Project Management with High Complexity and Uncertainty in a ...

2015 Proceedings of PICMET '15: Management of the Technology Age

Project Management with High Complexity and Uncertainty in a Government Organization: a Case Study of the Sao Paulo Tax Invoice System Development Francisco M. Matulovic1, Abraham S. O. Yu2, Bruno V. L. Paschoal3, Paulo T. Nascimento1 1

2

Universidade de Sao Paulo, Faculdade de Economia Administração e Contabilidade - Brazil Instituto de Pesquisas Tecnológicas do Estado de Sao Paulo, Diretoria de Inovação. Butantã - Brazil 3 Hertie School of Governance, Germany

Abstract--This case study analyzes the development of an incentive system to avoid fiscal evasion. It is named Sao Paulo Tax Invoice. It is an innovative way to use Information Technology (IT) to enforce tax collect in the retail sector. It was started in 2007 by the State of Sao Paulo Treasury. The government stimulates product buyers to ask for a tax receipt, at the checkout on retail stores, by returning to them a percentage of the tax paid by the store. Every six months the treasury calculates a tax devolution and consumers can register online and choose to receive the money directly on a bank account or through a state's tax deduction. Another incentive is an automatic lottery draw system that distribute money prizes and rewards to assiduous users. These became the motto of the marketing campaign, "the more you ask, the more you gain", with massive advertising, including television commercials, resulting in more than 17 million users registered. The objective of this paper is to address this initiative origin and its development process. Our results show that due to the political importance and many uncertainties involved, the project leader adopted a non conventional project management approach. Studies suggest there was a 22% increase in fiscal revenue in first years, indicating the system’s success.

I. INTRODUCTION In this paper we discuss a case study of an innovation project management, occurred in a governmental institution, that adopted the improvisation approach. The objective of this work is to understand how was the process of developing the Sao Paulo Tax Invoice System, by Sao Paulo State Treasury, highly important project, expected to increase tax revenues of the state. The launch was a campaign promise of the elected state governor Jose Serra, in 2006, after the success of similar initiative during his term in Sao Paulo city, he promised to bring the system to the state level. In 2010, with the propose of bringing the system to the federal level Serra run for president, finishing in second place, but in 2014 he was elected senator for the state of Sao Paulo and recently introduced a propose to create the Brazilian Invoice project, that encourage all states of the federation to adopt similar programs. [15] To analyze the project development process we made a case study in Sao Paulo State Treasury, interviewing members of the team responsible for the development and launch of the system in 2007. We made interviews with those involved during the concept phase of the project or phase FFE, the creators of the architecture, people who have taken technology selection decisions and system architecture,

mostly Tax Income Agents with expertizing in Information Technology. We present the context in which this project was carried out and describe the management process and the project’s results. Literature on improvisation is based on empirical studies of innovation projects in private companies, examples are [1] and [2]. On the other hand, in governmental agencies, the actual process of decision making has been described as “muddling through”, a sequence of slow and conservative incremental moves to effect changes [16] We have detected that this project had importance for the leaders and was treated with high priority by the government, for its implementation they used the approach known as "experiential", where a project manager has autonomy and experience to make decisions quickly, accelerating the development speed [1]. We started discussing the methodology used to prepare the paper, after the present revision management literature of high complexity and uncertainty projects, followed by the case study, first presenting the peculiarities of the tax system in Brazil and Sao Paulo States Treasury innovation process, then what is the Sao Paulo Tax Invoice and how it was managed. We close with a discussion of the case, a critical analysis of the data collected by the optical of previously mentioned literature. II. OBJECTIVES Address (1) what strategies government can use to innovate and deal with top priorities projects, describe (2) Sao Paulo State Treasury innovation process (3) how the program Sao Paulo Tax Invoice was conceived and built, its origin, how was the phases Fuzzy Front-End (FFE), development, prototype and scale-up. (4) Analyze how they dealt with uncertainties using literature of high complex and uncertainties project management III. METHODOLOGY We organized our available resources to get as close as possible to our objectives. To focus on the organization process we preferred more social sciences approach, using mixed qualitative methods and Grounded Theory. To get the first contact with the subject to be studied and to start collect data we preferred case study methodology [3]. The case study methodology is indicated to get data

