How to innovate
Jean Hartley considers how innovation can be encouraged and supported within the world of public services
Innovation is increasingly embedded in the language of governments and public service organisations across the globe. It is sometimes used as a label (“an innovative treatment ”or “an innovative service”) without explanation of what is meant by the term, or analysis of what is distinctive. In this sense, innovation may be fashionable rhetoric rather than an analytical term. It is generally associated with newness, change, excitement, improvement, a break from tradition.
To what extent is the commentary on public sector innovation merely “policy chic”(Behn, 1997) or how far is innovation a valuable concept to understand changes in governance and public services? Innovation is seen by policy analysts as a key means to go beyond the quality improvement techniques applied to services and organisations in the 1980s and 1990s into something that could make a substantial improvement in the overall efficiency, effectiveness and responsiveness of government and public service organisations. While some analysts focus primarily on innovation as a contribution to improving the quality of services, others also recognise its potential contribution to rebuilding trust in government by being more responsive to the needs and aspirations of citizens and users of services.
What is innovation?
But to avoid the pro-innovation bias in much writing, it is vital to carefully consider what innovation is and how it may contribute to improvement. Until recently, there has been relatively little written about innovation in the public sphere and so there was an over-reliance on what has been written about innovation in the private sector.
There are some similarities in innovation processes and outcomes across the sectors (from which it is important to learn), but also distinctive differences between innovation in private firms and in public organisations. Market competition is not the primary driving force for innovation in the public sector, though the stimulus to innovate is just as dynamic and pressing, deriving as it does from the pressures to solve complex and changing public needs and expectations. The unit of analysis for the costs and benefits of innovation in the private sector has been, until very recently, the individual firm. While for public service organisations it’s generally the institutional field (eg the health service not just individual hospitals) or even the public service as a whole.
So, inter-organisational networks are important in the public sector to spread innovation between organisations. This task is more complex than in the private sector, where innovation tends to be restricted to a single firm or a closed network of strategic partners.
There are important technological developments in public services, such as IT, health and highways equipment, but service innovations typically have high levels of ambiguity and uncertainty since they are affected by the variability of the human characteristics of both service giver and service receiver (the latter, in some cases, as a co-producer).
So, what do we mean when we talk about innovation in public services? It’s more than having a bright idea or a new policy: it’s about implementation into practice. Some writers have suggested that there is a spectrum of innovation from large-scale dramatic, ‘headline-making’ innovations to small scale, incremental changes.
Managing large-scale innovation
However, many others argue that there is a need to distinguish innovation from general and incremental change, otherwise there is no need for a concept of ‘innovation’, which is separate from change. And managing large-scale innovation and its risks is a very different management challenge than steering a continuous improvement strategy. Some research only examines successful innovation but a definition based on success may limit analysis both of innovation failure and also of how innovations come to be successful. An alternative, and perhaps more comprehensive, approach examines innovation and success as separate dimensions. This can be valuable where there is interest in how innovations are developed and sustained, and what barriers and facilitators act to weaken or support innovation activities. This means an interest in how innovations grow, are nurtured, meet problems – and how some of them fail.
Learning from innovation failure is a key issue given that a high proportion of innovations in the private sector fail. Innovations do not always lead to success – in any sector. In the private sector, it has been estimated that product innovation has a failure rate ranging from 30% to 95% with an average around 38%.
In public services, there may be several reasons for being even more pessimistic about failure rates, given the range of stakeholders, each with their own varied views about ‘success’, and the added pressures of scrutiny by politicians and the media. But, a great deal can be learned about creativity, managing risks and taking forward projects even where an innovation is not ultimately successful, and many successful innovations have failed prototypes littered before them.
Who is responsible for developing and implementing new practices? In the private sector, the focus is usually on managers and staff as sources of innovation, both working inside the organisation to create and action new ideas, and networking outside it to scan for useful ideas, market needs and competitor innovations.
However, for the public sector, we also have to consider policy-makers and policy advisors in the innovation process. In addition, for both the public and private sectors the role of users in contributing to innovation is gaining greater attention.
