Public Sector Innovation – issues from Innovation Studies

Ian Miles, CRIC & PREST, University of Manchester

-Note for PUBLIN project preparation, November 20011-

Summary

This essay is offered as a springboard for discussions of how innovation studies

might relate to our proposed project on public sector innovation. It is meant to be
provocative rather than exhaustive, highlighting what to me seem like some
fruitful approaches and starting points. The essay thus identifies a number of
themes in innovation studies which might be expected to be reflected or
substantially changed in looking at the public sector. It suggests that analysis of
innovation in the latter could enlarge and refresh innovation studies – much as
service sector innovation research has found itself trying to do. It invites critical
comment, other statements of viewpoints, and further discussion.

Introductory Note

A thread that runs through much of the following discussion is the need to
use a workable classification of different types of public service to guide
the research: to select case studies and survey samples, to provide for
comparative analyses. It is likely that innovation research can find much
of value in available classifications derived from political science and
policy analysis literatures (especially the more comparative lines of work).
However, these may not be completely adequate for the task, and an early
issue for PUBLIN is to determine a classification which is a good enough
starting point for useful work – it does not have to be the definitive model,
this may emerge from the research. One major issue that relates to this is
the unit of analysis to be studied: innovations or services? Whole service
branches or individual service deliverers?

Finally, I am concentrating here on technological innovation. This is purely

because I could do this in the available time, and having much to say about
organisational innovation would be another huge discussion. It is an area
well worth study and articulation of indicators, etc. However, I suspected
two things would emerge. (1) There is possible even more difference
between public and private sectors here than in technological innovation,
and (2) we have less of a substantial base of research to contrast public
sector innovation with.

1
© Ian Miles 2001 I’ll work up this text and place a tidy version on my website.
Public Sector Innovation – Why? What?

There are several reasons why we should want to study public sector innovation
processes. Among these are:
 It is likely that, just as service sector innovation casts light on neglected
aspects of manufacturing sector innovation, so public sector innovation can
cast light on neglected aspects of private sector innovation. Along similar
lines, it may indicate shortcomings in innovation measurement and
management approaches.
 The public sector is vast. What happens here has major implications for the
economy as a whole – public services consume taxes and impact on quality
of life, they are major customers for the private sector and major
demonstrators of innovation to the world at large. Their innovation processes
are thus extremely significant.
 Historically, the public sector has often been the vanguard innovator for major
new technologies, and the driver for enabling research in academia and
private industry. It is likely to continue to play this role, and the story of
technological revolutions and trajectories cannot be anything like complete
without it being taken on board.
 Capitalists might want to see public innovation studied as a way of indicating
where new markets may appear, and how to reduce their tax burdens;
socialists might look forward to prefigurative modes of postcapitalist
innovation. We could also anticipate that greens, feminists, and those from
many other political perspectives could find relevant issues addressed as to
how their particular agenda is or might be reflected in regulatory and other
influences on public sector innovation, and its wider impact.

These arguments – the list could go on! – make a strong case for work in the
area. However, for a project to be funded, it will be necessary to be more
focused as concerns the research questions to be addressed. Rather than
attempt to resolve this on the basis of a priori reasoning, lets take a rather more
pragmatic approach.

The public sector is vast and heterogeneous: we may drop bombs on

Afghanistan, treat heroin addicts with methadone programmes, provide natural
childbirth and free school meals, organise intensive care treatment and
laproscopic surgery, administer tax and immigration systems, put out fires and
hunt for master criminals… The ISIC and NACE classifications distinguish a
wide range of public services, but just hint at the variety of functions performed

