A Private Sector Perspective on Public Management Innovation

During the last few decades, there have been communities of scholars studying innovation in the private sector and innovation in the public sector, but – regrettably – there hasn’t been a great deal of interaction between the two groups. The entrepreneurial vibrancy of several sectors of the US economy, particularly IT, has attracted the attention of private sector innovation scholars and, consequently, their research has attracted a great deal of attention both within and outside academe. In contrast, the widespread belief that the public sector is rife with waste, fraud, and abuse has conditioned Americans to believe that innovation in government is an oxymoron. Therefore, the scholarly community focusing on innovation in government is smaller and much less well-known than its private sector counterpart.

It is thus surprising that private sector innovation scholars at the Harvard Business School have turned their attention to public sector innovation. What is even more significant is that this group includes Clayton Christensen, arguably the best known and most frequently cited private sector innovation scholar. There are precedents for Christensen’s pivot to the public sector. The Harvard Business School has often gone beyond a narrow private sector focus and engaged more broadly with civil society. For example, after studying competitive advantage in business strategy guru Michael Porter pivoted to studying the competitive advantage of nations.

Academic life, unfortunately, is rife with territoriality, and Christensen’s public sector pivot might meet with derision from public sector innovation scholars who resent his incursion onto their turf. Intellectual territoriality impedes the advancement of knowledge. Public sector innovation scholars should therefore welcome Christensen’s new and different perspective on our chosen field of study.

As someone who has been studying public sector innovation for two decades, I will provide as fair-minded as possible an assessment of Christensen’s (and co-authors Nikhil Sahni and Maxwell Wessell’s) article “Unleashing Breakthrough Innovation in Government” in the summer 2013 issue of the Stanford Social Innovation Review.

The article hypothesizes that innovation in government is possible and then presents five necessary conditions for it to happen, with illustrations drawn from a handful of innovative programs. Obviously I am in sympathy with the hypothesis. I’ll comment on the definition of innovation and the five conditions.

The definition of innovation they use is “driv[ing] out costs through the implementation of novel technologies and service models that get the job done better for constituents.” Christensen and his co-authors have chosen to focus on innovations that reduce cost. This choice emphasizes efficiency, a key private sector virtue, and coincides with the conservative worldview that government spending must and can be reduced. Public sector innovation scholars have defined innovation more broadly to include new programs that spend additional money to meet what politicians and public servants think are legitimate social needs. This includes innovations in policy areas such as health, education, public safety, and social services.

The first of the five conditions cited is the ability to experiment. Christensen et al rightly cite the widespread use of pilot programs in American government. Periodically there have been initiatives supportive of experimentation, such as the Clinton Administration’s Reinventing Government that mandated the establishment of “reinvention labs” throughout the federal government. And decades ago Justice Brandeis referred to the states as “laboratories of democracy.”

The second condition is the ability to sunset outdated infrastructure. Here Christensen et al cite Washington, DC’s mobile-payment parking system that developed an app to pay for parking through mobile phones. They anticipate the day when parking meters – “the old infrastructure collection system” – will be phased out. What Christensen and his co-authors forget is that government is obligated to provide service to the entire population and, unlike the private sector, cannot fire the customer. Governments maintain outdated infrastructure because it serves the needs of those citizens at the technological trailing edge. It is appropriate for government to do its best to migrate people from outdated infrastructure, but must do so much more slowly than the private sector can.

The third condition is the existence of feedback loops so that innovators can see how users are responding to their innovations. Christensen and his co-authors regret that, in comparison to market feedback for business, the public sector rarely has comparable feedback because citizens’ votes in general elections do not express their views about particular programs. This greatly underestimates the ability of the public sector to get feedback. Public sector innovators are now well accustomed to using customer surveys and social media. In addition, the public can express their feedback to politicians, who are never shy about passing it on to public servants, and referenda often put policy or management issues before the voters.

The fourth condition is the existence of incentives for product or service improvement. Christensen and his co-authors recognize that incentives for private sector and public sector innovators are different and that, because it is constrained in the use of financial incentives, the public sector must put more emphasis on various forms of recognition for successful innovators. The problem they did not address is what happens to unsuccessful innovators. If the public sector is to experiment, there are bound to be unsuccessful innovations. If public servants associated with unsuccessful innovations are publicly humiliated and then fired, few public servants will be willing to experiment in the first place. The private sector has the institutions of limited liability and bankruptcy to limit the pain endured by innovators whose innovations turn out to fail the market test. A public sector analogy would be career neutrality so that innovators whose initiatives are not received successfully are not publicly humiliated and fired, but rather can get on with their careers.

