GovTech — The Challenge of Innovation with Public Sector for Startups
This article acts as a primer for companies seeking to create new innovations in partnership with public sector in the UK. It’s not always fun, but it can be hugely rewarding.
I’ve spent the last 5 years, working with ministers, civil servants and public services to create new innovations. Though rewarding, it’s not easy. This is part of a series of articles I’m writing to capture insights related to working with Public Sector. I’ve also written about policy for non-policy people and how public sector treats failure.
Understanding Public Sector
Public sector tends to be seen as less innovative than private sector. This is probably true, but there are some good reasons for this:
- Public Sector has to serve everyone — Google can ask you to use the latest browser to access it’s site, but Public Sector has to serve even the lowest literacy, hardest to reach groups e.g. phone/post/home-visit
- Legacy is a burden— Public Sector has usually been around for a long time and as it can’t cut off people, usually has lots of legacy systems/services that it maintains/can’t shut down
- Can’t change markets — the public sector can’t change markets to chase richer customers and in the UK, we have had a decade of austerity
- Can’t leverage IP — public sector often can’t access capital markets or exploit IP in a more entrepreneurially without a proxy to do so for them, or changes to legislation to allow a path
- Cost versus Value — procurement is intentionally an “arms length” mechanism to buy things, to avoid corruption, but this often places a barrier in the way of understanding the value of a solution over cost
Combined these challenges are anchors on the speed that Public Sector can explore, adopt and scale new ideas.
Public Sector Structure
Understanding the tangible barriers is one way to overcome them. Another set of barriers lies in the structure of Public Sector. Democracy is predicated on the idea of equal say, this manifests in the Western world as a series of “checks and balance” systems made up of elected officials (e.g. Ministers) and processes administered by unelected officials (e.g. Civil Servants). The diagram below is a simple representation of the hierarchy, but I cannot emphasise enough, how much messier this is in real life.
National and local governments often overlap on the delivery of services, for example, budgets for social care for the elderly are set nationally, but are given to local authorities to spend. These lines are frequently redrawn and it’s important to understand the complexities in areas such as health and social care, where national gov’t will often monitor and advise local delivery. The role of ‘poacher and gamekeeper’ is often shared, swapped, or spread over multiple stakeholders.
The scale also varies, with some public services run by small teams inside the national civil service, with no budget to deploy. Others, such as the NHS, are multi-billion pound organisations with their own complex and politic hierarchies and layers of procurement.
It’s important to recognise the differences in character, culture, and drivers of each of the roles within the structure. Needless to say, these are broad strokes and not specific to individuals.
- Ministers — are elected, highly publicly accountable via the media and usually hold a portfolio (collection of services) for ~2 years. They are also affiliated with a political party and other groups, that influence their choices. Because of their short tenure, announcing “good news” now is often more important than strategically delivering change over decades.
- Special Advisors — are usually assigned to a minister to help with the political choices. They are generally media/language savvy, with no fixed tenure.
- Councilors —locally elected officials with the party affiliations. A very mixed bag of views, even within single parties. They have an important voice but are limited in their operational influence.
- Civil Service (local/national) — non-elected, with low accountability outside of their own structures, or to ministers, who they tend to “wait out”, due to long tenures. Usually, the higher you go, the better they are at “playing the game” with elected officials, media and delivery. This varies wildly based on the individual.
- Public Services — as described in the section above, these vary in scale and complexity. Generally they are closer to delivery than the civil service and are thus more accountable to the public.
- External Organisations — that’s you. Though it’s important to note, it’s also IBM, Microsoft, Google and any number of 3rd sector bodies, Teckal’s (wholly owned gov’t subsidies exempt from procurement rules) and the like who will compete with you to engage.
The relationships within these groups are complex balances of cultural etiquette, particularly at senior levels. The hardest part is that none of these rules are documented, as in essence, they are their own source of power — “in the land of the blind, the one-eyed man is king” and all that. Here are some basic rules that you should be aware of:
- Hierarchy — People will very rarely overstep a chain in command inside the system, as an external provider you’re much more able to talk to their bosses-boss than they are.
- Etiquette — A range of unwritten ways to engage with various groups. For instance, the civil service may become peeved if you were to engage a minister without asking their ‘permission’, or if you didn’t CC them in on email correspondence.
