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Innovation in Public Services

Lawrence Green

Overview Public Services and Innovation

1. 2. 3. 4. 5. 6. Introduction innovation in services and innovation in public services The public service (PS) industries some dimensions (employment and expenditure) Drivers for innovation in the Public Sector the modernisation and contraction agendas in the UK Forms of Public Sector innovation Management of innovation - sources, directions, features and barriers Review - public sector and private sector innovation compared
Caveats: a UK or Euro-centric view research concerning public service innovation remains at a nascent stage some evidence but the contours of the field are emerging much material here originally produced by Prof. Ian Miles (MBS)

Service Industries and Innovation

Service Industries Size - 70-80% of all economic activity in developed economies (20-25% in manufacturing) Intangibles finance, communications, entertainment, news, health, education Specificities of services 3i approach: intangible; interactive; information intensive Transformative transforming states (of people, artefacts, environments) Specificities of service innovation ad hoc, nonformalised, project based, informed by user-inputs

Classifying public services

What are the public service industries?
NACE codes classes G to O cover services in general


Wholesale & Retail Trade Hotels, Restaurants & Catering (HORECA) Transport & Storage Financial Intermediation & Real Estate (FIRE) Business Activities (legal, design, computing & consultancy etc.) Public administration, social security & welfare (& defence) Education Health & social work Other social & personal services

Public Services expenditure (UK)

Source: HM Treasury

Area of Expenditure
General public services

Spend for 2003/4 (bn)



Defence Public order and safety

Enterprise and economic development Science and technology Employment policies Agriculture, fisheries and forestry

27.4 27.1
6.5 2.1 3.6 5.5

2.5 2.4
0.6 0.2 0.3 0.5

Environment protection Housing and community amenities

7.7 6.1

0.7 0.5

Recreation, culture and religion



Education and training Social protection (welfare)

Total Expenditure on Public Services

61.1 155.0
437.1 (650bn in 2010)

5.5 13.9
39.2 (44.8% in 2010) 5

Distribution of UK Public Service Employment

Defence NHS Central Govt Education Social Services Police Local Govt Public Corps Total (Public Sector)

Employees (millions 2003)

0.2 1.5 0.6 1.5 0.4 0.2 0.9 0.4 6.0 (of 29.5)

Source: Office of National Statistics, Labour Market Trends

Why study public service innovation?

Size & Significance major employer and delivery agent (Health and Education) Political interest delivering improved services at reduced cost? Modernisation (up to 2009) and Contraction (post 2010) agendas politically inspired reorganisation and reinvigoration of public services versus contraction and changed ownership Under-researched field like services innovation (of which it is part). Unclear how far existing concepts and instruments apply Practical issues identifying successful approaches to public service innovation

Drivers for Public Service Innovation

Politics - New Labour (powerful push) Debate frequently cast in terms of public sector crisis Demand - new and unmet demands and expectations (welfare system designed in 1940s for existing needs and conditions) Value for money - major investment but low productivity (rhetoric of resistance) New Pressures - ageing population; NHS waiting lists; crime; social decay and polarisation Drivers beyond politics Structural factors - demographic change, immigration, globalisation Public expectations 20th Century services, in 19th Century facilities, for 21st Century citizens? Reduced deference and trust Technological development role of ICTs - facilitating and supporting innovation in the public sector (esp. delivery innovation) Public spirit motivation collectivist ideology and ethos doing better for patients, learners etc.

