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Innovation in public sector drives private sector growth

22 Oct

On the 21st October in MBS the Manchester Institute of Innovation Research presented findings from a recent survey on ‘Public Procurement and Innovation’ part of a wider study sponsored by the ESRC, BIS, NESTA & the TSB . Professor Jakob Edler and Dr Elvira Uyarra said the team were surprised themselves by some of the findings; particularly that innovation in the public sector was when adopted by businessn was improving their export sales.

Key findings can be found on and were presented to a small group of  public procurers in local government, health and the Cabinet Office alongside those from supplier companies such as SERCO and smaller companies such as Renfrew.

Out of a sample of 800, 50% of which were SMEs, 60% of reported that government, in particular, was stimulating innovation in business largely  in larger companies. In other words the procurement process was having more impact than had been expected – particularly where contract specifications made direct reference to requiring innovation. Innovation was more likely suppliers said, if procurers had early interactions with them and was ‘outcome’ focused.

However, the survey also reinforced well-known anedotal barriers to innovation mentioned by the majority of respondents such as,  price, too little early conversation between supplier and public buyer,  risk-averse procurers,  little acceptance of variation and over-prescriptive specifications.  SMES , Social enterprise and third sector organisations were particuarly excluded by the above. None of which was surprising.

David Shields, Head of Government Procurement Services said a lot of the difficulties concerned siloed budgets in government and public services and wider structural barriers  that determine the timescale, criteria and performance measures in contracts. he also said he thought these could be overcome with better procurement practices. “The main issue is how to take to scale?”

Mike Phillips from Renfrew a  design company brokering engineering solutions reported that in his experience public procurers remained risk averse to new solutions. He thought the problems were felt in smaller companies down the supply chain. Innovators who provide solutions, discover that once their innovations are accepted and are adopted by the NHS or DH they are caste back down the supply chain even though they drove the innovation in the first place.

Colin Cram from MERK1 said ” SMES cannot respond to specifications, yet they are the key to recovery and growth, the public sector tends to buy what its always bought and goes along with grand schemes rather than smaller innovators.”  

I agreed that given that SMES are key to local recovery, public procurers had to  find ways of involving SMES and that this was an issue about size as much as ownership; public institutions talk to corporates and do not have the mechanisms for networking with smaller agencies or the contacts for spotting innovation. Whereas they do have the internal human capacity for public procurement. At the local level there is more effort to communicate with  SMES and social enterprises, their being at the heart of more innovative services in health, care and personalised services.

There are two strands to governmental innovation practice, one which is about efficiencies and taking innovation scale and the other about exploring alternatives and supporting pilots. Departments such as the DH and MOJ in particular invest smaller entrepreneurial SEs for their innovative personalised services for offenders, NEETS or those with mental health problems etc and then cannot find a way of commissioning these from the mainstream. The issue of how to take to service innovation scale is a critical problem for public service reform. At the moment too many smaller third sector organisations and social enterprise are losing their contracts rather than gaining them because they are not large enough to compete and do not fulfil criteria of having a turnover over £2million or the financial capacity to carry costs incurred in development that large, public service contracts involve.

Where it is a matter of innovative products central government can commission once  departments barriers are overcome. For instance, at the roundtable Alec from Coston recounted the how they had created a ‘closed loop service’ for waste paper recycling for various goverment depts and were looking to extend their services across the whole of government in order to achieve a level of tonnage that would justify no longer sending waste-paper to Germany for recycling.

Innovative services are delivered through a complex set of relationships that demand continuity – the value of smaller social enterprise is that they have the capacity to respond to changing personal and local conditions; these smaller agencies  are not large to win large contracts from DWP, DH etc,  most had contracts with the Local Authorities. Given public expenditure cuts, local authorities have 25% less to purchase with. 

DWP appear aware of the conundrum of both the need to rationalise the benefits system to reduce costs and of delivering more effective personalised local services, in an attempt to deliver on both counts they are putting pressure on prime contractors to work in partnership with local sub-contracting agencies ( often in the third sector or a social enterprise). 

However, this is not just a managerial solution but also a political one of priorities. It is interesting that a Tory MP, Chris White  is introducing a Bill to support the work of innovative social enterprise by including ‘social value’ as an outcome to be delivered by suppliers within contract specifications, alongside ‘price’ and other outcomes . He said he recognised this is a ‘Dry Bill’ not one that needs supporting non-the less. 

Social Enterprise 2011 on 8the November in London, we need more of these events in Manchester see


Politicians play – while we burn

15 Oct

The last two weeks have seen Cabinet Ministers demonstrate a total lack of  know-how or seriousness about government – their complacency while ‘Rome Burns’ is amazing,  but perhaps not surprising given that many ministers appear not to care about governance and believe that not caring about how government works  is positively cool.

