Should government agencies embrace co-production for policy and services?

Ovum has published an interesting article by Steve Hodgkinson on Co-production: the new face of public services.

In the article Hodgkinson concludes that,

Agencies now need to nurture and embrace co-production by design, or risk either failing to harness this new resource or being left behind like old-style monopolists in an increasingly dynamic and competitive public services market.

What do you think, do government agencies need to integrate the wisdom of crowds in the design of public policy and services?

Or do agencies need to focus on developing their own internal design capabilities, using tried and true engagement, consultation and test processes to fine tune public policies and services to community needs?