FIFTEEN
Innovation Management in Government
CHAPTER SUMMARY: Governments can contribute significantly to economic activity. This chapter looks at fostering innovation in government, the requirements for engendering success in government innovation programs, and how government innovation–management structures differ from the private sector’s. We also look at the five requisites of government innovation and explain why we think we are in the midst of a golden age of government technological innovation.
The most famous government unit in the United Kingdom is probably the intelligence agency that the James Bond movies call MI6. In policy circles, though, it is the Behavioural Insights Team, known informally as the “nudge unit,” that gets the attention.1 Established in 2010 under Prime Minister David Cameron, the unit was named after the book Nudge, written by Nobel Prize–winning economist Richard Thaler and Holberg Prize winner Cass Sunstein.2 Nudge discussed how government and businesses could significantly improve outcomes through small changes to human behavior that Thaler called nudges.
For example, Thaler highlighted research that showed that if retirement savings were switched from an opt-in to an opt-out setting, workers would save more money. Research by the U.S. retirement giant Vanguard, which administers millions of workers’ retirement plans, documented that firms with opt-in retirement-plan enrollment enjoyed only 59 percent employee participation. In contrast, companies with automatic enrollment had an 86 percent participation rate.
The nudge unit was controversial at first. Critics derided the team of academics, economists, and psychologists as disconnected from reality. But the nudge team racked up considerable successes through small changes. For example, it suggested making a small change to tax-collection notices, stating the percentage of people who paid their taxes on time. This simple tactic yielded real improvements in the speed and rate of tax payments in an experiment on 200,000 real taxpayers.3 So the British government adopted the tactic.
In another experiment, the nudge unit worked with four government agencies to increase organ donation by testing eight different messages requesting that people join the organ donation registry. It tested these in a randomized fashion on roughly a million visitors, becoming one of the largest social science experiments in history. The winning message appealed to empathy, saying: “If you needed an organ transplant, would you have one? If so, please help others.” It is estimated that this experiment added more than 100,000 organ donors to the registry.4
The nudge unit was deemed successful enough to spin out as a “social purpose company,” jointly owned by its employees, the Cabinet Office, and an innovation charity, Nesta.5 With dozens if not hundreds of policy successes to its credit, it now works with governments all over the world and is an oft-cited example of government innovation that works. It was part of a wave of experimentation attempted in the United Kingdom in the decade from 2010. This experimentation was in part due to extended austerity and reductions in government spending but was also motivated by the defining mantra of the long-standing conservative government: do more with less.
Moving People’s Cheese Is Harder When It’s Government Cheese
Innovation management in government is harder than in business but often more valuable. It is usually more complicated too, because of rules, regulations, and political considerations. Nearly all government innovation must happen entirely in public view, rendering it susceptible to derailment by aggressive political constituencies even if it is certain to yield improvements. Even the barest hint of corruption can shut down a project that has tremendous promise, and missteps are far more likely to become public debacles, painful for government leaders and workers alike.
Internal adoption of innovation can be hamstrung by internal rules and regulations designed to ensure fairness or transparency that, though they may do precisely that, also slow its implementation.
Real changes to incumbent structures often threaten jobs if they are to deliver fiscal “efficiency,” resulting in resistance from workers and their unions. Taxpayers themselves are fickle adopters of new technology efforts; if a product in the consumer realm must be ten times easier, then one in the government realm should be fifteen times easier. And taxpayer criticism can quickly scuttle or delay innovation efforts in the field, reducing the necessary adoption period and innovations’ endurance.
Perhaps most insidious of all, all too often, extraordinary performance that reduces costs results in reducing resources to the department that logged the success; concurrently, overuse or misuse of resources is encouraged by the “use-it-or-lose-it” reality of most government agency funding cycles and policies.
That said, government innovation can be done. Done well, it can have tremendous impact. In New York City, for example, former Mayor Michael Bloomberg and his team conceived of and instituted a novel phone-based system that functions like a city concierge and analyzes calls to prioritize maintenance and policing. Bloomberg also installed a culture of data-based management and systems to monitor New York City in a way previously unimaginable. This data focus led to a decade of astounding improvements in the provision of city services and helped improve the quality of life in a city once deemed unmanageable.
We will explore several other examples of innovation management in cities and governments. Fortunately, many of the tactics applicable to the private sector work well in the public sector too. Innovation prizes to solicit proposals to solve public and government problems are a proven recipe, and, in a similar vein, crowdsourcing of ideas from broad swathes of the electorate has been shown to yield promising results.
One apparently common aspect is government innovation’s greater dependence on external expertise, particularly with regard to technology. Government bodies are generally not equipped for innovative technology development. Rarely are they scholars of user experience, and they are not generally accustomed to testing new products on customers.
Fortunately, governments are more open now than ever before to innovation partnerships. Throughout the developed world, government organizations realize the need to make good use of technology if they are to effect change. In the United Kingdom and the United States in particular, conditions of constant austerity have forced consideration of changes that previously might have been unimaginable. India went as far as rechristening its planning and policy ministry the National Institution for Transforming India (also called NITI Aayog) so that it could focus on instituting innovation in its federal and state governments. The reality is that governments must do more with less. Here are some ways in which they can.
