Wednesday, April 14, 2010

Why does government struggle with innovation?

The Public Sector Innovation Network email list (run by the Department of Innovation - you can subscribe from their website) sends out some very interesting articles about innovation every week.

This week one in particular caught my eye, a piece entitled The Biggest Obstacle to Innovation that looks at inertia and how this may have greater impact in a public sector context than in other situations.

The article's author, Tim Kastelle, argues that government has many disincentives to overcome inertia. With no profit motive, no threat of organisational failure (an agency going 'out of business' - rather than the threat of a front-page news item) and where there is often a deeply entrenched non-innovative culture, there's simply no pressure for government to innovate.

I often wonder how it would be different if departments were established on the basis of profit - with the government paying multiple departments to provide services and the departments competing to offer the same services at the best possible price.

This has some equivalents - governments frequently pay commercial providers to deliver services on their behalf based on value and service levels and in many jurisdictions pays not-for-profits on a similar basis.

Of course it could lead to duplication of effort and greater instability both in employment and departmental survival - but aren't these key factors driving innovation?

A stable, monopolistic environment doesn't tend to lead to innovative behaviour and tends to increase its bias to inertia over time - actively preventing innovation to maintain the status quo. We've seen that again and again both in the commercial and public sectors. Civilisations have failed due to their institutions being unable to respond rapidly to environmental and social change.

Perhaps a hybrid model is feasible - having departments with core responsibilities and then having 'fringe' services bid on competitively by departments for management rights. Whoever gets the rights would be responsible for delivering that service and would be 'paid' for delivery in a way that allows the department to take excess funds and funnel them back into core activities - and appropriate compensation for staff (personal gain - whether monetary or through social credit - is a key factor in innovation).

This hybrid model already exists in Australia in some ways. Often a lead agency is appointed as the manager and budget holder for cross-government initiatives. However there's unlikely to be a competitive bidding process whereby departments compete to demonstrate they can deliver the best value.

If innovation is becoming a core attribute required by government organisations, merely to keep up with the rate of change in society and the development of new ways to deliver services and fulfil public needs, perhaps we need to rewrite some of the rulebook, sacrificing part of our desire for stability in return for greater change.

Maybe this won't be such a large sacrifice anyway. Government departments often restructure due to internal or external pressures and already need to react to our fast-changing world. Stability is becoming more and more of an illusion and constant change more a reality. The need for public servants to be biased towards action, as Tim discusses, is becoming greater and greater.

Constant change has negatives and can be very uncomfortable for individuals used to stable environments, but if we can harness it to drive innovation in our policy development, service delivery and in how we organise and operate the instrumentality of government it may also uncover some major benefits.

What do you think - should we trade public sector stability for innovation?


  1. Craig, I've been thinking about this issue for a few days before I saw this post today. My feeling is that there is a role for the profit motive in some areas of public sector innovation but something bothers me about giving it the primary role in all innovation. After all, and correct me if I'm wrong, but the profit motive would not explain the success of innovations such as scholarship, creative commons licensing, open source projects of all kinds, as well as other collective management arrangements aligned with a commons. Is it possible that innovation occurs along different lines in different "sectors"? And if so, what would innovation specific to the Australian public sector look like?

  2. Thanks for mentioning my blog post Craig - I appreciate it!

    Like David, I'm not sure I'm entirely comfortable with introducing too much of a profit motive into the public sector. When I talk about innovation, I define it as executing new ideas that create economic value. The key point is that value is not necessarily profit. All of David's innovation examples clearly create economic value - but not necessarily profit.

    Interestingly, I ran across this post today:

    which reports that in the UK at least, public sector managers are actually much more innovative than the stereotypes would suggest. I've seen similar examples of dynamic, innovative public sector organisations here in Australia as well. So I know it can be done within the existing frameworks. Plenty of challenges involved though...

    Thanks for the thought-provoking post!

  3. Hi Tim,

    The dilemma is always how should the public sector measure economic value (in order to demonstrate value and benefit). Profit is a nice clean yardstick. Money goes in, money goes out, profit (or loss) is the difference between the two (with various complicated accounting steps).

    However other economic value is harder to measure because it is based on guestimating the benefit of doing one thing rather than another.

    We saved 'x' dollars or created 'y' revenue for the private sector is hard to quantify compared to what would have happened if we did nothing - as we didn't do nothing and therefore cannot compare like for like.