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2 Why innovation is a priority

To what extent does innovation in the public sector matter? How does its value compare to the other issues that demand the resources and attention of the APS? What is driving governments to encourage and facilitate innovation within their public services?

To a significant extent, the answers lie in the environment in which we operate. While change is a constant, the pace and the scale of change distinguish the current operating environment and pose new challenges for governments and public services. We are grappling with social, economic and environmental changes that are potentially transformational. We are working in an environment that is complex, volatile and characterised by global competition. Demographic and resource pressures, environmental change, technological innovation, increases in information and knowledge, new threats of terrorism and violence, and global economic integration all frame new challenges for public policy in the 21st century. These public sector challenges call for new approaches and new and often more collaborative ways of working. In addition, specific fiscal pressures on governments add a further spur to innovative approaches.

In an era of rapid shifts in technology, consumer demands, and public sector challenges, a capacity for organizational innovation isn’t a luxury—it is an imperative. The ability to innovate is the ability to adapt to an altered environment, to learn, to evolve. (Eggers and Singh 2009, p. 6)

Policy challenges

Governments and public services around the world are grappling with very complex issues—climate change, security concerns, economic disadvantage and lifestyle health challenges such as obesity and diabetes—to name just a few. Making progress in these areas requires, among other things, looking for better and more innovative ways to perform our traditional public service role of providing policy advice to the Government. (APSC 2009a, p. 1)

These increasingly complex policy problems faced by governments everywhere require increasingly sophisticated responses. The challenges cannot be adequately addressed without innovative approaches and solutions, and they are challenges that often cannot be met solely by the public sector or even by the nation as a whole.

No single organisation or country will have all of the capabilities, capacities, insights and solutions to satisfactorily address all of these issues. In addition, some problems can only be tackled with the active participation of those who are to be assisted—for example, Indigenous disadvantage. Broad engagement with stakeholders will be required to develop, trial and deliver appropriate solutions for complex challenges.

Increasingly, governments are looking for innovative solutions to these complex problems which require complex skills sets, novel communication strategies and unprecedented levels of cooperation between citizens, communities and governments.

Changing expectations

… public expectations of service quality are rising, largely because of implicit competition from the private sector. When members of the public visit the motor vehicle department, they expect the same kind of service they get at McDonald’s: quick, efficient, and courteous. When they call the Internal Revenue Service, they expect to be treated as they would be when calling L. L. Bean or American Express. (Altshuler 1997, pp. 42–43)

Citizen expectations of the public sector are changing—and innovative policy development and services delivery are critical to meeting such expectations.

New information and communication technologies and major changes in private service industries have transformed the customer experience in recent decades—so much so that citizens[3] have had markedly divergent experiences in the private and public sectors.

With the commercial world delivering highly individualised responses, the public is less tolerant of a public sector that cannot match this capacity and one that insists on delivering uniform services (Goldsmith and Eggers 2004). Individuals want to know why the government cannot treat them as individuals when multinationals can. They want services that are specific to their needs and circumstances.

As new processes, new technologies and new media become more pervasive, there is an increasing expectation, particularly among young people, that those developments will be reflected in the way public sector agencies interact with others and in how they develop and create solutions and services:

Youth want governments that are customizable, fast, and innovative. They want choice and the opportunity to collaborate. (Tapscott 2009, p. 265)

Not only is there demographic pressure on governments from younger generations encouraging and accelerating changing expectations, today’s ageing population in developed countries also has high expectations, particularly for high-quality and timely health and aged care services.

Global competition

For those countries seeking to move ahead in the global marketplace innovation in the public sector has become and will remain as important as it is in the private sector. (Kamarck 2004, p. 44)

Global integration and competition extend to the quality and efficiency of public administration within countries. The public sector in developed nations represents a significant proportion of the economy—total government expenditure as a proportion of GDP is around 34 per cent in Australia (ABS 2009a) and closer to 50 per cent in some European Union economies (Eurostat 2009). Thus, increased productivity through innovation in the public sector will have a significant impact on Australia’s wider economy and trading position.

Innovative public policy overseas can impact upon the competitiveness of firms within Australia. For example, higher levels of efficiency leading to lower taxes or more effective light-handed regulation in a competitor country can lead to competitive disadvantages for Australian business. Globalisation exposes the performance of governments and of their public services to comparison and competition. Thus there is increasingly a competitive driver for innovation in the public sector.

Fiscal pressures

There are increasing pressures on governments for efficiency, productivity gains and cost reductions. They come from a range of sources, including the demographic pressures of an ageing population. Such pressures have been exacerbated by the global financial crisis, which has led to substantially increased levels of public indebtedness for most developed countries, including Australia.

The global financial crisis and its impact on government revenues, returning the budget to surplus over the medium term and managing the fiscal implications of an ageing population and a lower rate of growth in labour force entrants are key challenges facing the Australian Government (PM&C 2009). For the APS, they make for a very challenging fiscal environment in which to operate and will demand new and innovative approaches, especially to service delivery.

Public sector management

Essentially NPM can be seen as the growing awareness within the public sector of a need to acquire and develop management skills and attitudes more traditionally associated with the corporate … sectors of the economy. The resultant endeavour is characterized by a drive to bring public sector management reporting and accounting procedures closer to (a particular perception of) business methods, rooted in ‘management thought’ on ‘best’ practice through the adoption of a set of different (sometimes conflicting) reforms and initiatives. (Hall and Holt 2008, p. 22)

The New Public Management (NPM) approach seeks to move the public sector to embrace private sector practices to increase efficiency and productivity. It is often, but not always, associated with privatisation and the outsourcing of government functions. It requires new models of operation for public sector functions, partnerships with service providers and third-party organisations and the introduction of new imperatives into public sector service delivery. It envisages increased reliance on networks and collaboration in service delivery and policy development, and this means the adoption of new processes and approaches.

There is increasing contestability over the provision of services and advice that were once the sole province of the public service. Again, this introduces a level of competition into the public sector and gives a spur to innovation in the public service.

High-performing public service

Humans are wired for creativity; we long to express it. By emphasizing innovation, you will be tapping into your staff’s deepest intellectual and professional desires. (Lafley and Charan 2008, p. 28)

A high performing public service is based on capable, skilled and professional people. Such staff are attracted to join and remain in the public service in large part because of the interesting and challenging nature of the work—work that offers the opportunity to make a real difference. To attract and retain highly motivated and skilled public servants, the APS must provide them with opportunities to innovate, to apply creativity, and to make a difference.

Those drivers are some of the reasons that the public service needs to make the most of its innovative potential. However, there will always be other unexpected or unknown challenges that will result in a need for innovative public sector solutions. A look back at the recent past provides numerous examples of such circumstances—the global financial crisis, swine flu and numerous natural disasters. The public service needs to be able to adapt quickly—it needs to be able to innovate.

Key points

  • The pace and scale of change and the global and local challenges facing the public sector make innovation a necessity to meet future needs and expectations.
  • Today, citizens expect to be treated as individuals and have services directed to their individual needs. The public sector is expected to be as innovative in its services delivery as the private sector.
  • Global competition extends to having an innovative and productive public sector. The public sector is a significant segment of the economy and impacts on overall productivity and performance.
  • Fiscal pressures will add to the imperative for greater productivity and innovation.
  • Evidence suggests that APS staff embrace opportunities to be innovative.
  • Increasingly, delivery of public services is subject to privatisation, outsourcing and market models of provision and governments seek a diversity of sources of advice. The APS must develop new ideas and adopt new models and approaches to be competitive in a contestable environment.