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2015 Proceedings of PICMET '15: Management of the Technology Age TABLE 1 – INTERVIEWS DETAILS name

education

occupation

2007 project function

interviews data (duration)

George Hermann Rodolfo Tormin

Bachelor Engineering

Federal Income Tax Agent, since 1986

Project champion, coordenate production

2014/11/03 (30 min)

Renato Pei An Chan

Bachelor Chemical Engineering State Agent *, since 2002 (Unicamp)

Do not apply 2014/12/03 (1h 30min) (Coordenator since 2014) 2015/01/15 (1h)

Alvaro Ribeiro Botelho Junqueira

Bacharel Computer (UFRJ) Master in Administration (FGV)

Create business rules

2015/01/06 (1h 30min)

Newton Oller de Mello

Bachelor Electrical Engineering State Agent *, since 1998 Vice Executive Director, Board of (USP), Tax Administration in 2007 Bachelor Business Administration (USP), Master Business Administration (Mackenzie)

Create business rules

2015/01/07 (1h 30min)

Daniel Freire Gomes

Bachelor Computer Science (USP)

Software planning and development

2015/01/15 (1h 30min)

State Agent *, since 2002

State Agent *, since 2002

2014/12/04 (1h 30min)

* State Agent = Income Tax Agent of Sao Paulo State Treasury

quickly, with only few months available, we did 1 non structured interview and 5 semi-structured interviews with important members of the project, in december 2014 and january 2015. Most of them were participants in the first year of the project, including project leader George Tormin, Treasury vice-secretary in 2007, responsible for the execution and Renato Chan, actual coordinator, that did not compose the initial team, but gave us actual information and perspectives for the future of the program and Treasury. We also used 24 interviews, with a variety of people related to the project, representants from government, parlamient, retail sector, and more, from a previous research by one of the authors from this paper, Bruno Paschoal, realized during the period between 2011 and 2012. We used document analysis methodology, reviewing the principal laws relative to the program, and researcher triangulation methodology, with collaboration of an Sao Paulo Tax Invoice researcher, author of published papers about it. This preset work is part of an ongoing research effort, based on grounded theory, we are still collecting data and planning analyzing it from different perspectives to develop concepts and possible reach new administration academic theories. [3] These work is sponsored by Brazilian National Council for Scientific and Technological Development (CNPq, Portuguese: Conselho Nacional de Desenvolvimento Científico e Tecnológico) and is part of an ongoing research effort. IV. LITERATURE REVIEW In traditional project management, as proposed by the PMI and other similar approaches, the separation of planning and execution is an implicit assumption. In this rational and linear approach, managers do the planning first and then carry

out the execution. However, as early as [1], had discovered that the “experiential” approach of project management accelerated R&D projects in a technologically dynamic industry such as computer manufacturing. The experiential approach is based on multiple design iterations, extensive testing, frequent project milestones, improvisation and flexibility. In order to practice this approach, these projects had a powerful project leader and a multifunctional team [1]. In the experiential approach the activities of planning and execution can be done in parallel or even in a reversed sequence. This approach is also known simply, in the literature, as improvisation and it is defined as “the degree to which composition and execution converge in time” [2]. That is, the planning and execution take place concurrently. The components of improvisation are: creativity, intuition, bricolage, adaption, compression (of timescales), innovation, and learning. Researches have exposed that in practice many project managers have intuitively adopted experiential approach or improvisation, but without an understanding that there is empirical support for these actions [4]. The main reason that improvisation is required is that many events are unpredictable in managing innovation projects. The practice of project management has developed the key steps in risk management: risk identification, risk prioritization and risk management (e.g., risk mitigation and contingence action). However, these steps assume that the relevant probability distributions are known. But if there are unpredictable events, then by definition, project managers cannot even identify the respective probability distributions and therefore other approaches are needed. Researches in innovation management have developed management approaches for projects involving higher level of uncertainty such as probe and learn [5] and selectionism [6]. Probe and learn is basically another term for learning from trial-anderror. Selectionism recommends the execution of parallel

