Issue 2

InnovationApril 2011

APS Human Capital Matters: InnovationApril 2011, Issue 2

Editor’s note to readersWelcome to the second edition of Human Capital Matters—the digest for time poor leaders and practitioners with an interest in human capital and organisational capability. This edition focuses on public sector innovation.

Ahead of the Game: Blueprint for the Reform of Australian Government Administration (the Blueprint) emphasised the need for the Australian Public Service (APS) to build a culture of innovation. For example, the Blueprint notes that ‘Leaders must support innovation by fostering creativity, and ideas—a culture of risk aversion may prevail if innovation is not rewarded.’

Innovation has been a central theme of recent thinking on APS reform. In addition to the Blueprint, the Australian Government commissioned the Government 2.0 Taskforce to identify how the public sector can better use the tools available for online innovation. The Taskforce report, Engage: Getting on with Government 2.0, was delivered in December 2009. In 2010, the Management Advisory Committee (MAC) report, Empowering Change: Fostering Innovation in the Australian Public Service outlined the drivers of, barriers to, and sources of innovation in the APS.

The MAC makes 12 recommendations designed to support and drive an innovation culture within the APS and in early August 2010 the Secretaries Board approved an APS 200 project to oversee actions arising from Empowering Change. This examined ways to further the key directions of the Empowering Change report; in particular, to develop a more open and collaborative approach to public policy and administration; to integrate innovation into our work in a more strategic and systematic way; to develop and apply the right skill sets to facilitate innovative approaches; and to share, recognise and reward innovation in the APS, both to increase learning and to develop a more innovative culture.

There is no doubt that the management of a workplace climate that fosters innovation is a key challenge for all those who lead and manage APS organisations. Nor is there any question that innovation is central to the ability of the APS to respond effectively to an environment characterised by an increasing pace of change, daunting levels of complexity and broadening expectations of both the people and Government. Concurrently, there is an unrelenting pressure to continuously improve performance and reduce costs—in short, to do everything ‘better, faster and cheaper’.

The articles summarised in this issue of Human Capital Matters provide a variety of perspectives on innovation in the public sector.

Travis Bland and his colleagues attempt to develop a clearer management perspective on the relationship between collaboration and innovation.

The European Commission’s flagship ‘Innovation Union project’ focuses on Europe’s efforts to address wicked or diabolical problems such as climate change, energy and food security, health provision, and an ageing population through a greater focus on innovation across all sectors.

Two reports by Jitinder Kohli and Geoff Mulgan outline how Congress and the Obama Administration can better assist public sector leaders in ensuring that there is a constant flow of innovative ideas into the Federal Government. The reports stress that concerted action is needed within each government agency as well as across government.

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The Partnership for Public Service and IDEO acknowledge the dilemma of the gap between citizens’ rising expectations of the public sector and the shrinking budgets and timelines facing many US Federal Government agencies. The authors’ set out concrete actions to overcome the impediments to public sector innovation.

The UK National School of Government’s Sunningdale Institute explores what models of innovation and innovation support exist in the public sector, where they are and are not effective, and to recommend ways in which innovation can be better supported in future.

And finally, in an OECD report, Phillip Toner analyses the principal approaches, debates and evidence in the literature on the role of workforce skills in the innovation process in developed economies.

About Human Capital MattersHuman Capital Matters seeks to provide APS leaders and practitioners with easy access to the issues of contemporary importance in public and private sector human capital and organisational capability. It has been designed to provide interested readers with a monthly guide to the national and international ideas that are shaping human capital thinking and practice.

Comments and suggestions welcomeIf you would like to receive further issues of Human Capital Matters please send an email to HumanCapitalMatters@apsc.gov.au with the word ‘Subscribe’ as the subject.

Thank you to all those who took the time to provide feedback on the March edition of Human Capital Matters. Comments, suggestions or questions regarding this publication are always welcome and should be addressed to:

Dr David SchmidtchenAPS Workforce GroupAustralian Public Service Commission

Ph: 02 6202 3707

E-mail: david.schmidtchen@apsc.gov.au

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Travis Bland et al, ‘Enhancing Public Sector Innovation: Examining the Network-Innovation Relationship’, The Innovation Journal: The Public Sector Innovation Journal, Vol. 15, No. 3, 2010, 17pp.

