The following commentary was adapted from an essay by Jagjit Dhaliwal, deputy CIO for the Los Angeles County Office of the Chief Information Officer. It was originally published on LinkedIn, and it's been lightly edited for style and brevity.
"Innovation" may be the most overused word in any organization. All organizations may be innovating in some shape and form, but generally struggle to measure the value or sustain it in the long term. It is not only about adapting emerging technology or launching a new product; it is more of an ongoing journey involving business, technology, process, people and culture which needs to be embraced at all levels within an organization.
So, what exactly is this "innovation in the public sector?" I believe that it’s a mindset that enables creative ideas to improve the lives of the residents and an environment to facilitate the implementation of these ideas. Certainly, it involves all stakeholders including executives to enable the culture and individuals to embrace it. While not a goal in itself, it provides the foundation to achieve business goals. It helps in improving employees' as well as residents' productivity, growth, and development. It also helps to bridge the gap between citizens and the government. It goes beyond technology and involves investments in a wide range of knowledge-based assets that extend beyond research and development. Social and organization innovations, including new business models, are increasingly important to complement technological innovation: "Innovation in government is about finding new ways to impact the lives of citizens, and new approaches to activating them as partners to shape the future together."
Why We Innovate
Both the public and private sector are striving for innovation, though the purpose may be different. The private companies continuously try to innovate their business, products and services, which can be purely for business survival, competitive advantage, higher revenues, lower costs and/or better margins. Public agencies may not be looking at revenue and competition, but for lower costs and better customer service. The residents and the world around them are changing rapidly. The changing demographics and societal, economic and technological trends are shaping our future. Citizens' needs and demands are also evolving, and governments globally must become more agile and innovative to keep pace with this rapidly changing world. In the end, it’s all about "value proposition" to the customers, who are all residents in the case of the public sector.
All organizations and their executives understand the importance of innovation. According to McKinsey, 80 percent of executives think their current business models are at risk to be disrupted in the near future. In addition, 84 percent of executives say that innovation is important to their growth strategy. The Accenture 2015 U.S. Innovation Survey tells a similar story: 84 percent of executives considered their future success to be very or extremely dependent on innovation. What’s more, according to the 2017 PwC Innovation Benchmark, 54 percent of innovating organizations have trouble bridging the gap between innovation strategy and the larger business strategy. While innovation is crucial for long-term performance, it is challenging and often fails. Ninety-five percent of all product innovation fails, according to HBS. The most important reason for the failure is missing an innovation strategy itself. Even if there is a strategy, it may lack important characteristics:
How We Innovate
Developing an innovation strategy is crucial to initiate, cultivate and sustain successful innovation. The following steps must be taken into consideration when developing an innovation strategy:
1. Set clear objectives aligned with business strategy. The innovation strategy cannot be just piloting emerging technologies or implementing a one-off project. It must be a holistic strategy aligned with the business strategy. Sometimes, teams define objectives that are too vague or futuristic, and it’s difficult to demonstrate progress. The strategy must have short-term and mid-term objectives along with some early adopters to gain momentum.
2. Include multiple innovation types. The main reason for innovation failure is locking into one specific approach. Just setting up an innovation lab would not suffice. Based on the diversified segment, we may need to focus on both technology and business model innovation. Four types of innovation are possible based on the business problem and capabilities. It’s important to diversify ideas in different types and periodically recalibrate, based on the outcomes.
3. Navigating the budgeting process. The agencies face growing pressures to deliver more with less. With a limited budget, there is always a question of whether budget processes could better support public-sector innovation and, if so, how. The budget agencies wishing to promote innovation should consider the following measures:
- Adapting or strengthening the integration of budgeting with strategic planning.
- Periodically integrating government-wide policies with the budget.
- Increasing the capacity to gather and use evidence on innovations to promote greater fact-based deliberation about the scalability of these initiatives.
- Providing more incentives and flexibility to undertake the experiments so necessary in seeding the process. One such process within the county of Los Angeles which I really like is the Quality and Productivity Commission, offering the Productivity Investment Fund.
4. Dealing with regulations and procedures: Bureaucracy and red tape are often seen as the main barriers to innovation, particularly in the public sector. There would be a need for red tape reduction programs helping to identify unnecessary administrative burdens and integrate administrative silos.
5. Measurement criteria: It’s important to define metrics and KPIs to measure progress. It can be operational quantified key performance indicators (KPIs), for example, the number of ideas in the pipeline, the number of ideas validated and converted into projects and the net new cost/budget OR business outcome measures aligned with business strategies. For example, the number of fires prevented due to early fire detection innovation project implementation, or the average time spent by the resident to receive service, the percentage of cost savings or the percentage in productivity increase.
6. Innovative culture: Public employees are central to all stages of public-sector innovation, and how they are managed can be fundamental to enabling organizations to innovate. The organization should promote the culture of entrepreneurship to enable employees to demonstrate entrepreneurial behavior in their work to the benefit of their employer. Also, there should be a mechanism to incentivize staff and build capacity.
7. Governance: There needs to be a multi-facet governance structure that includes the organization, the executive sponsor, business leaders, external partners including academia, service providers and, lastly, a channel with the citizens for direct feedback and inputs.
8. Executive commitment: Last but not least, the commitment to establish the right conditions for innovation starts at the top. The executive commitment is important to remove any impediment or any conflicting priorities. They can help with the budget, risk mitigation and the monitoring and evaluation of results. In the end, it’s about the employees who should have the ability, opportunity and motivation to innovate.