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tests and makes the selection afterwards. These researches provide methods or approaches on how to improvise. In a more abstract discussion about knowledge management, organizational learning and prescriptive methodologies such as decision analysis [7] divided decision context into four spaces: in Known Space, the relationships between cause and effect are well known by the decision makers. Use of database systems, forecasting models and simulation softwares are recommended. In the Knowable Space, the relationships between cause and effect are not clearly understood, there is a need to collect and analyze additional data. Operations research models such as linear programing and more elaborated decision analyses are recommended. In the Complex Space, there are many interacting causes and effects, there is no model to predict consequences and every situation has unique factors. In this situation, French’s [7] recommendations are: use expert judgement and simpler models such as decision trees. In Chaotic Space, decision makers have no previous experience in the problem and therefore unable to identify cause and effect. In this situation, the recommendations are trial-anderror or “poke it and see what happens!” This brief literature review shows that in a project management situation where there are important unpredictable events, over the project life, or managers have low knowledge over the market and technology, improvisation is a recommended approach. This approach suggests that the top management should be flexible to deal with unexpected events, should be prepared to carry out multiple trial-and-error tests, and provide the project leaders with enough autonomy in managing unknown unkowns. V. BRAZIL'S TAX SYSTEM AND SAO PAULO STATE TREASURY According to Constitution, Federative Republic of Brazil is formed by Union, states and Federal District, and municipalities, that share different responsibilities on Nation Tax System. Political-administrative autonomy, grants each level of government the right to institute taxes, fees (corresponding to utilization of public services and police power) and contributions targeted at improvements (resulting from public works). [8] Union, the top level and central administration, controls import (II) and export taxes (IE), taxes on manufacturing (IPI) and for income (IR), and many others less importants. States receive an annual tax for car licensing (IPVA) and the most important and focus of the study, Tax on the Circulation of Merchandise and Interstate and Intermunicipal Transportation Services and Communications (ICMS), that work similar to a VAT system. Principal taxes municipalities administer is tax on services of any nature (ISS) and land (IPTU). [8] Consumers in the purchase of goods and services is subject to two types of taxes, one for goods and one for services, and the state's responsibility is the first and the

municipality's responsibility the second. The tax on services follows a simple formula, a fixed percentage of the value of tax receipt. The rate on products requires a more complex formula is used in Brazil an added value system where each link in the production chain is subject to the payment of taxes, therefore, to calculate the amount of taxes paid for goods, it is necessary to calculate how much is paid in each link. The Tax Substitution regime is a legal institution by which is attributed to a particular taxpayer the responsibility for payment of the tax on the taxable event practiced by a third party. Simply put, it centralize tax collection from supply chain on the central company, e.g. instead of every gas station pay taxes, the refinery, central link in the chain, make the payment for the entire chain and receives credits back from their suppliers, gas stations. It's a fact that Brazil has a high tax evasion, on all taxes from all levels, according to an interviewer the retail sector on state of Sao Paulo can reach high evasions taxes, what can possible drastic reduces ICMS collect and states income. Retail sector can make sales without paying taxes, if the store does not process tax receipts, resulting in short-term higher profits. Encouraging consumers to ask for tax receipt has been achieving increase in tax collection. [9] [10] Sao Paulo State Treasury is responsible for the tax collection and monitoring for evaders, it has highly trained professionals and invests heavily in information technology. As the State of Sao Paulo accounts for approximately one third of the national GDP, hence is the largest state in terms of state taxes collected, demonstrating the importance of this department to the State and nation. According to our respondents, there has been since 1998 modernization programs with IDB resources, is related that the actions of the Secretary Yoshiaki Nakano, treasurer and secretary of the Sao Paulo state government from 1995 to 2001, caused profound impacts in the department. Before the first modernization program there were still workers using typewriters. The modernization included qualifying the staff and improve the technological environment, in line with what appeared to be occurring in other developing countries [11]. One of the consequences of these reforms was the valorization of the post Income Tax Agent, main function, the career plan was redesigned, considerably increasing wages and prestige in tenders, bringing very qualified personnel, mostly educated in the best universities. Was prioritized the use of information technology, then another important change was the opening of special places for agents with expertise in IT, with different tasks such as software design and development of customized systems. The last tender was in 2013, with total of approximately 35 thousand applicants for 885 jobs, including 103 positions specific to IT. The department invests in training its employees, it was reported that in 2014 was created a Masters in Tax Administration, including participation of people in Spain. Each year the department sends officials to international conferences and encourages benchmarking and adoption of

