Why government can't innovate

Phil Wainewright Profile picture for user pwainewright April 29, 2014
Innovation involves risk. Government bodies can't die, which means there's no incentive to embrace disruption.

Council of Europe, seats of the members 06
The story of how the US Post Office killed the digital mail service launched by startup Outbox is a telling reminder of how innovation gets stifled in the public sector. There are exceptions but they have to struggle against the grain. This is worth bearing in mind for any public agency trying to drive a digital agenda or a cloud first policy: it's going to be a hard slog.

I won't recount the Outbox story here — follow the link above to read the original account by Derek Khanna in full. Instead, I want to highlight one passage in particular, where he references Clayton Christensen's work on The Innovator's Dilemma and its notion of disruptive innovation:

In a well-functioning market, we would expect a company like Outbox to disrupt the dominance of the incumbent and force them to either innovate or die. But of course, USPS is not a normal company; rather, it is an entity of the US government, and the market forces that lead to innovation and growth in the free market are completely missing in DC bureaucracy.

This is the key point that startups and other innovators are prone to overlook when dealing with government. In the private sector, there's an existential imperative to innovate because if you don't innovate fast enough then your competitors will come along and steal your market share. Late adopters shrivel, stagnate and ultimately get taken over or fade out of business.

Existential threat

In government, the incumbents never face this existential threat. Yes of course the politicians have to face elections — we'll come to that later — but they're not the ones that take the technology buying decisions. Those decisions are in the hands of unelected officials, who have a job for life.

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Thus the public sector never benefits from the natural process of attrition we see in the private sector, whereby businesses that fail to innovate simply become less relevant as their customers migrate elsewhere. Government faces no innovator's dilemma because there is no existential threat. The government agency will never face a competitor; there will always be a city council (even if it falls into bankruptcy, it just carries on with restructured credit).

This is why so many attempts to inject private sector vigor into the public sector, such as introducing private financing or setting up so-called internal markets are doomed to failure. They never change the structural dynamics of incumbency — in fact they normally make it worse by adding extra complexity, new cost burdens and cementing it all within a multi-year contractual framework.

Even when a formerly public agency is privatized, in many cases its existence will still be protected by regulation, ensuring that it can never truly face the threat of extinction.

Why bother?

The innovation dilemma for government is, why bother? Innovation involves risk. If the institution's survival is not threatened then there's no incentive to embrace disruption.

This is why the public sector is so often a technology laggard. It only gets a refresh when it's become patently clear that it's no longer fit for purpose. But even when buying new technology, there's little incentive to take the opportunity to experiment with innovative new ways of getting things done. If you take risks, people will complain or you'll get criticized for making the wrong choices. No public servant every got fired for leaving things as they are.

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This is where the politicians ought to be able to make a difference. But we shouldn't expect too much of our elected representatives. The very nature of disruptive innovation is that it breaks with convention, it runs counter to what everyone else is doing. The essential nature of representative democracy is that it reflects the will of the crowd. Sure, a good politician will show leadership and gain support for needed change. But a wise politician chooses her battles carefully. Change is disruptive and too much disruption loses votes.

All of this is not to say that government innovation is impossible; it's just very difficult. Therefore anyone who is trying to innovate within government needs all they support they can get. At diginomica we're glad to give that support — we've seen how tough it can be.

Image credit: © Ingo Bartussek – Fotolia.com

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