 It would be possible for a research project just to focus on innovation in one

functional area – for example at CRIC we have research on medical
innovations. There is a large literature (usually disguised as “administrative
science” in the US) dealing with innovations within hospitals, etc. In such
sectorally focused studies, innovations are addressed they are often
approached from very specific angles. Thus the defence/military sector – this
 has spawned a huge literature, and indeed some of the pioneering innovation
studies were stimulated by defence and related aerospace innovation
processes (e.g. studies of the Manhattan Programme; Project Hindsight’s
efforts to trace back the history of innovations; much work on technological
forecasting and trajectories). Many of these studies were rather applied, and
often answer specific political agendas – what are the spin-offs to civilian
industry, what re the benefits for SMEs, etc.
 It would probably be a lot more interesting to contrast different areas of the
public sector in a systematic way, examining how the functional requirements
and modes of governance that have been developed shape the innovation
process and its outputs. The instruments and analyses developed o this
basis would be likely to be more generalisable. (Note the difficulties of cross-
national co-ordination, however: multi-team research projects often have
difficulty in agreeing the sectors of interest.)
 The range of public services is probably too wide and differentiated to make it
sensible to try to consider cases from right across the range. There are
various classification schemata that might be used, but a first question is
whether it makes sense to rule out some elements of the public sector – not
because they are not interesting, but for such reasons as: they are already
well-studied, they are difficult to access, they are extremely different from
other public services…. Some of those we MIGHT want to rule out are:
 Armed forces: different, difficult, not directly dealing with the public much
of the time.
 Public services to industry, RTOs etc: while PREST has considerable
interest in this topic (including the boundary shifts between public and
private) these services do not interface with public qua public very much.
 Administration2: much of this does not deal with public. Could rule out
central back-office activities – but then would miss some interesting areas
like statistical offices.
 Public utilities: understudied in innovation terms (as opposed to regulatory
terms) but increasingly privatised.
 Emergency services: possibly difficult, but do deal with public and much
interesting innovation.3
 Health, education: much studied in their own right.4

2
There is quite a tradition of research on IT in public administration; OECD studies, and more
recently quite a lot of EC-funded TAP projects which attracted some study; there’s a journal and
people like Ig Snellen and Sally Wyatt have contributed to the field.
3
One interesting issue that comes up in some emergency services, and also in some social
services, is the relation between the development of the service and related social science. Look
at criminology, for instance. Here there are really fascinating interplays between technological
developments in policing and such methods as profiling, expert systems for linking crimes,
analysis and prediction of public disorder, etc. Similar in some nonsocial sciences I imagine, like
forensics. How far are these accommodate sin the academic disciplines; how far are consultant
or internal services developed? Etc.
4
Health already noted; much work on education innovation – e.g. CERI in OECD.
I arranged that list roughly in order of my own preferences as to which might be
dropped; others will disagree. The aim is to start us thinking about criteria for
choice of public services to study, and to relate this to the task of specifying
research questions to work with.

What could be very fruitful would be to formulate questions which allow us to

investigate different contexts motivating and shaping innovative practice and
outcomes, in such a way that we can do more than merely provide a pale
reflection of what has been well-established in studies of private sector
innovation. Which brings us to the links with innovation studies.

Innovation and Markets

The most important developments in innovation studies have largely centred on

evolutionary approaches (often “evolutionary economics” or “neoSchumpeterian
economics”, but drawing on wider elements of political economy and thus of
other social sciences). In terms of articulation of evolutionary accounts, the main
thrust has involved looking at market mechanisms – which are not precisely
coterminous with the public sector, but which have sufficient overlap to render the
innovation process in the public sector often out of scope. So much so, that one
would be surprised to find innovation happening at all, since in many accounts it
appears to be solely a response to competition. This is a caricature, but its easy
to assume that the reason firms innovate and get rewarded (or not) is mainly a
matter of competition driving the search for innovation. But we could expect
random variables to be at work much as in biological processes, where genetic
mutations are not generally presumed to follow any search routines or teleology
or other nonradom vectors – though watch this space for dissidents). And other
drivers could be at play, such as avoidance of interpersonal conflict with clients or
workforce, search for individual fame or glory (whatever happens to the firm), etc.
Most of the innovation researchers I know have sophisticated appraisals of the
motivations for innovation (and why these are sometimes absent or frustrated),
which don’t reduce in any simple way to the search for profitability/long-term,
sustainability/market share or whatever the current orthodoxy is about economic
rationality.