Role of policy-makers and advisors
The role of policy-makers and policy advisors in the innovation process is crucial for understanding innovation in public service organisations. Both national and local politicians may have a central role in innovation, for example, in developing new policy frameworks and legislating for radical change, building the support in the organisation and among citizens and their political parties for the enactment of those innovations.
One simply has to think about some of the innovations which emerged initially as policy ideas from central government in the Blair years, which were then developed, tested and sometimes modified in organisations across the country. Foundation hospitals, City academies, NHS Direct, the application of ‘Best Value’ to local public services are all examples of policy-led innovations. Innovations can also occur at local level, such as congestion charging for London, or new waste management processes by local government.
The large scale of national policy inspired innovations and the legislative, financial and staffing resources deployed means that innovation outcomes are quickly apparent. However, there can be problems with top-down implementation because the capacity and motivation for continuous improvement is not necessarily embedded in a command-based approach.
The classic public service model of innovation as designed by policy-makers and implemented by managers is not the sole approach to innovation. Increasingly, innovation is as much a ‘bottom-up’ and ‘sideways-in’ process as a ‘top-down’ process. American research in the public sector suggests that in the US half of all innovations (51%) come from either middle managers or front line staff. The figures are higher for developed Commonwealth countries, such as the UK and Australia, where 82% come from organisational staff (75% from middle managers).
Ways to share best practice
Benchmarking, sharing good practice, pilot programmes, Beacon schemes, health collaboratives, are all ways to share and spread good practice across the public services, and these networks are sustained and used by professionals and managers.
Interestingly, users are increasingly important in creating and not just using innovations in public services. Users are also more and more important for the private sector too, as innovations in, open source software (for example, the Linux operating system for computing) and, in the leisure industry, surfboard design show.
In the public sector, the public may be not only customers but also citizens and advocates. They may co-design services and products. If public services are to create public value, then this is increasingly necessary for many services, particularly where outcomes, such as community safety, or education, or tackling obesity, cannot be provided by the producer alone.
Innovating to improve
The value produced from innovation has perhaps been under-analysed, in both the public and private sectors. There is an important difference in innovation between private and public sectors. In the private sector, innovation success can be judged by its impact on profit, wealth creation or market share. This is not the case for public services, where innovation is justifiable to the extent that it increases public value.
On the other hand, innovation and improvement need to be seen as conceptually distinct and not blurred into one policy phrase. The UK central government currently places a high policy priority on the improvement of public services, so it is easy to see how the concepts of innovation and improvement may become conflated. However, the world is littered with innovations which led either to no or short-term improvements, or which had negative, unintended consequences (just think of high-rise housing or Betamax videos).
It is therefore useful to consider a number of possible relationships between innovation and improvement. These are shown in Figure 1. The analysis is based on organisations, but it is applicable also to service areas, business units, or partnerships of organisations. There are two dimensions in the figure. The first (horizontal axis) concerns whether or not there is innovation in the sense of a step change in the organisation. The second concerns whether or not there is improvement in performance.
In box 1, an organisation exhibits neither improvement nor innovation. This may occur where an organisation is operating in a highly stable environment,where innovation is not needed because there is a close fit between that environment and the organisational processes, systems and stakeholder needs. This is theoretically possible but in practice highly unlikely – the world is changing at such speed that either innovation or continuous development will be needed.
In the second quadrant, marked 2, improvement occurs but without innovation. This is an organisation that focuses on small, incremental changes in order to achieve improvement (eg continuous improvement methodology, total quality management; incremental development) but where the changes do not individually constitute innovation in that they are not large-scale.
Continuous development may be critical for many organisations but we should not confuse it with innovation. In box 3 the organisation implements innovation but there is no resultant improvement. Indeed, there may even be a deterioration of performance. Several situations fit this pattern. First, innovations do not always lead to success – in any sector. A failure rate across the board of about 40% is not unusual (Tidd et al, 2005), as already mentioned in this article.
Public service innovations not only have to run the gauntlet of commentary from press and politicians, but also there is a need to consider the complexity and contested nature of success, given that different parts of the public may have different views or values about what constitutes success (as an example, consider whether school academies are a ‘good’ or a ‘bad’ Innovation).
