In the wake of the proclaimed “budget emergency”, should we get ready for the “innovation emergency”? With fewer resources, Australia’s public sector will not achieve its performance targets by working harder, but only by working smarter. And that must mean a more innovative approach to policy development and the design and delivery of our publicly provided services.
More fundamentally, the budget strategy requires us to ask what kind of public sector we want. Is it just lead in the saddlebag, a necessary regulator or a potential partner in value creation across our economy and society? The obvious reluctance to come to terms with climate change seems to be as much about rejecting a role for regulation as it is about the evidence of global warming.
An emerging perspective among OECD countries recognises that governments can:
…create conditions for a productive economy and society. Governments both innovate themselves and support innovation by providing infrastructure, services and programs for the community, businesses and individuals.
In Australia’s case, government actions and investments account for around 35% of GDP. Announcing the “end of the age of entitlement” is unlikely to do justice to the magnitude of this management challenge.
Our new report for the Institute of Public Administration Australia (IPAA) Australian Public Sector Innovation: Shaping the future through co-creation, to be launched on Thursday by Terry Moran, attempts to address this challenge in light of international research and experience. There is much to learn from, be inspired by and to emulate in the approaches of the Nordic countries, Canada, the US, UK and New Zealand.
Recent studies have highlighted how innovative approaches to policy and service provision can lead to more effective responses to complex social issues. They emphasise that changing community needs, aspirations and expectations require a changed public sector. The studies also show how public sector organisations themselves can become more innovative, and they identify the cultural barriers and capability gaps that need to be addressed before high level strategies are likely to be effective.
The common thread in these studies is the observation that “for those countries seeking to move ahead in the global marketplace, innovation in the public sector has become and will remain as important as it is in the private sector”. This is the case for four main reasons. In the first place, the public sector constitutes a large part of the economy, with implications for national productivity and social value creation.
Second, the public sector is a major customer for firms, so its procurement strategies assist in gaining access to global markets and value chains. Third, public policy addresses the increasingly complex challenges of an interconnected world, and in doing so structures the regulatory context in which innovation takes place. Fourth, organisations are the incubators of professional and entrepreneurial talent, and how this talent develops is of systemic significance for the economy and society.
In his account of “Government as impresario”, Nick Gruen identifies the growing innovation opportunities enabled by peer-to-peer technology platforms and government decisions on data openness and free access to digital assets.
Gruen argues that in the new digital economy, government should view itself as an information funder and wholesaler, an innovation partner, a promoter of information platforms, a sponsor of standards and a collective purchaser, in order to maximise the innovation benefits from its decisions.
But innovation, by definition, involves uncertainty and risk. The incentives for private sector innovation are clear - market share and profit are firmly planted in the minds of executives. On the other hand, the public sector is risk averse, with a deeply entrenched culture and operating environment creating a level of inertia that puts it at odds with innovation. So, how can public sector organisations develop the capacity to seek, secure and sustain innovation?
Innovation is a way of thinking and acting that challenges all of us. Efforts are only likely to be effective and sustained when an organisation develops a culture that supports innovation and a strategy that seeks it.
The public sector of the future will need to explore new business models, open innovation, co-creation, user-centric approaches and high levels of employee engagement. Innovation thrives on people with a diversity of skills and knowledge prepared to work together to implement and sustain innovation. It can neither be fully planned nor de-risked.
Two aspects of innovation, which require different skills and capabilities, are vital. First, “focused innovation” prioritises continuous improvement and arms organisations with capabilities to improve existing products, services and processes.
The second tenet, “re-framing innovation”, identifies new transformative approaches and desirable futures, including those which address “wicked” problems or intractable situations.
These new directions for innovation in the public sector require the public sector to sense, seize and transform opportunities, adapt and manoeuvre their knowledge-based assets, and reposition their knowledge sourcing strategies.
Beyond budget cuts and “efficiency savings”, Australia needs a strategic framework for managing innovation in its large and diverse public sector. This can only happen on the basis of a shared understanding that the design and delivery of our public services is an integral part of the national innovation ecosystem.