Five Requisites for Government Innovation
Over the course of 2014, Clayton Christensen and two other researchers from the Harvard Business School interviewed public-sector innovators, surveyed hundreds of government initiatives, and held a conference on the topic at the school in order to gather information and bring together the community. Christensen’s team identified five core requisites for public-sector innovation:6
• Ability to experiment
• Ability to replace outdated infrastructure
• Existence of feedback loops
• Existence of incentives for product or service improvement
• Existence of budget constraints on end users
Christensen’s team analyzed how the District of Columbia (Washington, DC) had managed to move from coin-operated parking meters to a system of using mobile-phone apps to pay for parking spaces. Parking is a major problem in many cities: people driving into cities may spend 20 percent to 30 percent of their driving time searching for parking, contributing significantly to gridlock and to carbon emissions; simply paying parking meters can entail difficulties; and a shopper needing extra time has to run back to the car to top up the meter.
The phone-app system offered drivers with smartphones very clear benefits from the beginning. The city would no longer need to pay coin collectors to drive around the city to gather all the coins. This enabled workers to spend their time on more valuable tasks; it also lowered carbon emissions and was less hassle for those who could pay by tapping on an app rather than digging around in seat cushions or carrying coins in their bags and wallets.
The city engaged a third party to build an app called ParkMobile that was to replace the parking meters. With careful change management, consultation with public-sector unions, and some user testing, ParkMobile ended up a major success within two years of its October 2012 launch. There were bumps in the road: on occasion, fines resulted from late information updates to meter readers. The fees per transaction made parking for shorter periods pricier than it had been. And, in its early versions, users had to input their license-plate details and the correct parking zone, a process that resulted in many manual errors.
The switch to a mobile payment platform nonetheless unlocked many benefits. Washington, DC, began to use “demand-based” pricing, raising or lowering meter costs according to usage in an area. Also, by switching meters from mechanical to electronic platforms, the city could remotely upgrade units and change pricing and terms. Today, ParkMobile is used by cities all over the United States, including seven of the ten largest metropolitan areas, and even for public parking lots that do not have meters. ParkMobile was so successful that the German automaker BMW purchased the company in 2018 as part of its effort to better understand transit solutions.
Of the innovation requirements laid out above, the ParkMobile installation clearly fits all five. The city government had the ability to experiment and was willing and able to replace outdated infrastructure. There were feedback loops in place; consumers are very vocal about their experiences, with consistent media coverage of ParkMobile problems. The city had a strong incentive to improve its service delivery—parking services—both to save money and to improve the user experience. The end user had real budget constraints. The perennially strapped city certainly could not endure cost overruns. The consumers were unwilling to pay high prices for parking spots; they would have voted with their feet and parked in private lots or ridden on public transit instead.
This is a high-cost example of innovation that requires years of planning. In general, the lower the capital expenditure required for a government innovation, the easier the implementation. The economically challenged city of Milwaukee, Wisconsin, is experimenting with placing mini-libraries in laundromats. The theory is that women (and it is mostly women, unfortunately) in poor neighborhoods must wash clothes and watch their children simultaneously.7 So the hope is that, given the opportunity, these mothers will spend that time reading with their little ones; a large body of research has demonstrated that young children strongly benefit from being read to. The libraries will also allow book borrowing, enabling children to read at home. This is another easy public-education hack: studies have associated children’s performance in school with the number of books in their homes.
Such an innovation is comparatively low cost and easy to test the effect of via a small number of laundromats. Government innovation can also be nearly zero cost, when the government works with another party to provide a benefit that is free but valuable. In Monongalia County in Pennsylvania, the county health department faced a rise in the number of syphilis cases. The department used its existing marketing channels but also tried a new one to reach a wide audience: dating apps. The county asked a popular dating app maker to post syphilis warnings when users from the county logged into the app.8 This raised awareness and contributed to public health efforts. It cost the county nothing but achieved a wide reach nearly immediately. Thus, exponentially advancing technology can also provide, for free and to a limitless constituency, benefits that otherwise would cost real money or effort to pull together.
A Golden Age of Government Technological Innovation
Despite the political turmoil evident all over the world, we just may be sustaining a golden age of government innovation. The factors that have facilitated effective innovation in the private sector carry the same weight in most cases of technological innovation in the public sector. Just as we benefit from getting free GPS information via our smartphones, so can we benefit by paying for parking meters or other government services via apps, remotely and without needing legal tender or wasting time to top up our meters.
Moreover, real government expenditure has never undone the broad government budget cuts due to the 2008 economic crash. The pressure to do more with less is acute. Necessity has always been the mother of invention, as the saying goes, but in the case of the United Kingdom as a nation, and many states of the United States, austerity is now deeply ingrained in the government ethos and is unlikely to reverse for years to come.
So the options are few. One of the best of them is innovation through technology. More global citizens are connected to the Internet via powerful smartphones than ever before. Those phones are enabling huge leaps in government innovation. Cheap sensors have rendered environmental data easy to collect. Smartphones and other technology are empowering citizen participation in government innovation to degrees not previously contemplated, enabling rapid feedback and faster decision-making. Cities and countries are turning to analysis of large datasets in order to understand where opportunities for improvement lie. These same environmental data-collecting and data-sharing capabilities can also help factories produce higher-quality goods. Ambient temperature and humidity can dramatically affect manufacturing processes; monitoring and understanding these effects will contribute substantially to the ability of Industry 4.0 to deliver on the promise of making more, higher-quality goods with the same physical plant.
As they are everywhere else, exponential changes in technology in the civic realm will only accelerate, increasing and improving opportunities to remake government through innovation thinking, humane design principles, and the other keys to rapid innovation in the private sector.