. With successful e-development, however, the initial success factors will tend to diminish in relative importance, and other factors will have to be strengthened to supplant them. Thus organizational capacity, development of clusters of firms with technological spillovers among them, penetration into new markets and an increasingly skilled workforce must be considered. To some degrees the new firms and activities will emerge from the creative destruction of the earlier successes. This creative destruction process seems heavily dependent on the development of an entrepreneurial culture and on a policy environment which encourages innovation and allows failure. E-development efforts should also be planned with this process in mind.

Teleonomic versus Teleologic Projects Processes

The concept of central planning for national economies has been largely discredited in favor of market approaches that depend upon a “hidden hand” and “creative destruction”. The term “teleologic” refers to goal directed activity, and has been extended to mean activity that is planned to reach a goal. The term “teleologic” refers to processes that give the appearance of being goal directed due to feedback and evolution rather than to planning per se. Thus the fall of Communism and the victory of Capitalism has been seen as a triumph of teleonomic approaches over teleologic processes in the management of the economy. Of course, modern economies use planning together with market mechanisms and “creative destruction.

The World Bank, like many other donors, relies heavily on planning. However, I would suggest that e-development projects should use feedback, evolution, and flexibly-managed learning organizations to complement planning! The teleonomic approaches should be explicitly planned into the project design. The project design should be seen as a living thing, with processes included for further elaboration, learning, mid-term corrections, and evolution. The teleonomic processes should be recognised as a design feature rather than, as sometimes occurs, as a design failure.

Thus, e-Sri Lanka complemented the pre-planning in effective ways. It emphasized the use of grants in sub-programs which resulted in evolutionary processes – diversity in ideas were promoted in the grant application process, strong selection was promoted in peer-review of the grant applications, and the process was iterative. So too, it promoted flexible management in learning organizations. It sought strong monitoring and evaluation mechanisms that provided feedback data on project performance, and allowed project corrections.

In Sri Lanka, there were changes that could not be planned for in advance, but they did not derail the project. Moreover, the information revolution is taking us into new territory, and it is not easy to plan for the economic and social transformations it produces. Complementing the teleological planning process with strong teleonomic processes is allowing the project to respond to unforeseen conditions and situations.

Decision Making Versus Consensus Building

E-development is a social and political process involving coalition formation; as such it may be more important to find a process that will achieve a working consensus in a sufficiently powerful coalition of stakeholders than to maximize some kind of theoretical rationality. The World Bank or a government e-development agency may develop a plan analytically with carefully balanced priorities and schedules. However, if that plan can’t muster adequate political support to be approved and implemented, and adequate political support to be maintained in the face of emergencies and changes (that so often take place in developing countries), then the plan won’t be worth much.

Legislative bodies tend to develop initiatives through a process of compromise, in which various parties are willing to give up some of their preferred alternatives to achieve a bundle alternatives that will have sufficient backing to be approved in a vote. The end result may well have earmarks that won’t pass close scrutiny, and to be more like a committee’s wish list than a plan. Still, as Voltaire said, “the ideal is the enemy of the good”. A good law that passes is better than an ideal law that languishes for lack of adequate support.

So too, developing an e-development strategy and a project to implement that strategy should be seen as a political process involving compromises among various interest groups. To be successful, it must be supported sufficiently strongly by a coalition of factions to have a chance of implementation. The e-development project design process must be such as to simultaneously retain enough rigor that the project elements will be likely to achieve the project’s goals, and to satisfice enough of the stakeholder interests to catalyze an adequate coalition of supporters.

This may be more difficult than it sounds. E-development can threaten vested interests such as those of existing telecom agencies and ministries, and raises expectations of grass roots activists that may be hard to satisfy. Workers who will have to learn ICT skills to perform in reengineered organizations may be fearful, and those for whom automation will require job shifts more than fearful. The process of creative destruction involved in moving up the chain in ICT industries will tend to dissatisfy those in the destroyed enterprises. The corrupt will usually not welcome the transparency that e-government activities will seek to foster. Yet experience has shown that it is possible to create sufficient social and political support for e-development to work.

