How do you see innovation as a possible catalyst for creating the future of government?

We face a new reality today. There are forces at play this century that have no precedent. The turmoil in markets, constrained government resources and budget challenges are some of the key influencers. Citizens are highly connected, more socially aware and much better informed. At the same time governments are faced with citizens who are increasingly demanding a role in policy and service design. The changes unfolding and driving our society are outstripping the public service's ability to adjust and innovate.

The focus in the public sector seems to be on austerity measures and cost-cutting. How does that influence innovation in government?

We have to be concerned that a lot of what we are seeing in the government today is being driven primarily by what we call efficiency innovations – essentially doing what we do, but more effectively. What it doesn’t allow, is the ability to change the dynamic around you.

One of my favorite authors is Sir Ken Robinson² who frequently addresses innovation. He contributes great insight, noting that the greatest challenge to transformation is the tyranny of common sense that tells us it can’t be done in any other way. Governments today, due to the limited resources they have, have a strong focus on efficiency innovations. However, they need to have a much greater portion of sustaining innovation – that idea of doing the things we do but in different ways. As well, we are in desperate need for more radical innovations – doing new things.

Also keep in mind, efficiency innovation ultimately will have minimal affect. If efficiency is all that you are focusing on, you are in a downward spiral and sooner or later, you will reach a point where you no longer have the resources to deliver on your responsibilities. Change requires investment.

In your experience with the government, is this counter to the general mindset?

Yes, there a lot of factors within the government working at the operational level, counter to what the stated values are. This is a huge cultural problem within the government. There is lots of rhetoric around the need for change, and yet the DNA of management and the structures of the organization can be working against what we need for the future.

Another cultural factor is transient leadership. The constant moving of senior executives creates a leadership with short term goals and small windows in which to create change. It also affects continuity as leaders rarely get recognition for implementing someone else’s ideas. Transformation takes time and churn of leadership that creates constantly shifting priorities, unrealistic time frames and approaches which undermine continuity are significant barriers to change.

How can Business Model Innovation serve as a blueprint for government innovation?

One of the most important aspects of business model thinking is moving away from defining your business by what you do, which often manifests as an obsession with process. Instead, focus on the value that you create for your customers or your clients. It really means making the job that your customer has to do, or the problem that they have to solve, the key reference point for what your organization does.

An example of this is from a few years ago, when I was working with a procurement agency where we spent a lot of time talking about what is the key value of the business. When we first asked the agency about this, they said that they were in the business of creating contracts and that’s what their business was.  At first, this appeared to be a valid perspective of how the organization thought about what it did.  But when you stop to think about it from a client or citizen perspective, the question is, what value do you create?  

In this context, the need of the clients, who have a job to do delivering their programs, is the good or service they do not have in-house. A great contract that may save the client money is worthless to the client getting the job done if the supplier doesn’t deliver on the contract. Until that good or service is delivered no value is created for the client - the contract is merely the vehicle for that value creation.

So how does a business model approach help to drive out the value proposition?

It is fundamental to business model thinking to understand the nature of the customer and the value proposition. This is the core relationship you have to get right to be successful.

Start thinking of your business activity relative to that relationship. Then, start addressing the other components of how you deliver that value and how you create that value in terms of the infrastructure you need, etc. 

It also opens doors by rethinking. Rather than focusing on what you do, you focus on the value you create which allows you to consider things, like open innovation for great partnerships and for finding new sources that can help support the infrastructure that maybe the organization doesn’t have its own resources to deliver.

One example of this is how to define Grants & Contributions in the federal government. The government tends to treat Grants & Contribution, as a financial transaction rather than seeing it as a business that uses open innovation and outsourced resources in order to deliver great value to citizens.

Now, you have also described business models as a tool for social and open innovation. Can you elaborate on that?

The great thing about the business model approach to innovation is that it can enable a whole new set of social and economic relationships. If you are willing to accept the notion of open business, you can leverage the knowledge and the sharing of talent that is out there. In doing so, you can harness the creativity of the public and private sector. You can do things like leveraging new technologies to address chronic social problems or leverage huge data stores the government has, in ways that the government itself may not have the resources or the creativity to do.

For example the use of platform business models can build a lot of strength around the shared value concept. This can enable a partner-driven business and creative solutions to chronic problems.

William Eggers, co-author of The Solution Revolution³ has some fantastic ideas on the coming together of private and government sectors.

That’s interesting, it is becoming difficult to separate product and service innovation as more products are adding services to their offerings, and more services are extending their brands through products. We have a similar situation emerging with social innovation. As we bring in factors like sustainability and the ability to address wicked problems that affect our society, there is a blurring of business, government and social innovation.

Indeed this is part of the dynamic of the new reality. The things we need to address are evolving themselves and the speed at which they are evolving in is surpassing our ability to create solutions for them with our institutions. We need to change the way the public service operates and delivers services.

We also hear a lot recently about the concept of Design Thinking. The idea breaks away from traditional business planning and traditional government planning.  Now, this concept makes a lot of sense when producing products and so on, but how would design thinking apply to government?

First of all, you have to contextualize design thinking into to a broader sense of entrepreneurship. The acceptance and application of design thinking principles is really a hallmark of the revolution that is going on in entrepreneurship. Design thinking enables the move away from plan-based management into discovery-driven innovation and leadership.