In this quadrant, there is also the situation where the innovation has not led to improvement in the short term but where the lack of immediate success can either be rectified or can have other benefits. Short-term performance loss is recognised as a feature of organisational change, due to two factors: the need to address operational bugs in the production or service processes and the learning curve or experience curve that results in part from staff adjusting to new ways of working. This is well recognised in the operations management literature, though has been less acknowledged in the public sector where political pressures may require a rhetoric of perfect improvement from day one.
However, very often, a failure to recognise implementation problems in a new way of working does a disservice to the reality as experienced by staff and users as well as hampering learning from prototyping.
Innovation without improvement may also occur where the innovation is not, ultimately, successful but where sufficient learning takes place to engage in a later attempt at improvement (which benefits from the earlier attempt). There are many examples of this phenomenon in both the private and public sectors.
For example, a local authority which pilots a new set of procedures to improve quality to the customer, but does not get it right first time but learns from the early mistakes. Again there is perhaps insufficient recognition of this phenomenon of learning from ‘failure’ in the public sector literature, though some Warwick research suggests that it is beneficial to longer-term learning capacity and service and corporate improvement.
Sustained innovation
Finally, box 4 in Figure 1 indicates where an organisation engages in innovation that leads to improvement, with noticeable improvements in quality of its outputs and outcomes. However, there are challenges here to move beyond improvement as meeting a set of static performance indicators, to ensuring that the improvements are sustained and that the improvements go beyond service and organisational improvements to ensure public value.
In addition, there is a concern to spread innovations that demonstrate improvements, beyond the individual organisation to the set of organisations providing that or similar services.
For example, an innovation in treating cancer will be judged successful not only in terms of whether one hospital can maintain a reputational or competitive lead over other hospitals, but in whether the innovation diffuses to other hospitals and indeed, whether the innovation leads to improved prevention, detection and survival rates in the whole population. This takes the consideration of the value of innovation well beyond the organisation’s boundaries.
Complex issues
One element of the context of complexity for public service organisations is that they are embedded in society, producing not only benefits (and obligations) for individuals but also providing public goods and services, establishing collective efficiency, collective rules and purposes. Public value is one major approach to thinking about the activities, outputs and outcomes for the public sphere. A key challenge for government is not only to improve the provision of public services but also to create a better society – however society defines this.
JEAN HARTLEY, Professor, Institute of Governance and Public Management, Warwick Business School, University of Warwick
THE CATALYSTS OF INNOVATION
In the private sector, competition is seen to stimulate innovation: it is all part and parcel of survival. As few public-service organisations face competition, the feeling is that these organizations therefore lack the stimulus to innovate. Yet a report, researched on behalf of the Department for Local Communities and Local Government, found that major innovations do occur across public service organisations and that competition is not the only catalyst for innovation. Often the actual driver of innovation is a changing society. The report notes four primary catalysts of innovation:
• Policy-driven (central government, policy-makers)
• Organisation-driven (meeting needs, expectations and aspirations of staff, users and public)
• Professional-driven (comparison with other organisations and sharing good practice)
• User-provided
Source: ‘Innovation and its Contribution to Improvement: A Review for Policy-makers, Policy Advisors, Managers and Researchers‘
HOW THE ORGANISATION CAN SUPPORT INNOVATION
Both private and public organisations view the development of innovative capability as a priority. This means innovation needs to be tested, challenged and explored. The ultimate aim is for organisations to become ‘ambidextrous’, eg supporting both continuous improvement and innovation. A report for the Department for Local Communities and Local Government found that many of the features that support innovation are those that also support the management of change:
• The external and internal context of the organisation, eg external pressures from stakeholders
• Leadership, innovation entrepreneurs and champions
• Innovation processes including organisational and innovation structures (eg stage-gate phases)
• and cultures: the engagement of staff and other stakeholders
• Evaluating intended and unintended outputs and outcomes of the innovation
• Ensuring feedback through performance monitoring and organisational learning
Source: ‘Innovation and its Contribution to Improvement: A Review for Policy-makers, Policy Advisors, Managers and Researchers’