I digress. The key to an evolutionary approach is that there is some process of

diversity generation, whereby new phenomena emerge, and there is some
process of selection, whereby some of these new phenomena are reinforced
positively, and thus become more predominant, while others are reinforced
negatively, and fade away. What it is that evolves is a matter of debate. It could
be firms, technologies, cognitive structures, neural nets, genes; it could be
evolutionary processes themselves (thus teleology emerges in human affairs out
of a nonteleological biological process; and now we’re on the verge of applying
our teleology to the biological process). Two of the weaknesses of evolutionary
approaches as developed to date are (a) methodological imprecision in
specifying the object of analysis (what is selected); (b) limited attention to
endogenous change in diversity generation and selection processes (large but
limited literatures examine things like the rise of the R&D lab, the construction of
markets).

The main selection processes studied, we reiterate, are market mechanisms

(processes relatively external to the innovating organisation) and internal
mechanisms of innovation management (prioritising particular lines of R&D. for
example). The latter are assumed to reflect the former, but very imperfectly –
much of the innovation literature looks at how factors such as firms’ internal
trajectories determine which innovations they foster and help explain why they
fail to anticipate market developments and requirements effectively.

If there are any empirical results in the literature, a good bet on the most heavily
cited ones is as follows. (I have tried to write these in terms so that links to public
services can readily be drawn, but more on those links later):
♦ Successful innovations are those where the innovator has been able to draw
on knowledge of users in order to relate the innovation to user requirements –
to “satisfy a latent demand”, to provided functionality that is extremely
welcome at the price that is asked. (Various people have criticised the
conclusion, and many of the supporting research studies, from SAPPHO
onwards, for a heavy dose of circularity. However, a substantial body of work
on user-supplier relationships and he like has found this to be a very useful
starting point, which can be illuminated in many effective ways.) Modes
whereby intelligence is gained about use/client characteristics and
requirements are important – a large literature (leading inevitably to
innovation systems approaches) deals with user-supplier links, user
involvement in innovation, etc.5
♦ The internal dimension is as important as the external one. A common result
in studies of successful innovations is that such innovations need to have
product/project champions to see them through the inevitable difficulties that
arise within organisations beset by competing (that word again) demands for
resources. Senior managers need to have a voice to convince them that the
innovation is with pursuing with, and to keep doing this as contingencies arise
which pre-empt management attention. There may be problems of
governance where firms are in complex ownership relations, have to answer
to informed stockholders, are under regulatory oversight, etc.6
♦ The innovator also needs “complementary assets” to pull the innovation
through, particularly if other agents are trying to introduce similar innovations
or even quite dissimilar ways of addressing the same problems. Such assets
can involve control of complementary innovations (that enhance the value of

5
There is some work on user involvement in public service research and innovation – cf the
paper by Grant-Pearce et al on the PREST website.
6
Thus privatised telecommunications firms complain that they are being prohibited from
undertaking some desired innovations by regulations designed to open the market up. Other
parties –including not a few users – have different perspectives.
 the innovation to users), of marketing and distribution channels,7 and
intangible assets like brand names and IPRs. Credit for the innovation may
not go to the original innovator; the dominant design may not be the first
design.8
♦ Firms can be seen as possessing assets, as above. They can usefully be
seen as having capabilities, which are not just the sum of individual skills and
assets, but also include management structures, internal information flows,
ability to retain staff, and network or other access to external resources. And
we typically see organisations as “path-dependent”, as being constrained by
their histories to search for innovations, for example, in particular ways, along
particular “corridors”. This may be disturbed by external shocks, by mergers
or other changes in governance, by accessing new knowledge through
networks. But often such changes come rather late in the day for many
organisations. This path-dependency is one way in which the evolutionary
approach goes beyond conventional economics and its assumption of rational
actors heading towards equilibrium states.
♦ There are a number of other commonly remarked features of innovation,
described in several terminologies with distinctive nuances. Again, the list is
not comprehensive. Innovations typically:
 Do not come uniquely out of the blue. The ideas are in the air; there are
other innovators seeking to introduce their own technical solutions to the
same problems, or rather trying to define “market spaces” for which they
can produce new products – the result is the formation of a “product
space” where for a set of (evolving) user requirements there are
alternative products with different functionalities and costs. Analysis of
competition between innovations typically starts from this context.
Within large organisations there may be several alternative solutions
being pursued; there may even be alternative definitions of the product
and market space in different points of the organisation.9
 Are themselves evolving things. The classic model for this is the industry
cycle or product cycle model, which can be put simplistically as: the first
commercialised innovations are typically expensive, demanding of the
user, and unstable in terms of which of a number of competing design
platforms will predominate; over time a process of “normalisation”,
“stabilisation” and “design dominance” develops through the medium of
institutionalised market forces and powers, so that competition shifts to
one of price competition, innovation to process innovation, and product