- Language — It’s important to understand the split between elected officials and “Big P, small p”. Big P is the Politics of elections and parties, this is where special advisors and media rules. Aligning with the Big P is important when talking to ministers. Small p, is the internal politics of the system, who likes who and how to manage the relationships. You need to learn this as you go, but beware, it’s often more relevant than the Big P.
- Feedback — Comment is criticism unless it’s a compliment. Be very, very wary of being candid about anything, as you engage. Challenger style sales tactics will often make people run away, as it conflates to bad media coverage, which leads to people losing their job. You need to find a balance of “good news” and moving forward with risk.
For examples of the above, just open any newspaper and read the political stories there. Once you see the dynamics at play, you can learn to understand “the why” of a political announcement and how a large company won the tender. They play the dynamics.
How Public Sector sees Innovation
Again these are broad strokes…
Risk is not well modelled
Innovation is inherently uncertain. If you know the outcome, you’re probably not innovating. However, when dealing with inexperienced innovators, it’s often the case that the nuances of the scale of uncertainty are lost. Consider the model below, as a way to understand risk versus level of innovation.
Taking three examples that could affect public service:
- An early stage trial drug for treating a specific cancer — a high risk of failure, but a high potential value if successful.
- Using Machine Learning to diagnose cancer — likely to succeed based on the evidence, but is not being done at scale yet.
- A messaging system for cancer patients to share their health data — not really innovation, just ‘novel to the system’ and relatively easy to model the impact.
However, for an organisation inexperienced in innovation, these are all lumped into the same bracket of “Innovative Projects” with two key challenges:
- Higher levels of innovation attracting more kudos, because announcing the “good news” of the project, has a disproportionate value
- All projects are set as “high risk”, as nobody in the system, wants to be attached to anything that has failed
This is not good if you’re trying to sell a simple messaging system to a minister. Instead, you’ll often find people riding in on buzzwords to win work. Which takes us to the next point…
Kudos is important
One of the other drivers of “Innovative Projects” is the kudos attached to being seen to be doing innovation. The emphasis is on being seen, not doing. This quest for kudos drives the marketing aspect of innovation and means that people are more likely to value the buzzwords than the incremental processes of continuous improvement. Why refine a database standard, when you can run a seminar on AI, Blockchain or VR?
Person > process
Though “Innovation” is a desirable term in the Public Sector, it doesn't’ really having a defined process to deliver it. It is often reliant on the drive of a single individual with a passion. These individuals are often lauded/broken by that process. Finding and supporting these people is key.
Slow failure > quick learning
One of the other outcomes of a Kudos based innovation system is the need to not be attached to failure. Once something has started, nobody in the chain of command wants to be attached to it going wrong fast. This sounds sensible, but in practice, kills the ability to create agile/lean learning loops.
Innovation requires collaboration. As a small company, trying to work with the public sector, you’ll need to overcome two key objections.
“We are not ready to partner, we have to run the proper governance process”
Governance is a system of checks and balances, designed to allow more democratic (safer) decision making. In concept it’s great. In practice it can be manipulated to kill ideas and stifle clear feedback.
Essentially what this means is that you need enough people in the chain of command to understand what you are offering and support it. This can be a slow and delicate process, especially if you’re trying to propose a change to a whole service. Don’t underestimate the power of the media to help this cause, positive PR around your solution/sector is a key way to warm the doors.
-We have no way to buy from you, we have not run the proper procurement process
Procurement is the way public sector HAS to buy things above a certain value. For innovation, it’s hard as you could essentially disclose your IP via the public procurement.
In the UK, SBRI, Dynamic Purchasing Systems, and Procurement Frameworks are useful ways to go through procurement without a disclosure. However, be aware that whatever you do, there’s a need to align with a certain set of rules e.g. having a certain level of turnover against the contract value. Procurement can also be an extremely slow process. The earlier to identify how to get through it, with your Public Sector partner, the better.
Overcoming the objections
Wrapping all of this up into a set of behaviors that you can adopt to try and partner with public sector is tough. But here’s a short list that may help:
- Engage with individuals who are vocal about the need to innovate and help tool them up to deliver it without breaking
- Learn the language of the public sector
- Communicate your understanding of the Unavoidable Challenges
- Find champions at every level
- Pay attention to the Big and small P’s when engaging different groups
- Prepare for governance and procurement challenges up-front
- Explain where your innovation sits on the scale of risk
- Identify short term kudos for the announcement
- Identify ongoing risk reduction measures
Personally, I’ve never experienced a more challenging sector to innovate in. But with the tools above, you’re in a better position than I was to start. Good luck!