Fostering Innovation in the Public Sector

Overview

Public sector innovation is about finding new and better means to achieve public ends. Innovation, especially breakthrough innovation, is complex and challenging for governments. Yet, the scale and nature of the challenges that governments face today require responses that go beyond incremental improvements. The public sector context has also changed with low level of productivity calling for a re-thinking and re-scoping of public sector processes, structures and systems.

This report looks at how the different aspects of public sector governance can support such innovation at all stages of its lifecycle, from identifying problems to generating ideas, developing proposals, implementing and evaluating projects, and diffusing them more widely throughout the organisation.

Many innovators feel held up by bureaucracy and red tape; however, it is often not the laws and regulations themselves that are the barrier, but the way in which they are used. Bureaucracy reflects a society’s underlying values, and in most democratic countries these include stability, efficiency, effectiveness, accountability and transparency – none of which are inherently hostile to innovation. Some tensions do arise, however, between the nature of public sector organisations and the attitudes underlying innovation. In some organisations, risk aversion, “silos”, hierarchical structures and a lack of diversity may have become embodied in rules and regulations, or they may have become part of the wider culture. Either way, they act as a barrier to innovation. Some countries have attempted to overcome these barriers through red tape reduction programmes or targeted rule exemptions, while others have used cross-organisational innovation delivery teams or behavioural insight approaches. Governments should assess the extent to which their employees feel inhibited in innovating and then diagnose the causes. If rules and procedures are indeed the barrier, these can be rewritten; but, if the problem stems from the underlying culture and behaviour of the organisation, building capacity to solve problems through innovation will be a more effective approach.

People are at the heart of public sector innovation, so one of the goals of public human resource management should be to support employees in innovating – that is, ensuring they have the ability, motivation and opportunity to come up with new approaches. Ability requires not just technical skills but also creativity and associative thinking, as well as the behavioural and social skills needed to bring about change. Motivation can be intrinsic, but is also strongly determined by the work environment, such as task design, organisational culture and management. Opportunity means giving people the autonomy, resources and connections they need to innovate. Four main approaches to promoting innovation emerge from case studies across OECD countries: awards and recognition programmes encouraging ideas from all levels of government, innovation-oriented networks and mobility programmes to bring people together across organisational boundaries, and holistic approaches to managing staff that create a framework supporting innovation. One key element is the organisational culture: how organisations treat risk, and whether employees feel empowered to experiment and to learn from their experiments.

Traditionally, budget offices might be the last place to expect support for innovation. However, in recent years budgeting has evolved away from only allocating resources towards also creating the conditions for innovation to flourish. Financial incentives, including dedicated funds, can play an important role in promoting innovation in government. However, in a fiscally constrained environment fiscal frameworks and targets are needed to keep a cap on overall expenditures. Greater budget flexibility within the caps, coupled with outcomes goals, can support innovation. The use of performance management and evidence to promote the widespread adoption of innovative approaches help link budgetary and policy objectives. Fiscal austerity in recent years has challenged budget processes, with mixed consequences for innovation. While cuts, especially targeted ones, can serve as a driver of change, across-the-board cuts can diminish the capacity of some organisations to create innovative solutions. Budget agencies need to strike a balance between giving line ministries the flexibility and capacity they need to pursue innovation, while retaining a focus on achieving the government’s central strategic goals.

Dedicated innovation units can overcome some of the barriers to public sector innovation, providing “room” to develop new ways of doing things. They are a structural response to the cross-cutting and interdisciplinary nature of innovation projects, and to the tension between continuing business-as-usual while introducing new approaches. Innovation teams serve five broad functions: supporting and co-ordinating the implementation of innovative solutions, experimenting with different approaches to problems, supporting the delivery of a cross-cutting initiative or agenda such as digitisation, providing the investment needed to give emerging ides the space to grow, and capacity building and networking support. An organisation setting up an innovation team should consider what it wants the team to achieve and choose its functions and structure accordingly. The closer teams are to the centre of government, the more authority they will have to implement changes; on the other hand, a team located more on the periphery will tend to be more open to radical innovation.

A risk management strategy can help ensure the success of an innovation. An effective strategy starts by understanding the context of the innovation: what it is trying to achieve, whether it is changing an established practice or introducing something new, where its mandate lies, and whether it is a solution in itself or is creating the conditions for one. The preconditions for success include proper resourcing, both financial and human. New processes – such as prototyping (quick iterations of solutions to test feasibility) and co-creation (engaging all stakeholders in the development of solutions) – offer ways to translate uncertainty into known risks faster than traditional approaches and to better control the use of public resources.

Innovation that harnesses the power of data, information and knowledge has the potential to transform all sectors, and the public sector is one of the most data-intensive parts of the economy. There are four phases to improving public sector information management for innovation: sourcing it, making it available and discoverable, and combining it with data from other sources; exploiting it, transforming it into knowledge and using it for decision making; sharing it as freely as possible inside and outside the public sector; and creating feedback loops and encouraging collaboration to create a rapidly evolving information system.