7
Public services can have monopoly control of some of these; they may also via public
procurement be important channels for private sector innovations to be developed, demonstrated
and “stabilised” (see below).
8
Historically the public sector was very free with its IPR, taking little concern about reaping any
financial benefits from private sector use of its innovations. And a good case of a public sector
effort to create an innovation where the design paradigm has been overtaken by other designs
(also arising from public sector research, but carried by private actors) is vdeotex and the
Internet/Web.
9
Many failed innovations reflect a failure to consider that ther people might be coming up with
different solutions to the same problem, using variants of the same technology.
 innovation becomes increasingly a matter of incremental and product
differentiation innovation on the basis of a common platform which large
numbers of users can access without unusual expertise being required.
Disruptive technologies can throw this “maturation” back into the melting
pot. This sort of model has also received much critique, though it
provides a useful rule-of-thumb for may empirical studies. A notable
development for services – the reverse product cycle model – portrays
services; (IT) innovation as triggered by the importation of new process
technologies from manufacturing, initially for efficiency purposes, which
gradually come to be used more for quality improvement and then for
new products. Again this can be a useful starting point, and it was for a
long time widely taken to be “proven”: more recently, serious attempts to
investigate the model have challenged its adequacy for many cases of
service innovation.

Note that apart from local details in formulation, much of the gist of these
conclusions are ones that could easily be transposed to innovations in non-
commercial contexts, and are quite plausibly rendered in such contexts. In a
simple evolutionary language, they are about “fit” of the innovation taking this as
the object of analysis) to its environment (with the innovation as the object, this
environment includes the innovating firm as well as the market. Which is one
reason why the conclusions can generalise away from the private sector arena
where most of the literature is sited.

But, but, the voices of straw men plead, its wrong to generalise in this way. It’s
the market that provides the ultimate driving force for innovation. Internal
selection environments reflect market forces, or of they don’t they’ll darn well be
selected against.

Lets concede that market competition is a powerful stimulus for innovation.

Innovation studies do demonstrate how innovations are efforts to change, or fend
off changes of position in, market relationships. Commercial innovations are
almost always competing against each other and always competing against
established ways of doing things, and selection processes operate in the form of
consumer or industrial demand. Particular solution types, designs, and brands
gain prominence, while others are not rewarded. Firms try to create, structure,
manipulate markets; but they are markets to a large extent still. The publisher
Dorling-Kinderseley, reputed as a provider of high-quality illustrated children’s
books, went under as a result of Lucasfilms’ failure to make Star Wars Episode
One the Phantom Menace the apocalyptic success they had promised (and
presumably sincerely anticipated … though a cynic might say that Lucasfilm
didn’t go under…) Airlines were not able to buck the market effects of 9/.11
(though no-fills airlines like EasyJet have actually prospered since – but they are
hardly as influential shapers of markets as the defunct national airlines were.
And so on: we can cite millions of examples of firms fixing markets – and
millions of examples of them being unable to do so (and not always because
competitors got in and made it tool hard!)