The authors acknowledge the rising pressure on the public sector to increase its capacity to innovate. Public servants are doing so by turning more and more to networks of public, private, and not-for-profit organisations. The authors note the existence of a considerable body of academic research on the relationship between collaboration and innovation. However, such research focuses mainly on the network’s capacity to generate new ideas and thus provides a somewhat limited understanding of this relationship. This is often of little practical guidance to public sector managers.

The article is an attempt to develop a clearer management perspective on the relationship between collaboration and innovation. It is centred on a case study of the Texoma Regional Consortium (TRC), a regional partnership composed of Texas and Oklahoma workforce development initiatives. The article’s principal purpose is to answer two questions: What is the relationship between the network form of governance and innovation? How can networks be managed to address the obstacles to innovation posed by the network form of governance?

The TRC, recognising that innovation is not an inherent feature or function of networks, designed, developed, and institutionalised several mechanisms to facilitate the completion of the process. TRC experience indicated the most significant to be integration, dialogue, and co-ordination. The authors conclude that these provide the basis for a clear understanding and better management of the network-innovation relationship which can be utilised successfully in other organisational contexts.

Two of the four authors—Travis Bland and Boris Bruk—are PhD candidates at the Center for Public Administration and Policy at Virginia Polytechnic Institute and State University (Virginia Tech). The others—Dongshin Kim and Kimberly T. Lee—are doctoral candidates at Virginia Polytechnic Institute and State University (Virginia Tech).

European Commission, “Europe 2020 Flagship Initiative: Innovation Union” (EC Communication), October 2010, 43pp.The document, a European Commission “Communication”, was released on 6 October 2010. It describes the EC’s new Innovation Union project which is part of the organisation’s Europe 2020 Flagship Initiative. Innovation Union is designed to focus Europe’s efforts on how best to address wicked or diabolical problems such as climate change, energy and food security, health provision, and an ageing population through a greater focus on innovation across all sectors.

The Innovation Union strategy—a central element in the Europe 2020 Strategy—is a strategic approach to innovation, one to be driven at the highest political level of the European Union (EU). Innovation Union is intended to facilitate government intervention in order to stimulate the private sector and remove bottlenecks which prevent ideas reaching the market. These include lack of finance, fragmented research systems and markets, under-use of public sector procurement, and slow setting of standards. Key components of Innovation Union are European Innovation Partnerships designed to mobilise stakeholders in improving R&D, better co-ordinating investment, speeding up standards, and better harnessing demand. This year the EC will also launch a major research program on public sector and social innovation and pilot a European Public Sector Innovation Scoreboard as a basis for further work to benchmark public sector innovation. In addition, EC funding for innovation research and activity will be increased substantially.

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The document is a detailed statement and analysis of proposals and expectations for Innovation Union. Two other items of interest, one an EC document and the other a brief commentary on developments, both of which appeared in February 2011, are also of interest. The first is “Innovation Priorities for Europe”, a presentation delivered to the European Council on 4 February by Mr J. M. Barroso, President of the European Commission. The second is an OECD Insights Blog dated 14 February, “Money Alone Won’t Make Europe Innovative”, by Mr Andrew Wyckoff, Director of Science, Technology and Industry at the OECD.

Mr Barroso sets out four priorities for strengthening Europe’s capacity for innovation which concern smarter spending to drive innovation, an improved framework for facilitating this, improved steering and monitoring of the process at the highest level of the EU, and a more future-oriented budget for these purposes. Mr Wyckoff argues that simply setting targets for increased R&D spending to enhance innovation will not achieve results unless this is accompanied by deep structural changes in Europe’s economies.

Center for American Progress and the Young Foundation Jitinder Kohli and Geoff Mulgan, “Capital Ideas: How to Generate Innovation in the

Public Sector” (Report), July 2010, Center for American Progress and the Young Foundation, 31pp.

Geoff Mulgan and Jitinder Kohli, “Scaling New Heights: How to Spot Small Successes in the Public Sector and Make Them Big” (Report), July 2010, Center for American Progress and the Young Foundation, 24pp.

