Fostering Innovation in the Public Sector

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25 Apr 2017
9789264270879 (PDF) ;9789264270862(print)

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Public sector innovation does not happen by itself: problems need to be identified, and ideas translated into projects that can be tested, implemented and shared. To do so, public sector organisations must identify the processes and structures that can support and accelerate innovation. This report looks at how governments can create an environment that fosters innovation. It discusses the role of government management in inhibiting or enabling innovation, and the role that specific functions such as human resources management and budgeting can play. It suggests ways to support innovation – including by managing information, data and knowledge – as well as strategies for managing risk. Drawing on country approaches compiled and analysed by the OECD Observatory of Public Sector Innovation, the report presents a framework for collecting and examining data on the ability of central government to foster public sector innovation.

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  • Foreword and acknowledgements

    Three years after the launch of the OECD Observatory of Public Sector Innovation, public administrations are pursuing innovation more actively than ever, and embedding it in government budgets and programmes. Yet, innovation is, necessarily, an unfinished business. Governments must continually adapt to address new and ever more complex challenges facing societies. Simply improving existing solutions is not always possible nor desirable. Today, governments are starting to look at transforming systems to put individual and social outcomes at the heart of policy approaches.

  • Executive summary

    Public sector innovation is about finding new and better means to achieve public ends. Innovation, especially breakthrough innovation, is complex and challenging for governments. Yet, the scale and nature of the challenges that governments face today require responses that go beyond incremental improvements. The public sector context has also changed with low level of productivity calling for a re-thinking and re-scoping of public sector processes, structures and systems.

  • Overview: The role of government management in fostering public sector innovation

    The nature and scale of public sector challenges require governments to develop a response that goes beyond incremental process improvements, but rather introduces new ways to frame problems and develop solutions. Because public sector innovation does not happen by itself, governments have a key role to play to promote innovative behaviours and create conducive environments for innovation. This chapter starts by discussing the change of trajectory of public sector innovation, from “green-field” to “disruptive” and what this entails in terms of governments’ capacity to respond to a changing context and the citizens’ needs. It discusses the key policy tools governments can use to support public sector organisations to accelerate their innovation activity. It introduces the innovation lifecycle as a useful framework to map the use of different policy tools for overcoming innovation barriers and strengthening organisations’ capacity to innovate. The chapter concludes with the key factors that explain the innovativeness of public sector organisations: capability, motivation and opportunity to innovate.

  • Dealing with regulations and procedures in public sector innovation

    Bureaucracy and red tape are often seen as the main barriers to innovation, particularly in the public sector. This chapter examines to what extent rules actually do inhibit innovation. Defining bureaucracy as a system of values as much as a system of rules and procedures, it considers how the wider bureaucratic context of risk aversion, silos, hierarchical organisations and lack of diversity can inhibit innovation rather than laws and procedures in the narrowest sense. The chapter examines some initiatives OECD governments have used to tackle barriers to innovation, from red tape reduction initiatives to behavioural insights. It discusses the challenge of using discretion to deal with use and procedures that seem to block innovation. It concludes with some considerations governments should apply to tackle both the specific rules and procedures which may be blocking innovation, and the wider context preventing civil servants from trying new approaches.

  • Incentivising staff and building capacity for innovation

    Public employees are central to all stages of public sector innovation, and how they are managed can be fundamental to enabling organisations to innovate. This chapter links theory and practice to explore how human resource management (HRM) can affect organisations' capacity to innovate. Starting from the premise that employees need ability, motivation and opportunity (AMO) in order to perform, it explores what this means for innovation for each of these aspects. The chapter then considers the kinds of HRM practices which might affect employees' AMO to innovate. Case studies from a number of OECD countries offer examples of awards and recognition programmes, learning in networks, schemes to increase employees’ mobility across sectors, and holistic HRM approaches to innovation. It then considers the implications for HRM approaches to leadership, work organisation, recruitment and selection, performance management, training and development, and compensation, which together may start to form the basis of a system of HRM for innovation. Finally, it considers some of the tensions that may arise as such a system is put in place and concludes with questions for further investigation.