Another digression. The point is that innovation studies tend to focus on market
forces as drivers and determinants of innovation, as underpinning selection
processes most critically, but also more indirectly impacting on diversity
generation. So what happens in the public sector?
♦ Perhaps some public services are competing in markets. Some services
feature public and private provision alongside each other, e.g. in (greater or
lesser parts of) education and health in many countries. Is this really market
competition, though? And how powerful an influence is it on the development
of the public sector, and its innovation processes? The answers are liable to
vary across sectors and countries, and over time: a research vista is sighted.
♦ There are other arenas for competition. One is international competition, and
an excellent if extreme example of competition by other means is warfare.
There is at least one stimulating innovation essay on this perspective, Mary
Kaldor’s The Baroque Arsenal, which argues inter alia that military systems
are driven to innovate in order to gain advantage in the next war. The only
problem, she goes on, is that they typically stay innovating in a path
dependent way, becoming very baroque, while (she doesn’t use the
terminology_ “disruptive innovations” – new ideas about war fighting – often
come along and undermine the whole edifice. I already mentioned 9/11, but
she has plenty of other instances, In any case, the point now is that we can
envisage competitive selection environments that are not market driven; there
may be a literal battle for supremacy. International sports might be another
example – at least the Olympics and other less marketised events.
♦ “Marketisation” is the theme of many government policies to public services,
motivated sometimes for simple expediency (we’ll buy some business support
if we sell this off; we’ll do away with difficult public sector workers..).
sometimes for cost-saving reasons (the private sector can provide this
cheaper, pay lower wages, etc…) and sometimes to introduce the magic of
the market into the public sphere (make public servants more responsive to
customers, introduce more advanced management philosophies etc), or a
combination of the above. )Which can directly or indirectly involve
innovations beyond marketisation itself. This can take various forms –
internal and quasi-markets, where units may compete against each other to
supply services (even services to the general public, provided with vouchers
or some other transferable entitlement); privatisation of various degrees, etc.10
♦ Though a service may not be competing in a market, there may be processes
more or less like “market feedback” at play. These range from the very
macro – voting, opinion polls, etc (a highly aggregated sort of message in
general, rather than specifying approval-disapproval of specific products) – to
much more micro ones (letters of complaint, protests against specific policies
or projects, even opposition to or support for individual teachers, surgeons,
etc.).
10
Agency theory from political science starts to look like a useful approach here.
♦ Public services often exist in complex supply chain arrangements with
numerous other players, many of whom can be commercial firms. For
example, a public health service is intimately bound up with academic
institutions, with manufacturers of surgical appliances, with pharmaceutical
companies, with pharmacists, and so on. The service is part of a system
which does have market components.

So public services are liable to vary in terms of how far they are subject to
pressures similar to those involved in the market selection mechanisms faced by
firms in mainstream innovation analyses. This could provide an excellent
starting point for case selection; in any case, it needs to be further
conceptualised and relevant indicators built into any studies of public sector
innovation we undertake with an aim to constructive engagement with the body
of innovation studies.

All of the above follows the standard line of beginning with the received
approach, and thinking about whether the area under study conforms to it. We
can expect some of the dynamics described in private sector innovation studies
to be present in the public sector. But are we restricting ourselves to seeing
public services as the “Other” by this sort of analysis? What if instead of starting
from private sector innovation, we begin with public sector innovation?