This idea of the importance of business plans, where you are thinking through every detail before you make a move, ultimately leads to the notion that you can prevent negative things from happening. Discovery-based approaches accept that you are working with unknowns – which mean you can’t play the game with the same rules that apply to a known business. When doing something that is new, it is better to make use of design thinking principles such as deep customer insight, prototyping of ideas and iterative development.

Design thinking ultimately minimizes the burn rate for new initiatives and focuses on what is really the core currency of entrepreneurship and innovation which is validated learning. In the context of innovation, failure is not a bad thing. Finding out what works, and what doesn’t is part of the validated learning process.

These are based on fundamental principles of design thinking.

But how does this work in government?

Well, again this is part of the cultural change that is needed. Although the public sector has tried to move to risk management rather than risk aversion, it has not really permeated the culture. There is a massive fear of negative press and a desire for absolute control. For example there was a recent article on the use of twitter in government which mentioned a particular government agency that has a 12-step process to approve a tweet. This reveals a fundamental misunderstanding of how social communications works today.

Are there any examples of governments around the world that have used Design Thinking?

Yes, there are some really interesting ones:

• The Mexican government has a citizen engagement platform that it uses a communications channel between citizenship and state government. While it seemed risky at first, it has resulted in a huge boost in the relationship and confidence levels and in the transparency of government.

• Innovation Norway in a central service agency of the government that acts as an interface between the government and industry. Its mandate is to find solutions to government challenges and to ensure innovative industry approaches are leveraged by the government. They have offices in Norway, Sweden and 30 other countries worldwide (including in Toronto), to cast a wide net in looking at innovative thinking and promoting innovation of Norwegian businesses.

• The UK has been a great leader in the idea of innovation in government which includes an organization called NESTA⁵ . They have embedded design principles in creating digital services for its citizens.  NESTA is a government-funded organization that helps drive innovation inside of the government and often brings together public and private sectors. It crowdsources many of its solutions. It very much focuses on the principle of working hard to make things simple - which is a really key principle of design, for example, building digital services, not just websites.

• Finland has also done some interesting things with government innovation. They use a gaming platform to get citizens to help solve small government projects – which they call micro-tasking. The results for Finland are something like a million tasks that have been solved by using citizens to help support or create solutions.

• If you look to the United States, there are some extraordinary successes in government innovation. One of the biggest and most powerful is Code for America which is an organization that uses tech-savvy individuals to build apps for all levels of government. Basically they go into a state or other level of government and build an app and then make it open to other governments across the country. It’s a really interesting private endeavor that now is also supported by government.
  
  

It is interesting. In a lot of these cases the development has much more open innovation brought into the front end.

Yes, and it also allows for further iteration and scaling which are all part of design thinking.

In terms of leading innovation, what impact does the current focus on performance-based management have on innovation?

There is a fundamental challenge with performance management. I used to think that evidence-based management was the problem. But actually, that’s not really the problem. Rather, it is what we consider as evidence for innovation, which is different from when you are executing an existing business model.

When you are leading within a known business, you have the data and typically a lot of performance history with which you are working. When you are stepping into innovation, you are facing a lot more challenges around the unknown, so the evidence you are looking for has to shift away from performance evidence into validated learning.

And so do we need new performance metrics around innovation that would allow for a change in the culture of government?

The goal is really to become client and citizen-driven instead of process-driven. It means moving the evaluative metrics for innovation away from the standard performance-based approach.

Do you know of any governments that are changing their evaluative frameworks to encourage more client and citizen-centric innovation outcomes?

I think the United States has made a big shift in the last five years in its thinking around innovation. A great example of this is the National Science Foundation that has driven a lot of innovation with engineers and scientists taking their developments to the marketplace.  

Until now that had been using very traditional methods. Last year, they engaged Steve Blank⁶, who is the author of the Customer Development process to work with some of their engineers. In fact, they did an A/B test with a pilot group and a control group. One group used the standard process that they had been using for years and they had their standard response for that cohort. About 25% of them received funds that would allow for further formal development into the market. However, in the second group that used Steve Blank’s customer development and discovery-driven process, their results were much greater, with 68% receiving approval for funds.

Ultimately, this is because they could show customer validation?

Yes. You know it’s very rare when you begin the innovation process the thing you end up with bears a very strong resemblance to what you started with. So much validated learning changes what you know about the marketplace and what you know about your clients. Now, the National Science Foundation has made it mandatory for anybody that wants to apply for grants to move products forward, has to undergo training in customer development and discovery-based innovation and entrepreneurship.

Many public sector leaders bring a kind of leadership legacy that is really quite different from the likes of design thinking and innovation. It seems to me, we won’t get there without new skills development. Would this also involve both innovation capability building and a new kind of leadership?

Yes, it’s the famous Einstein statement that we can’t solve problems with the same thinking we used to create them.

The challenge is that innovation often has to exist in the context of an ongoing operation. However, by developing capabilities in discovery-driven innovation methods and design thinking principles, you can control the costs, keep the burn rate low, pilot and test new ideas to make sure they work before you scale. Iteration is key.

So it is in fact very much incumbent on government agencies to both develop innovation skills as well as build strong relationships with entrepreneurs and others that can become channels that bring new ideas to government institutions.

Both from a perspective of open innovation and because we can’t simply tax our way to solutions and assume that centralized government will solve everything.