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best practices. For the development of innovative projects the Treasury encourages training and courses and has service contracts with the world's largest technology companies such as IBM, Oracle and Microsoft, and the availability of resources for the purchase of software, hardware and hire consultants or software factories. Many projects entered in the wake of this process and consolidated within the state of Sao Paulo. There were promising attempts to structure the innovation management, Treasury was developed a projects funnel or stage-gate model [17], with well-defined stages, passing by opportunity, idea, initiative, leader of the project, execution and finalization / maintenance. First of all opportunities were registered in a database of ideas, where agents could provide suggestions and have a formal process for evaluating each suggestion, giving feedback to all the ideas and the proposal to reward the best, which came to rely on more than 100 ideas, and some in fact been implemented. The first gate would be registering the opportunity, which would become an idea in the database. The second gate was the formal evaluation of board, which approved between 30% and 40% of ideas that could become initiatives. The third, and problematic, gate was the attribution of a leader or champion of the project, with high mortality rate, being reported low interest for possible interested in leading initiatives, it seems that if no one has taken the lead the idea sink. This low index of projects generated in fact by this formal process of evaluation of opportunity may have been a reason for discontinuation, or reformulation, of the practice. That was the closest practice they got for a more systematic approach to innovation management. Currently innovative ideas can arise dispersed within the organization, but there is a core responsible for planning and strategic planning, who summarizes planning and innovation and

decides which projects will be executed. Many innovative projects have been developed since Treasury first modernization program in 1998, respondents highlight Electronic Address from Taxpayer programs (DEC), Authenticator Transmission System (SAT), among others. The best use of the Information Technology department is attuned to what is happening in other countries, especially developing and in developed where it detects a significant change in the tax environment thanks to the advent of information technology, pointing a global automation trend tax processes through the use of computers. [11] The current system coordinator reported that the Treasury has a different culture than is commonly sees in public departments, which he calls constructive discontent, showing a more pro-active attitude of the staff front the difficulties in solving problems, one important indicator of the culture of innovation. VI. SAO PAULO TAX INVOICE In the year of 2007, the Treasury State of Sao Paulo launched the Sao Paulo Tax Invoice system, conceived to promote citizenship by incentive consumers to asks for tax receipts with Social Security Number (SSN), CPF in Brazil, and share transaction information with government, including location, date, time, value and even the itens bought, to ensure the store pays taxes.[9] [10] [12] Today there is also a website for consumer to check all tax receipts processed with a complaints system that permit to report evaders. If the store did not transmit the data to Treasury, government can't devolute a percentagem from ICMS tax paid by the store, back to consumers. Is possible to an online complaint and report the evader, a fast way to interact with government electronically [12].