Political responses to new drivers Labour and Modernisation

Prescription for an ailing public service sector: Innovation to increase effectiveness (& improve outcomes) of services Organisational Innovation - introduce greater accountability application of NPM principles (cost accounting, targets & evaluation) - private sector standards and disciplines Public-Private partnership the end of ideology Re-conceptualisation of service user as customer Import ideas (from US?) contestability and choice Stimulate innovation and dynamism cultural innovation

Public Service Renewal and Contraction (Con-Lib coalition)

Re-defining the problem space New (deficit-linked) push for innovation: doing more with less Ideological commitment to contraction in the size and reach of the public sector (reducing labour force by 350-500k?) Transfer of responsibility for personal care, health, pensions etc. (conceptual innovation de-risking) Transfer of responsibility for management and delivery of services (private and 3rd sector actors new partnerships) Private entrepreneurism and cultural change substitution of public sector labour


Forms of Innovation
New service products NHS Direct and Walk-in Clinics, real-time on-line travel and transport advice Improved service delivery systems electronic delivery of services (enhanced interaction, on-line payments and edemocracy). WebCT in education Organisational and administrative and innovation - costreduction, centralisation of services, one-stop shops. Major service re-organisations in healthcare and welfare (GPs to organise Primary Care) Conceptual innovation outsourcing, privatisation, de-risking, cultural change Re-consideration of boundaries interactions with external organisations and knowledge bases N.B much overlap and co-dependence across classes

Managing PS Innovation - Sources

Absence of R&D departments but increasing formalisation via innovation hubs (health), innovation unit (school education) Scanning activities importation of ideas from Denmark, Singapore, US etc. Government edicts much top-down innovation from PIU (New Labour) and ministries informed by think tanks (ResPublica etc.) Professional networks - exchange of experience across many levels professional networks, local and regional fora, and associations etc. Private sector importing ideas and processes from the commercial sector (often through in-sourcing specialist labour) Bottom-up locally-generated innovation from operational staffbut diffusion issues 50% of innovation in public sector is generated by operational managers and front-line staff (Borins US research)

Direction and Organisation of Innovation

Centralised - much top-down, politically-driven innovation (a result of high-level initiatives and targets)but requires direct leverage or robust management structures and lines of visibility and accountability Experimentation - learning, piloting and pathfindingthen Local adaptation modification and shaping occurs regionally and at institutional level - much space for interpretation of central edicts and initiatives (and such edicts often trigger local innovation of many forms) Grass-roots innovation high levels but diffuse and difficult to track also much innovation is invisible - it stays at the bottom. Also little funding and confusion relating to IPR Incentivisation much encouragement for front-line innovation but often led by individual initiative and energy - better efforts to formalise?


Features of Public Service Innovation

Partnership Based increasing incidence of public-private partnering for innovation in public programmes Effort to ensure adequacy of capability and capacity Devolved and shared risk (in large capital projects) Inculcation of private sector disciplines Knowledge sharing and cascading Dual leadership and blended teams Potential problems - alignment of vision; asymetrical access to knowledge resources; misaligned motivations and cultures Role of the 3rd Sector much innovation initiated and steered by NGOs, charities etc. Acting on expressed needs of service users (patient groups etc.) Experience (of need) deployed to inform and shape innovation Substitution of public sector agencies (delivering innovative services) Potential problems accountability, special interests, skewed provision

Barriers to Public Sector Innovation

Major focus of political rhetoric but some observed problems Public resistance often to re-organisation and perceived diminution of services Heritage entrenched practice and procedure Professional resistance often powerful professions fears with respect to loss of power, autonomy or conditions Pace and scale shifting targets and inadequate knowledge of consequences Risk aversion and political cycles visible failure and critical risk Supports - lack of R&D departments and dedicated budgets Consequence anxiety lack of clear picture of all eventual effects unintended consequences and ripple effects in massively complex systems

Public and Private sector innovation compared

Profit - drivers in the private sector are connected with profit and competitiveness those in the public sector are associated with response to targets, professional kudos, or personal commitment to improved user experience Organisation - public sector organisations rarely have dedicated R&D divisions or budgets there is little in terms of culture of innovation focus on operational activity Formalism - public sector innovation is ad hoc and non-formalised systems and mechanisms for innovation are rare (but growing) Rents - the financial benefits (rents) from innovation are rarely an important issue for public sector workers IPR little or no culture or tradition of IP protection in the public sector Learning - public sector tends to be more willing to discuss and learn from failure and underperformance than the private sector (wherein failed innovation is frequently hidden)