Christensen and his coauthors’ exemplified their fifth condition, the existence of budget constraints for end users, with services like postal delivery and defense procurement. National defense is a classic public good for which end users cannot be assessed. The problem is that many of the goods produced by the public sector are what economists call merit goods, namely goods for which it is possible to charge users, but which the public sector has decided to provide either free of charge or, as in the case of postal delivery, with substantial subsidies. There are numerous examples of this, such as education and some components of the health care system (Medicare, Medicaid). Public managers are well aware of delivery costs, but end users are not. The result is often queuing which generates dissatisfaction on the part of the public and consternation on the part of the managers.

Christensen and his co-authors conclude their article by stating what they call the paradoxical challenge of spurring economic growth while simultaneously reducing public spending. I dislike this formulation because it excludes the possibility of increasing taxes from their current unconscionably low level, especially for higher income Americans. But I do agree with their conclusion that “ensuring that the ability and motivation to innovative effectively exists through the public sector is a vital piece of any solution [to societal problems] we develop.” The five conditions they propose are reasonable ones, but need to be embedded more deeply in a public sector context. I hope that the Harvard Business School and Prof. Christensen will not regard this recent article as a one-off, but that they and the community of public sector innovation scholars will continue the conversation.

 

6 comments

  1. The public sector is often seen as sclerotic and conservative in contrast with a dynamic and innovative private sector. This assumption lies at the basis of much of the outsourcing of public services to the private sector. In this interview and in her new book , Institute for New Economic Thinking grantee Mariana Mazzucato argues against this assessment and in favour of state-led innovation and economic growth. She maintains that the public sector usually bears the highest risks of funding innovation without then reaping the rewards.

  2. Sandford I couldn’t agree more – the separation between social innovation and business innovation is problematic, especially as the mainstream view on innovation comes from research on product innovation and its uptake by the market which is
    comparatively easy compared to complexities and viral nature of public service and systemic innovation which demand changes in thinking, relationships and minds sets.

    I’m currently working on locality or place-based innovation in the UK and other countries
    which dependent on collaborative leadership and the capacity to transform practices as well as specific leadership abilities – context matter much more in practice than theory ever allows for.

    Interested to hear what you’re doing – lets have a Skype,
    Best Su

  3. Great response, Sandy! Context is everything. And I was pleased that you encouraged them to do more.

    Mary

  4. Good article. I worked on change, improvement and innovation projects for many years in the public, not profit and private sectors. In my fifties, I decided to start a PhD in innovation. I was very disappointed by the academic literature. Some issues:
    1. The point of this article is very good – innovation is just as important in the public and private sectors. I remember working on projects in Singapore where official national strategies prompted all organisations to be more innovative. The distinction between private and public sector is artificial.
    2. The distinction I found lacking was the lack of distinction between service innovation and manufacturing innovation. I had no idea that so much of the literature assumes that innovation concepts are the same regardless of the sector. I thought this was naive and very unsophisticated. The service sector is very different and should be studied with new eyes. Too many ideas from manufacturing are simply repeated in the service without testing their validity.
    3. How we define which organisations to study. I was stunned by the robustness (or lack of) some of the work. When a study was done on innovative organisations, what qualified you to be studied was a question like, “Did you launch an innovation last year?” Seriously???? This hardly seems like a quality way to qualify organisations.
    4. Do all people think alike? The answer is obvious. Despite 40 years of study on cognitive style that defines predictable differences in the way we think, solve problems and deal with the world, much of the academic literature is based on the assumption that all people think alike.
    Working in the public sector, one interesting observation I made that it can be a safe place for highly innovative people. Often these people become expert problem solvers. One woman I met had 20 jobs in about 28 years within various departments. She became an expert in solving a particular problem. When the project was completed, she moved on before she got bored. It is very common for people to move widely within government. This is often very hard to do in the private sector.

Leave a Reply

Your email address will not be published. Required fields are marked *