Figure 1 – Registereds users growth

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The Sao Paulo Tax Invoice program has changed tax design in many levels by adding one more tax procedure and a legal obligation to retail sector to use it. Most of interviewers saw the initiative as citizenship promoting, by providing people new ways to interact and help Treasury in tax collection, what can provides better health care and education services, as Brazil has a large welfare system, a lot of people depends on it. Since its launch in 2007, the program has steady growth in user numbers, it can be seen from the graph above that the program currently has nearly 17 million users, thousands of new registrations per month, indicating that the public is interested in the program and that its future may be even more promising. VII. DEVELOPMENT PROCESS OF SAO PAULO TAX INVOICE SYSTEM Prior to his election as governor in 2006, Serra was mayor of the largest city in Brazil, Sao Paulo, winning the municipal elections in 2004, ruling the city in 2005 and 2006, breaking its mandate to assume the post of governor of the State of Sao Paulo in 2007. Mauro Ricardo was his Secretary of Finance at City Hall and George Tormin was his right arm, the two were responsible for municipal project implementation with similar name. In State of Sao Paulo, as Treasury Secretary and Vice-Secretary, they were now in front of the statewide initiative. Both are Federal Tax Agents allocated in the states in which they operate, they have a large history of work together, for over twenty years, and have many projects together in the area of Information Technology and Systems Development. Serra was intended to quickly launch the project and political will was not enough, according to one interviewee, reporting of generic way how the project management generally occurs in a public departments, "for the government only political will does not solve nothing, is necessary, but not sufficient, the department must have management capacity". The desire of Serra and his team was to quickly launch the project, but to meet a tight schedule, the project would have to be supported by very skilled professionals with higher technological infrastructure. For an outsider observer they only have to “copy” the municipal initiative to state level, but there still huge uncertainties remaining, were about (1) how to adapt it to state tax system, (2) what would be the impacts of ongoing Tax Substitution program on Sao Paulo Tax Invoice (3) how would be the acceptance by the retail sector, (4) who would pay the costs for the technology adoption, (5) would the technology be ready on time, (6) would the public be interesting on it, (7) what would be the impact on state's finances to returning money back to consumers, (8) how to transfer back money from tax devolution, (9) would state parliament approve the laws without major changes and in time (10) what would be the infra structure to transmit and store the amount of data generated by virtual transactions (11) would the possible increase on receipt amortize the costs

from develop the program (12) what would be the system name. A big difference from municipal and state level is the public, with almost 17 millions of users and almost 0.5 billion transactions monthly, the state level initiative has more users and transactions than any municipal initiatives. The city of Sao Paulo is in State of Sao Paulo, what make any state policy always involve a huge number of person. Other big difference is that municipal taxes are relative to services, and state tax are relatives to products. Another difference and additional difficulty was the program of Tax Substitution caused a problem that some products did not pay taxes on checkout, last point of supply chain, and consequently did not return any money to customer. This problem drove the proposal of a lottery draw, so the consumer would always have an incentive to ask for the invoice. There was much anxiety about project due date, to deal with uncertainty (5) they created a set of laws that determined project due dates. Some interviewers related that the time was very limited, they worked under pressure most of time and during the first months they have no clue about the time needed to finish such big project. With the strategy of fast development, they decide to proceed with software development and law formulation with some uncertainties unanswered. At the time, it was the bigger project of Treasury and was not execute and was not executed in the traditional manner of the Treasury, as reported by respondents if it used the traditional manner it could take up to 2 years. To accelerate the development was made an unusual configuration in the office, the Vice-Secretary led the development of the project with the intention of centralizing decisions and streamline the process, making weekly meetings with the staff and providing even the particular cell phone to meet any unexpected demands for quickly solve problems. According to people who worked with the leader he knew he would deal with the unknown [7]. Faced with so many professional resources, they developed a strategy to develop the project without hiring a big consulting company, avoiding outsourcing, another nontraditional approach. The main technology and design decisions have been resolved internally, eventually was hired IT professionals to support software development in most intense periods of development. A problem reported by the current coordinator is the lack of documentation to launch the system quickly. As part of the planning process work fronts were created with experts so that the demands were emerging. The legislative front, committee persons involved in the preparation of the bill that regulated the Sao Paulo Tax Invoice system, accompanied the initial effort of the teams in line, preparing the State Law 12.685 of 2007. Besides regulate the Sao Paulo Tax Invoice operations, the bill also determined the schedule of the development team software. So, because the legal pressure, they have to put software in production during development stage, on october 2007 first.