Capital Ideas details how Congress and the Obama Administration can better assist public sector leaders in ensuring that there is a constant flow of innovative ideas into the Federal Government. The authors see this as imperative given the economic, social and security challenges facing America. They recommend six key public service-wide approaches: 1) identify priority fields for innovation; 2) open up the space for ideas; 3) finance innovation; 4) fix incentives; 5) change the culture; and 6) grow what works.

The report stresses that concerted action is needed within each government agency as well as across government and sets out a number of approaches to pursuing this under five themes: 1) unleashing the creative talents of agency staff; 2) setting up dedicated teams responsible for promoting innovation; 3) diverting a small proportion of agency budgets to harnessing innovation; 4) collaborating with outsiders to help solve problems; and 5) considering issues from new perspectives.

To assist in this process the authors outline more than 20 different ways in which public sectors are currently supporting innovative approaches. These are drawn from several international jurisdictions. They include:

the US Transportation Security Administration’s IdeaFactory and the South Australian Government’s A-Teams (fostering employee ideas);

Denmark’s MindLab and the British Prime Minister’s Strategy Unit (promoting innovation research and innovative thinking);

the UK Government’s Regional Innovation Funds (specific funding for innovation work); the DeepDive facilitation technique operated by Deloitte that is being used by the US

Navy to reduce the carbon footprint of its bases (public-private sector collaboration); and the Netherlands Kafka Brigades which develop solutions to situations in which red tape is

causing individuals or businesses particular problems (adopting new approaches to solving long-standing and new challenges).

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Scaling New Heights is the companion report to Capital Ideas. It focuses on how American public sector leaders can best “scale up” (i.e. develop) ideas that have been proven to be effective. The authors identify three impediments to scaling up ideas in the public (“social”) sector compared with the private sector: 1) unlike commercial markets, there is no automatic sorting mechanism for the most promising innovations; 2) successful small-scale social innovations receive little support to scale and grow; and 3) current funding models for social innovations are inadequate.

To address these deficiencies, the report sets out a model to enable the public sector to improve scaling. It has four elements: 1) focus government funding programs on delivering outcomes; 2) design funding models that encourage scaling; 3) shape the knowledge field in order to support what works; and 4) invest in social innovation mentors.

Jitinder Kohli, formerly a senior British civil servant, is a Senior Fellow in the “Doing What Works” Project at the Centre for American Progress. The project seeks to promote more efficient allocation of public sector resources and better results for the American people. He is also a Fellow at the Young Foundation. Dr Geoff Mulgan is Director of the Young Foundation and a former senior UK civil servant. His Visiting Fellowships include one at Melbourne University. His most recent book is The Art of Public Strategy (OUP, 2008).

Partnership for Public Service (PPS) and IDEO, “Innovation in Government” (Report), February 2011, 20pp.The report acknowledges that innovation has a pivotal role to play in helping to bridge the gap between citizens’ rising expectations of the public sector and the shrinking budgets and timelines facing many US Federal Government agencies. The authors’ principal purpose is to address this dilemma by identifying better innovation directions for senior public service leaders. Accordingly, they outline a number of impediments to successful innovation and set out concrete actions to overcome them.

The authors list four key barriers to innovation: 1) politics and miscommunication disrupt efforts to promote collaboration and preparedness to innovate; 2) government employees have no defined process for introducing and exploring new ideas; 3) measuring the success of government programs is more difficult than in the private sector thus making it harder to justify investment in new ways of working; and 4) the status quo, rather than risk taking, is preferred by governments and many senior public sector leaders. All are symptomatic of a governmental system which is designed to perform reliably, not to adapt to changing circumstances.

The report advocates several approaches to addressing this situation. Innovation must be seen as not simply a one-off project or a new online tool but rather as a process that requires a shift in thinking, a disciplined approach, and strong leadership. More specifically, the authors outline a six-stage process for driving innovation: 1) Commit to Innovation; 2) Define Agency High-Priority Performance Goals; 3) Identify Opportunities and Brainstorm Solutions; 4) Prototype, Collect Feedback and Refine Solutions; 5) Implement Ideas and Navigate Change; and 6) Achieve Results.

The Partnership for Public Service is a not-for-profit, non-partisan body which works both independently and in collaboration with government and other think tanks to strengthen and revitalise US government. IDEO is a design consultancy whose primary role is to assist public and private sector organisations to innovate.

