‘Private sector good, public sector bad’ is the received wisdom when it comes to innovation, but the market often fails on quality while the public sector can deliver the goods, argues Graham Leicester
LAST week I wrote about the challenge of “wicked problems” – those which are complex, messy, with no easy answers but which tend to be covered in simplistic, black- and-white terms in most media and political debate.
Like the question of how the public sector might innovate as easily and effectively as the private sector.
I want to declare this a wicked problem. Because I think the standard answers – that the public sector is too bureaucratic, not as entrepreneurial as the private sector, that civil servants are risk-averse, etc – are incomplete, unhelpful or wrong. Innovation starts with good ideas. That challenge is common to all sectors. But once it has a good idea, the private sector can pretty much rely on the market to do the rest. The public sector has no equivalent.
Successful innovation, as Geoffrey Moore put it, depends on “crossing the chasm”. A new product is launched. It might either improve on an existing offering or try to “disrupt” the market by addressing a need that has been underserved or neglected by the big players. In either case, if successful, the new offering will be taken up in sequence: first by “early adopters”, then by the early majority (once they see that it works), the late majority (who follow the herd), and finally the “laggards”.
A “chasm” exists between the early adopters and the early majority; between visionaries and pragmatists. The early adopters like to try new things. The early majority are more wary. They like to be right. They do not want to take risks. They will only take something up if they know it works better than what they have already. Once the pragmatists have adopted something, sales scale naturally and, as an entrepreneur, you start to make money – which is the object of the exercise.
For tech start-up guru David Weekly this is the natural order of things in Silicon Valley. The place works because nobody tries to make it work. Start-ups release ideas into the market, governments don’t pick winners, investors follow the money. As Weekly puts it: “Silicon Valley’s start-ups are stupid, its government is stupid, and its investors are stupid. Companies are successful here because business intelligence is distributed, and the ultimate arbiter of correctness is the market.”
It really is that simple. But market innovation systems have become highly sophisticated. Each phase has distinct institutions and financing mechanisms. There are research funds, prize awards, “google time” and so on for speculative idea generation at the pioneering stage. Then there is venture capital, alternative investment markets and business incubators for start-ups. Finally, there is the stock market, pension funds, the investment banks, the big chains to service the needs of the mass market.
Interestingly, the institutions of the mass market are just as bureaucratic as the public sector – because of their role in delivering uniformity. They tend to be resented for that reason (Costa Coffee in Totnes, Tesco almost anywhere) and are endlessly cajoled by (equally incumbent) business school professors and consultants to become more “agile”.
With all these sophisticated systems in place, innovation in the private sector works seamlessly.
Compare this with the public sector. There is no shortage of creative ideas and radical intent in public agencies. Many develop into impressive projects, detailed in encouraging reports and conference platform presentations.
Yet still these examples remain the exception, and the wider systems and the culture of which they are a part carry on their course untroubled. Like rockets propelled by the energy of their creators, these innovative projects eventually run out of fuel and fall back to Earth.
If, rather than making money, you are trying to develop rounded individuals in the education system, or more resilient patients in the NHS, or expressions of public joy in sport or the arts, there are no obvious mechanisms and institutions of natural selection to determine which innovations should spread and which fall.
And so we unthinkingly fall back on the mechanisms of the market. We privatise. We encourage competition. We introduce vouchers or votes or other proxies to mimic the effect of “sales” to consumers. We ape the processes of Dragons’ Den to decide which innovations in policy and practice are worthy of our time and “investment”.
We invent curious indicators of “willingness to pay” to assess the “public value” of services that are not for sale (as philosopher Michael Sandel argues, there are some things that money cannot, and others that it should not, buy). We try to calculate the monetary return on investment of activities that are intended to celebrate other aspects of our shared lives, treating them as if they were business propositions nonetheless. How else could we justify hosting the Olympics?
If we cannot make the case for innovation in terms of cash return, we have to show instead that it will deliver savings in other areas of public spend in the future. Why else would anyone teach children in Raploch to play the violin?
And there’s the rub.
Money has become the only, or at the very least the primary, measure of success or failure for innovation in our public and voluntary services. These sectors have all adopted market models of innovation, driven on by government-sponsored innovation agencies wedded to methods from enterprise and technology.
But the processes of market innovation drive us towards precisely the dull, faceless, bureaucratic culture the public sector is trying to escape. Venture capitalists chase the ultimate goal of “exit”: the sale of their start-ups to one of the large incumbents. The market is blind to vision, intent and purpose. So too is the public sector when it sits on the pragmatic side of the chasm, asking only for a better version of what it already has.
Market mechanisms can drive down costs and help our public services deliver “more for less”. But what if we want better for less? Or different for less? Market disciplines alone are simply not up to the job of providing the renewal mechanisms we need for these more complex purposes.
The 100 artists who recently wrote to Sir Sandy Crombie at Creative Scotland asking the organisation to “end the use of business-speak” should really have challenged the all-pervasive “business think” that lies behind it. The same could be said for health, for education, for social care, for justice, for every department of government.
Crossing the chasm is a wicked problem for any innovation in which money is not the primary issue of concern. I believe all the elements of a real innovation system for public services, with distinct financing and institutional support for each phase, are available – but will not be deployed until we recognise we have a problem.
As things stand, public sector innovations face two equally dispiriting fates. The first is to burn brightly for a while, fade and die. The second is to be drawn back by our market and pseudo-market mechanisms into the system from which they are trying to escape.
The radical public service innovator today feels like Jay Gatsby: “So we beat on, boats against the current, borne back ceaselessly into the past.” We owe them better than that.
• Graham Leicester is Director of International Futures Forum