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2015 Proceedings of PICMET '15: Management of the Technology Age TABLE 2 – SAO PAULO TAX INVOICE SOFTWARE MODULE DESCRIPTION AND LAUCH DATES module

description

released

difficulty

1

Engine core

The basic architecture to support computational process

2007

Medium

2

Public registration

For interested people to register online

2007

Low

3

Devolution calculator

To process business rules and calculate amount of money 2007 to make available to the public

High

4

Tax information Receiver

Receive information from tax equipment of all retail stores, large volume of data

Critical

5

Money distributor

The process from transfer Treasury money to costumer

2008

High

6

Automatic tax lottery draw

The system and software algorithm to make prize distribution

2008

Medium

7

Security enhancements

Improvement in system processes, putting barriers for outliers

2009

Medium

8

Complaint system

Permit public to easily and online report evaders

2009

Medium

9

Treasury debt control

Important functionally for internal control of debt

2009

Medium

10

Official document authenticator

To validate reports and numbers generated by automated 2009 process

A team of IT was created with State Agents, staff from the Treasury. In the initial team composition were Newton Oller de Mello and Álvaro Junqueira, Agents with experience to develop and consolidate the business rules for the system operations, the work rhythm was already intense. The fist problem faced was lack of IT qualified personnel, in other words, the human resources required were much higher than anticipated by the project leaders.They can count with public company PRODESP for software development, but there was a fear of use of outdated technology and high risk to finish project within due date. The solutions were develop the software with Treasury Agents with experience in IT and eventually contracting services from software houses and professional consultants, mean while they started preparing a tender for next year, 2008, for tax agents with IT expertise, for project maintenance and thinking in IT strategic functions. The State Agent, specialist in Information Technology, Daniel Gomes Freire, a computer scientist, designed the software using as base Microsoft .NET and SQL, these decision is related to the fact that the department was accustomed to use that solution and had previous experience with it. Daniel led the development of the system relying on third-party support, IT professionals or software factories 1, in addition to their own office technology team. According to mostly of our interviewers, today the software for Sao Paulo Tax Invoice contains 10 modules, but 1 Fábricas de software são empresas especializadas no desenvolvimento de software sob medida, muitas vezes alocando profissionais no espaço cliente, atuando junto com os funcionários no desenvolvimento e programação do sistema. São em sua maioria programadores especializados na linguagem e tecnologia requerida pelo cliente, recebendo por hora de serviço, flexibilizando a produção do software do cliente e podendo atender demandas variáveis com a alocação e remoção de profissionais rapidamente. A procura por esses profissionais é muito alta e por isso eles podem receber valores altos por hora de serviço, na maioria dos casos a mão de obra especializada representa o maior custo para a produção do software.

2008

Low

the first version, launched in 2007, only contained one, most of that were launched in the first 2 years of the program. According to Daniel, for the IT team, the first year of system development had many unexpected surprises [6]. The challenge was great because they have to develop new features as corrected problems reported by the User in the system in production. Often to avoid inconvenience to the users system maintenance was done outside of business hours. During the efforts of building it some problems occurred, since they used Microsoft .NET as base technology and with peaks of 0.5 billion transactions monthly, the hardware need was huge, requiring a consulting from Microsoft for project improvements and data center creation, optimized for that technology that can scale-up the system. A curiosity about the prototyping phase is that it is overlapped with development one, the distinction is very unclear [2]. When Treasury launched the program, put the software on production server, in 2007 octuber, there was only a registration module ready for public. To reduce the usage of TI infra structure, instead of real time data collect, they collect and process tax devolution every six months, making math calculations to detect evasion outliers. A simple way to process a large queue of data and calculate money devolution to consumers without the need of high consuming computer process, simple by avoiding real time process. The law required an update in all tax equipments in operation and, consequently, the software used by retail stores also needed an update, for a basic reason, they were not ready to SSN number input [13]. The equipment used by Treasury to collect tax information is independent and coupled to the computer store, because of hardware limitation, low memory, some tax equipments also needed an hardware upgrade. [13] The first sector to have its mandatory use was restaurants,