I cannot believe that Oliver Letwin is so blase about government that he strolls through St James and dumps letters from constituents into a park bin, while Andrew Lansley appears to have not noticed that years of dieting have not reduced obesity,- or that Liam Fox did not think that perhaps having his best friend, with interests in the arms trade, at almost all official meetings with no civil servant present was not good governance. It is not only Boris that is bonkers.

All a time when we have experiencing the worst economic crisis since the 1930s and people ( especially women)  are losing their jobs, pensions and the possibility of work because the country’s debt has soared  largely because of a lack of governance over the finance and banking sector. The attitude to being in government by many ministers seems childish and a bit like they are still playing in the playground.

The country might have rejected Brown for a failure ‘to appeal ‘and to stop micro-management, but there are few people in the regions who gave the Coalition  a mandate for  complacent government and most are desparate for good governance. Unfortunately, in spite of Austerity there is little political leadership, rather the old see-saw politics, that lurchs the country from mild statism to ‘no- government all ‘. Being in Coalition is not initself a new way of governing.

Cameron is totally right not to listen to his own Party – but he seems to be overseeing a group of ministers who perpetuate a rich, public school boy culture who appear to think that ‘being attractive to the public is about being nonchalent,  uninterested in ideas and casual about how to run the country.  It is clear there is an interest in learning from Tony Blair’s diaries about how to remain in office. so lets have an equivalent interest in how to support innovative government.

Innovative government seems to only concern the size of government,   policy-makers have entrenched and are not asking the difficult questions, removing ‘red tape’ is not a bad thing,  but hardly a policy if new forms of more open and inclusive governance are not being developed.  While they continue to be bypassed as dinasaurs some locality leaders ( across Party lines) are exploring how they can better work with business etc – but not at any price, new governance requires mutual adjustement on all sides. I am working with a number of places where creative leaders are attempting to break out of both tribal politics and sector silos, particularly with those in Yorkshire with Local Government Yorkshire and Humber where there is a tradition of leadership innnovation. Their public innovation awards will be announced on the 17th November – and they get better every year.

Innovation is about connections between people, collaborative and exchange in any sector – good governance is about creating the mechanisms whereby creative new firms and public services have access the markets. Government can do something about this – but no-one is talking about it.

On Friday 21st October we are having a Roundtable on Innovation and Public Procurement and will post interesting feedback from the MBS research, public procurers, businesses large and small and the Cabinet-Office.

More than chat between friends – the public value network

5 Jan

The lack of communication and authentic relationships has blocked innovation in institutions for many years, but mass communication on Facebook is not exactly a radical alternative – even if it does connect people across the globe through good holiday pics.  There is a need to distinguish social activities that are anchored in social objectives and those that are pleasent but with little social purpose.

The Public Value Network  and  its Baker’s Dozen ( see below) outline principles for adding public value through sustained and anchored relationships that envigorate because of shared social beliefs rather than just personal promotion.

A Baker’s Dozen Principles of Value Networks
To help guide network strategies
The true shape and nature of collaboration is not the social network – it is the value network. Value networks are purposeful groups of people who come together in designated roles to take action or produce an outcome. Only through the power of value networks can we address our complex issues – together – and create a more hopeful future.Here are a Baker’s Dozen principles to guide value network strategies.1.   The natural pattern for creating value through collaboration is a network pattern. Exchanges of knowledge and ideas open the innovation pathways for creating new kinds of value.2.   The emergent purpose of a network is revealed through the pattern of roles and exchanges within the network. Sometimes the “espoused” purpose of a network is at odds with what it really produces.

3.   You cannot administer a network – you can only serve it through the roles you play. Network strategies fail when people try to run a network like a hierarchy.

4.   People – not processes – are the active agents. Only people can make decisions and initiate actions, in organizations, and in networks.

5.   Every business process has a hidden network pattern of human interactions. Traditional work design approaches ignore the critical human interactions that build relationships and make the processes work.

6.   Sustainability of a network depends on how highly people perceive the value of participating. People “vote with their feet” and abandon networks where they feel they do not receive value.

7.   The primary mechanism for creating social and economic good is the network. Yet, our traditional units of analysis for production are the firm, the industry, or the nation-state.

8.   The molecular level of value creation is the exchange. Value is not limited to financial value – any exchange of goods or value puts us solidly in the realm of economics.

9.   Every interaction in a network is an opportunity to create value or build relationship. Network interactions have intangible value even when financial transactions are not involved.

10. All value is subjective and contextual – even financial value. Value is an emergent property of social systems.

11. The dynamics of value in a network are dependent upon network effects. One cannot determine the value of the network by simply adding up all the roles and their outputs.

12. The success of an enterprise depends on how efficiently it can convert one form of value to another. As individuals and firms we must be able to convert our material and intangible assets into more negotiable forms of value.

13. Patterns of human interactions and intangibles are leading indicators for success. Network patterns can show work processes at risk and show how companies build strategic capability for the future.

Topic Tags:  collaboration, network pattern, network strategy, social network, value network