  • The role of the budget process in promoting public sector innovation

    As OECD countries face continuing pressures to do more with less, public sector innovation increasingly offers a means of improving performance across government. Drawing on the OECD’s extensive research on budgeting reforms across member countries, alongside in-depth case studies, this chapter examines the impact of budget processes and particularly the role of central budget authorities (CBAs) in supporting public sector innovation. The chapter considers how strategic outcome goals, fiscal frameworks, spending reviews, financial incentives, flexibility and performance management can serve to support (or hinder) innovation. It considers what conditions need to be in place for fiscal austerity to give rise to innovative ways to reduce spending, and how funds and other incentives can be used to encourage innovation. It considers the balance between granting the flexibility line agencies need to pursue innovation and the need for fiscal accountability, and the role of performance management and evidence in finding that balance. It concludes with some measures that budget agencies should consider in order to sustain public sector innovation.

  • Organisations supporting innovation

    In recent years, there has been significant growth in the number of organisations dedicated to supporting innovation by addressing some of the barriers to it in the public sector. Based on a survey of more than 70 innovation teams across OECD countries, this chapter examines their role in creating a culture of innovation and spreading the use of innovation processes and methods. It categorises them according to their activities, from units supporting and co-ordinating the development of innovative solutions to innovation labs providing space for experimentation, performance teams supporting service delivery, including through innovative methods, innovation funds, and organisations providing capacity building and networking support. The chapter considers the implications of where innovation organisations sit in government, whether centrally or independent from the executive and how that affects their work. It examines when innovation teams were formed and how they are beginning to measure their impact. It discusses the considerations governments might take into account when deciding whether to set up an innovation organisation and what kind to create, and concludes with some questions for further research.

  • Managing risks and uncertainties in public sector innovation

    Breakthrough innovations entail uncertainty, something the public sector is ill-equipped to manage. This chapter explores the distinction between risk and uncertainty, and the innovation management practices that can transform uncertainties into measurable risks, overcoming the bias against the unknown that is one of the main barriers to innovation. It considers the differences between public and private sector organisations and their implications for risk management. It distinguishes the different stages of the innovation lifecycle of any innovation, and identifies the activities and risks associated with each step. The chapter outlines a step-by-step approach to managing innovation, starting with a clear understanding of the context. It then considers three pillars of successful risk management: setting the preconditions for success, including proper resourcing and gaining a clear mandate; using new processes to mitigate uncertainty, including iterative prototyping and co-creating proposed solutions with the ultimate users; and the strategic orientation that ensures that innovation in one area does not have unforeseen consequences in other areas. It ends with some tips for innovators to overcome cultural barriers and build support for innovation, and two possible models governments could adopt to counter uncertainty on a wider scale.

  • Data, information and knowledge management for innovation

    The potential for information to drive public sector innovation is immense and growing every day. This chapter considers the distinction between the interrelated concepts of data, information and knowledge, and the recommendations the OECD has made in this area, particularly the need for open government data (OGD) to maximise the public and private benefits from public sector information. The chapter identifies four interconnected phases in organisations’ management of information: sourcing, exploiting, sharing and advancing, and the challenges that arise from each one, along with examples of solutions to those challenges from around the world. It considers how data analytics, combining data from within and beyond the public sector, provide governments with improved foresight, delivery and performance. It also considers how innovation can be built into the work of an organisation by using feedback to create a continuously evolving information ecosystem exploiting the collective intelligence of staff and the public through such means as crowdsourcing and knowledge networks.

  • Conclusions: Towards a framework for country studies of public sector innovation

    The OECD’s call for action (Box 1.1) has set the direction for those governments wishing to embark on an innovation journey. It has urged governments to develop a framework to tackle the most significant barriers to innovation and make the most of innovation to improve their public sectors. This report has taken the call for action a step forward by identifying and analysing key aspects of how government works that affect the public sector’s capability and motivation for innovation, thereby creating (or not) an environment that supports it.

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