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in 2007, traditionally a sector with high tax evasions. There was no culture for asking for tax receipts in restaurants, but with massive campaign on public television, they stimulated public to starting asking for it. People who live and work on the city of Sao Paulo, who was already used to city program, were first adopters.. The implementation schedule goes and over time other retail segments were obliged to adopt the Sao Paulo Tax Invoice, when occurred an good surprise in 2008, when large supermarkets were forced by law to adopt it, the sector not only don't complained, but actually was very supportive to the initiative, what was not expected, a situation that was only detected after emerge, which can be defined as an unkown unkown [6]. The reason for the unexpected support is simple, it was because large supermarkets already pays taxes and are economically harmed by those who do not pay, the tax oversight is tight in big companies. The acceptance by large supermarkets stimulated the public for asking Sao Paulo Tax Invoice receipts on small stores too, what was an unexpected key for the success and which answer uncertainties (3) and (4). The first concept thanked for the lottery draw, in 2008, was very different from the actual concept. In the very first beginning they thought of doing draws with the printed receipts, sent by people. The prizes would be cars and houses and the draw will occur live in an animated television show, with the presence of the governor, what is traditionally doing in Brazil. They actually migrated from that concept to use the current tax technology. With a lot of electronic tax collect device installed in sales points all over the state, they mixed the concept with the automation of most of its process. To help ensure a reliable process they contracted IPT, a public company, that developed a software that use Federal Lottery numbers in the draw algorithm. A curiosity related by one interview is that they only have know how in receive money, they have to develop new skills, what is a good react to another unknown unknown [6] and the answer for uncertainty (8). Another surprise emerged after launch [6] was the public good perception of the program and the improvement of Treasury public image. That was a second good surprise and a response for uncertainty (6), there was a general good acceptance from the public, that promoted the program, asking for tax receipt with SSN. The acceptance was so good that even caused a problem, Treasury was not ready to deal with the volume of public demand, they need to outsource a Call Center because the impacts of Sao Paulo Tax Invoice costumers calls for information, with more than 2 thousand call per month. They changed the first name of the system after one year after public reported confusion about it, it had the ambiguous name Online Tax Invoice, these change is related to uncertainty (12) [6].

VIII. IMPACTS OF SAO PAULO TAX INVOICE ON STATES FINANCE AND SOCIETY According to Cynefin model [7], some of the Sao Paulo Tax Invoice uncertainties could not be answered in advance accurately. With many public policies to enforce fiscal revenue concurring on different levels, federal, state and municipal level, each one with their own set of laws and often with different strategies [12], became hard to track impacts of an isolated policy. When we can not clearly define causes and consequences, we are on Cynefin chaotic domain, common place for public policy makers, but sometimes the effects can be distinguished after the public policy implemented, what represent a move from chaotic domain to complex domain [7]. Some studies that tried to estimate the impact of the Sao Paulo Tax Invoice on state finances are suggesting positives results up to 22% in tax collection [9], but they used approximations and limited models. There is still no official report about Sao Paulo Tax Invoice impacts on finance. Naritomi tried to find the results of the Sao Paulo Tax Invoice program by comparing the VAT tax collect from wholesale with retail sector. The results shown an increase in almost 22% over 4 years [9]. Another study, using different methodology, comparing Sao Paulo with brazilian states without tax lottery, also reached a positive effect vary between 5% and 10% [10]. A basic critic it that there is still no official report about the Sao Paulo Tax Invoice program impact on State Finances, only academic works with restricted access to data. Some interviewers registered a concern about the volume of money that was returned to population, almost 100 millions of dollars every year, what could be used to support health care or educational initiatives. Another good result pointed by most of the interviewers is the public image of Treasury, they related that public feel empowered when perceive impacts from their complaints. A good surprise, resulting from the success of the initiative, was win Sao Paulo State Prize Mario Covas for Public Policies in 2007, concurring on category “Efficient Use of Public Resources and Debureaucratization”. In 2010 the system won an international award, "22nd Computerworld Honors Laureate Medal Ceremony and Gala Awards Evening", on Washigtion DC. IX. CONCLUSIONS To innovate, organizations must be prepared to deal with the unknown [6] [7]. In the case of the Sao Paulo Tax Invoice we can say that they were prepared and also got luck, adopting the “experimental” approach and heavy-weight manager and with unexpected good surprises, like large supermarkets support, and others that required they developed new skills to solve the problem, like lack of technical skills. Treasury State of Sao Paulo was constantly developing

