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?