Beyond Markets?
Even without undertaking any new studies of the subject, we can already say
quite a lot about motivations, diversity generation, internal and external
innovation processes here. The following points can be thrown into the pot:
♦ Innovations are often motivated by social conscience – i.e. people motivated
to achieve social ends like curing disease, stopping injuries, reducing
ignorance. They may be driven directly by such concerns, or by awareness
that solving such problems will bring them status and kudos, and maybe even
financial rewards. We could see this as a rough analogue to commercial
innovators seeking to meet “market needs" – the different nature of the
concerns, of the ways in which the problem-solving is funded, etc., may have
subtle as well as the blatant effects on shaping innovations.
♦ Public services often have complex levels of intermediation. The innovation
has to be “sold” to managers and professional users in central and (often) a
large number of branch outlets of the service/ (Large technical systems
literature in innovation studies is probably relevant because of this feature.)
The end users in the general public may have little say in the process, may
even be unaware of it (e.g. a surgical procedure.) Diffusion and “roll-out” are
correspondingly complex – and indeed these are sites of innovation
themselves, with processes of health technology assessment, evidence-
driven policy, etc. constituting efforts to formalise the criteria for units to select
among alternative procedures. These developments also reflect the
important role of professionals in many areas of delivery of public services,
 whose levels of autonomy and craft-like expertise at work mean that they are
important sources of innovation (not always codified and reproduced) but can
also be resistant to innovations that threaten their status or resources.
♦ Public services as implied above are frequently organised in the form of many
branches of a huge organisation (often with some measure of equitable
universal service obligation). Empirically, it would often (not always) be
inappropriate to take the establishment as the unit of analysis in innovation
surveys. Many innovations are rolled out from the centre, on a plan
established centrally. (An interesting line of research might contrast such
rolled-out innovations with those that are more bottom up, or more
voluntaristic.)
♦ Public services face particular difficulties in performance ,measurement.
They don’t have conventional sales and profits. Often the indicators that are
first proposed are very problematic: improved health services mean more
people living longer and thus more demand on health services, being the
classic example. Official statistics find it hard to recognise productivity
improvements in public services. But there are moves in many countries to
(a) improve these measures, coming up with more concrete evidence as to
productivity gains;11 (b) introduce management systems, awareness
campaigns, etc., which can incentivise performance improvement,
disseminate good practice, learn by comparison, etc. This latter tendency
looks set to be a major driver of organisational and technological innovation/

This list could be extended, like most of those already presented. It should be
possible to present it in a more systematic way, perhaps along the lines of some
of my early essays about differences between manufacturing and services, and
how these relate to innovation processes. But again the aim is more to provide
food for thought than to be anything like definitive.

And what should this food for thought do nutritionally? One thing is to highlight
the way in which many of the factors mentioned have parallels in the industrial
world. People are motivated by engineering aesthetics (they like innovations that
“tidy things up”), by desire for recognition by peers, even by desire to do good as
they see it. Market considerations may intervene, but are they the starting
point? If anything, an evolutionary psychology approach (despite the banality
and conservatism of most evolutionary psychology, the approach has mileage)
would se markets as being just one way in which we secure the status, prestige,
group dominance or whatever the current orthodoxy there is. Similar points
about the nature of professions and professionalism also apply.

11
A common result of studies of IT innovation in public services is that efficiency-related
innovations often have had huge impacts not just on labour costs, but also on such parameters
as speed of dealing with “customer” enquiries. I did a study in the ‘80s in which we found a
computerised records system allowed local authority staff to answer queries about housing
benefits while on the phone to clients; previously it had take days to respond. The example
underscores the information-intensity of many public services: IT innovation is highly relevant,
and is notoriously problematic in terms of productivity measurement!
Productivity and efficiency impacts can also be problematic in commercial
innovation – especially process innovation, and organisational innovation
(notoriously where IT systems are involved). There is a strand of research on
management fashions and the like that has relevance here too – the “carriers of
innovation” may really be the captains of jargon, those intrapreuners who can
rise by deployment of the next big thing by way of consultant-speak and practice.

And so on. The point is that there are things brought to the fore by starting to
think in terms of public sector innovation, some of which are fairly specific to
public services (or at least confined to peculiar private sectors such as those
based on large technical systems); and there are others which are features of
innovation in most sectors.

So: the innovation studies literature can contribute to studying innovation in

public services, big time. It suggests many important indicators, dynamics, etc.
But there are things we need to explicate that it neglects, and where the ideas,
measures, and challenges involved in the public services may tell us things of
more or less relevance to private sector innovation too. The upshot should be an
enlarged, but still evolutionary, innovation research approach.

The critical issue of classifying and taxonomising different types of public service
for the purposes of innovation research may also contribute to comparative
political studies and policy analysis.