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new technology and tax mechanism to enforce tax collection. The Sao Paulo Tax Invoice program was an unpredictable consequence of that continuous innovation effort and fast environmental technology change. It promoted a new era for tax administrators, for the first time they returned money of tax collection back to the population. The Sao Paulo Tax Invoice program still deal with new demands, because of its outdated technology, the construction of new functionalities is not a priority for an overloaded IT department. With heavy use of Information Technology (IT) and public incentive to people to adopt a new stance, the Sao Paulo Tax Invoice program is proving to be a success tax mechanism. The fiscal effort grew apparently with controlled cost. Despite criticism, the initiative has reached good results, with approximate 8 years old of uninterrupted taxes growth every month, the result is a growing network of collaborators that help tax administrators avoid fiscal evasion. There are knowledge gaps in international literature about government innovation processes [14]. The intention of the present work is an attempt to help fill those gaps. We selected the Sao Paulo Tax Invoice program because of its heavy use of Information Technology (IT) and its impact on people everyday life. Leadership is also an important variable for successful project management [14] in public department innovation management. It certainly was an important factor for the success of the Sao Paulo Tax Invoice system. The unexpected support from large supermarkets sugests that policies to prevent fiscal evasion will be supported by large supermarkets chains. This can be extrapolated. Besides supermarkets, every large company from the retail sector may support initial efforts for fiscal enforcement policy until it "spreads" to small companies. It is beneficial in monetary terms for large companies to support that kind of initiative because in the long run it corrects competitive distortions with the informal economy and improves the economic environment, what pays back the initial "investment". A find that can be used for future policy development, probably large companies from retail sector can share costs for fiscal enforcement, what can be an entrance door to the State’s Treasury new technology named “SAT system” to take off. The decision to have a law passed in the State’s Law Chamber prevents the State’s Government opposition to change the program’s operation. On the other hand, it has reduced flexibility in introducing further innovation in the system, something not detected in literature and a possible contribution of the present work. Soon after the launch, Alagoas State representatives came to visit Sao Paulo and learn more about the system, to study a way to enable a similar program in their territory. Access was granted to documentation and system code, however there are difficulties in integration with current Alagoas State technology, like the sub-system of taxpayer identification, which prevented the simple transfer of the software to another State, it had to be reprogrammed from the documentation. This can be another problem resulting from

accelerated management mode and can reduce the rhythm for the technology diffusion. A similar proposal at the national level has been advanced. This federal initiative could improve the Brazilian Treasury image, as well as the image of every Treasury from the 26 remaining Brazilian States. We are not concerned in this paper with the results of this particular initiative. We focused on innovation management and innovation processes. However, recent studies suggests that the Sao Paulo Tax Invoice program is providing a significant raise in taxes collected [9] [12]. REFERENCES [1] [2] [3] [4] [5] [6] [7] [8] [9] [10]

[11] [12] [13]

[14]

[15]

[16] [17]

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