Knowledge Based e-Development Project Planning

In-depth knowledge and understanding of the both the local situation and the process of e-development is a fundamental requirement of e-development project development. For example, developing a coalition of the key stakeholders requires knowing who those stakeholders are, which in turn requires an understanding of the dynamics of change in the national systems involved in e-development. So too, developing a knowledge-based partnerships with key stakeholders effectively requires the outside donor having a considerable base of local as well as e-development knowledge to begin with.

E-development is a process, and it is important that e-development activities be appropriately scheduled. I would suggest, for example, that the initial efforts be pilot projects chosen to have high benefit to cost ratios, of modest proportions, without extreme technical difficulty. They should be visible so that key stakeholders will learn from them. Since such pilots are often not institutionalized, much less scaled up, due to organizational inertia, I would suggest that the initial pilot projects might be chosen not to be too central to organizational success. Funding such quick-results pilots requires knowing which pilots are likely to yield positive results quickly, which are likely to be influential in the minds of the stakeholders they are to influence, and having a knowledge-based strategy for using the pilots in the project and program development process.

Fortunately, the donor agency does not need to possess all the knowledge and understanding described above. It can employ consultants and fund studies to complement its staff’s initial knowledge and understanding. However, more important is for the donor agency to partner with local entities who can complement its knowledge and understanding. Most if not all developing nations now have reached some rung on the e-development ladder, albeit a low rung for the least developed nations, and have ICT leaders who understand the national e-development situation. Partnering with these leaders will help to tap their knowledge and understanding of the situation, and will start to form the coalition that will be required for e-development success. Indeed, the donor agency offering the carrot of external financing and external legitimization may be just the thing to catalyze the formation of such a coalition.

The implementation of a project is a far longer and more taxing process than its design and approval. Involving local experts in the design not only improves the knowledge base, but it gives them a stake in project success, and tends to coopt them into long term support for the project.

The analytic effort used in designing the e-Sri Lanka project was more serious than that usually undertaken for a donor project, and followed the precepts described above. It also involved members of the Washington and Colombo team that would implement the project. In doing so, it built the team contacts that would be important over the long run, provided the team with a useful feeling of ownership for the project, and helped those team members absorb and internalize knowledge that would be invaluable over the years in project implementation.

Funding Risky Projects

Developing countries live in precarious situations. Countries have low per capita income and wealth because they have failed to thrive economically consistently over the long term -- gains made in one year are lost in another. Developing nations have little of the complex redundancy and economic cushion that enables rich countries to ride out disasters and crises.

The poorer the country, in general, the less it has adopted ICT, and the less experience it has utilizing ICT to enhance social and economic development. Such lack of experience in the sector increases risks of failure of ICT initiatives.

These factors do not lend confidence that a developing nations will be successful in rapidly adapting to the information revolution.

On the other hand, countries have little option but to try again. Moreover, donor agencies do accept the risks of funding projects in less developed nations. They fund not only humanitarian projects, but development projects. They make the decision that the potential benefits merit acceptance of the risks involved, even when those risks are significant.

Experience over recent decades has demonstrated that there are high rates of return to investments in ICT in many sectors, and that ICT investments can play an important role in reducing many aspects of poverty. Moreover, there are obvious synergies among many ICT initiatives (as well as less obvious ones).

Experience in the United States and other developed nations has demonstrated that holistic e-development is an effective (implicit) strategy for enhancing overall economic growth, and experience in several developing nations has demonstrated that ICT-enclave development can also be an effective growth strategy.

I would suggest that donor agencies should accept the risks involved and fund e-development projects, even when those projects are exploring unknown territory, and even when the national policy and institutional environment is not ideal.

However, the risks can be ameliorated by knowledge-based approaches to e-development project formulation. Partnerships among experts from the international donor community and key stakeholders from the domestic community of the nation involved can provide the needed analytic base. Indeed, the partnership approach should extend to explicit building of the formal and informal coalitions that will be needed for project success. The process should be used to build a team for project implementation, and to coopt key stakeholders for support of the project. Moreover, teleologic approaches should be complemented with unusually strong inbuilt teleonomic approaches to project implementation.