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Sunningdale Institute, “Beyond Light Bulbs and Pipelines: Leading and Nurturing Innovation in the Public Sector” (Report), 31pp. The UK Cabinet Office and the Department for Business, Innovation & Skills (BIS) commissioned the National School of Government’s Sunningdale Institute to explore what models of innovation and innovation support exist in the public sector, where they are and are not effective, and to recommend ways in which innovation can be better supported in future. The report’s authors based their inquiry on a comprehensive literature survey and interviews with 17 experts on innovation working in government and non-government bodies. These included the Whitehall Innovation Hub, the Young Foundation, and the Cabinet Office.

The authors found there to be no shortage of innovative ideas and practices in the public sector. However, they concluded that innovation is not just about “light bulb” moments of creativity, but that sustained co-ordination is required in order to make something of them on a larger scale. Therefore, innovation must be considered as a linked process from initial idea generation or identification, through scaling up and development, to launch and diffusion, with the latter stages just as important as the former.

The authors emphasised that, while innovation is important, a one-size-fits-all approach should be avoided because different settings require different sources and forms of support. The report contains a framework for analysing innovation and supporting it, and defines four types of innovation—product, process, position, and paradigm. The latter, on which the authors focus, includes the main internal and external factors exercising greatest influence on the innovation process.

The report argues that successful innovation also requires good strategic leadership, and an acknowledgement that frontline employees have considerable discretion in determining the progress of innovation approaches; the primary driver is not always central decision-making. The report’s principal finding was that as yet no clear government-wide strategy for innovation is well enough articulated to provide an enabling framework adequate to addressing the innovation challenge across the public sector.

The authors also concluded that government could benefit more from innovation approaches currently emerging if it provided stronger corporate support for innovation. In addition, the authors identified an under-developed innovation capability amongst senior civil servants as a key contributing factor to the weakness of central government’s innovation strategy. In order to foster and disseminate innovation expertise and enhance motivation to pursue more innovative approaches, they recommended the establishment of a unit along the lines of Denmark’s MindLab.

The Sunningdale Institute is a virtual academy of leading British thinkers on management and governance. It is managed by the National School of Government, the UK Civil Service’s centre of excellence for learning and development. The report’s three authors were Professor John Bessant of Exeter University, Professor Sue Richards, Director of the Sunningdale Institute, and a Sunningdale Institute researcher, Mr Tim Hughes.

Phillip Toner, “Workforce Skills and Innovation: An Overview of Major Themes in the Literature”, OECD Science, Technology and Industry Working Papers, 2011/1, 73pp.This OECD Working Paper outlines and analyses the principal approaches, debates and evidence in the literature on the role of workforce skills in the innovation process in developed economies. It draws on the disciplines of innovation studies and work organisation, institutional labour

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market studies, and neoclassical Human Capital theory, as well as official survey data in describing and quantifying the diversity of skills and occupations most involved in innovation work. The focus is on the firm as innovation incubator, but the implications of private sector developments for government innovation are also dealt with in less detail.

The author draws out eight key messages from this survey. These are set out on pp. 59–62 of the document. They include: a strong circular and cumulative interaction exists between knowledge, skills and innovation (No. 2); a broad range of workforce skills and occupations are involved in pursuing innovation (No. 3); workforce skills are a necessary but not sufficient condition for successful innovation (No. 6); and demand for higher level workforce skills depends on the growth of technically progressive and adaptive firms and industries (No. 7).

Dr Toner also identifies four major findings of his research:

The predominant form of innovation in firms is incremental, and this points to the central role of the broader workforce in generating and diffusing organisational change.

Achieving high academic standards within a nation for the largest proportion of school students not only supports high levels of participation in post-school education and training but creates a workforce with greater potential to engage productively with innovation.

The extent to which a firm’s workforce actively engages in innovation is strongly determined by particular work organisation practices.

Large differences exist across developed nations in workforce skill formation systems, especially for vocational skills, which produce significant disparities between nations in their share of the workforce with formal vocational qualifications, and in the level of these qualifications. The resulting differences in the quantity and quality of workforce skills are a major factor in determining a nation’s levels of innovation and economic performance.

Dr Phillip Toner is a Senior Research Fellow in the Centre for Industry and Innovation Studies Research Group at the University of Western Sydney.

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