Intriguing Factors in the Innovation/Risk Equation

Duane HerpergerDuane Herperger is President of ideaConnect Marketing and Communications and CAPAM’s communications consultant.
‘Wavelength’ articles explore ideas about issues and opportunities in public administration.

Every democratic public service strives to be innovative. CAPAM’s International Innovations Awards have clearly demonstrated that the spirit of experimentation and continual improvement is a priority for countries within the Commonwealth and beyond. Whether through providing better policies and services, reducing taxpayer costs, or ensuring a more prosperous and secure nation within which to thrive, most governments enthusiastically support discovering new ways to improve the lives of their citizens.
Creating a truly innovative environment, however, implies an intrinsic readiness to promote intelligent risk-taking and to accept failure as part of the learning process. In many private sector organisations, taking chances and learning from mistakes in order to achieve greater success is strongly encouraged. Is the public sector capable of assuming such a risk approach? Indeed, should it? What are the conditions necessary to achieve a risk-taking attitude in government?
In this Wavelength article, CAPAM explores recent thinking that tackles the subject of innovation and risk from a variety of perspectives. We look at how the public sector deals with risk and failure, the concept of catching the innovation ‘bug’, the role that motivation plays, and why promoting experimental government should be considered.
Public sector institutions are often encouraged to emulate private sector practices in the way they conduct business. The rationale behind this is a perception that being entrepreneurial means having a greater ability to cut through red tape and quickly take advantage of opportunities as they arise. However, while public and private sectors share a number of traits, fundamental differences exist that influence the way in which risks and failures are addressed. Dr Gambhir Bhatta identifies these contrasts in his article, “Don’t just do something, stand there!” Revisiting the Issue of Risks in Innovation in the Public Sector. He explains:
Firms, for example, can sustain several failures that shareholders can accept as long as one success yields on an average a positive rate of return. Public sector organizations rarely have the luxury of living with several failures regardless of how many policy successes they may have. This obviously has an impact on the decision domain to innovate. The practice of risk management in the public sector is also more complex because of the fact that even as decisions are made under conditions of uncertainty, they still require a political judgment… The environment in the public sector has other manifestations of complexity – such as diversity (depth, breadth) of stakeholders, horizon (discrete/on-going, e.g. generational/intergenerational concerns), managing in a ‘fishbowl’, dynamics of owner/provider mix, etc. … To operate, manage, and innovate in this environment then is rather difficult, which invariably, it could be argued, leads to an attitude of aversion to risk. (Bhatta 2003)

Geoff Mulgan further recognises the unique environment within which governments must operate. He states:

Risk is often cited as the reason why innovation is so hard in the public sector. If things go wrong those responsible will be mercilessly blamed: by hostile media, opposition politicians. Experiments that don’t work will be denounced as a waste of scarce public money. So it’s natural to default to safe bets. A better approach is to see risk as something to be managed. This is why innovation is often best organised on a small scale, and fast, so that the costs of failure are minimized. (Mulgan 2014)

Indeed, being risk averse does not guarantee success. In his article How Does Innovation Work in the Public Sector? Tim Kastelle suggests that public institutions need to think about risk more effectively. He explains that by avoiding risk, an organisation actually increases the chances of significant failure. “Small innovations are the mechanism for adjusting to small changes in the operating environment, so if these are avoided, the organization’s fit with its operating environment becomes increasingly poor.” (Stewart-Weeks and Kastelle 2015) By remaining static in an increasingly complex and interconnected world, the real risk becomes one of being unable to adapt and evolve.
Despite heightened scrutiny and increased complexity faced by the public sector, maintaining the status quo is simply not an option. Creating attitudes, cultures and mechanisms where effectively managing risks and accepting failures in order to realize future innovation is paramount. So how does government best instil intelligent risk-taking where the possibility of setback does not become incapacitating?

One alternative is to shift the way in which innovation is viewed. Rather than restricting the concept to particular projects or programmes, innovation must be embraced in a holistic sense whereby the phases of innovation – infection, inspiration and implementation – are considered organisation-wide. Martin Stewart- Weekes writes in his article Innovation Infection: Catching the Innovation Bug in the Public Sector that:
Although technical, financial, and operational issues are always important, the big factors that determine, in the end, whether innovation happens at all, let alone whether it is successful, are organizational and cultural. To be effective, innovation has to engage an almost emotional, visceral level of commitment and energy.

He goes on to suggest there is a “growing sense of innovation as a ‘bug’ that organizations catch, a kind of ‘good virus’ to keep them healthy and robust in the face of other ‘bad-virus’ infections that can debilitate or even disable.” (Stewart- Weeks and Kastelle 2015)
The table below summarizes Stewart-Weeks’ guidance on how to catch the innovation bug and ultimately realise its benefits:

Table 1: How to Catch, Inspire and Implement Innovation

Jo Casebourne explores the motivations that drive public servants to innovate, and explains how creating the right cultures will help to overcome associated barriers. In her paper, Why Motivation Matters in Public Sector Innovation, Casebourne asserts:
We know that public servants draw on intrinsic motivations in their work and that what drives them is a mix of altruism and more self-interested motives. We know that innovation is more closely linked to intrinsic than to extrinsic motivations. We also know that the New Public Management1 model does not work in harnessing the motivations of public servants. Getting the balance right between rewarding intrinsic and extrinsic motivations is not easy. However, it is a lot more likely to be successful at encouraging innovation than a model based solely on extrinsic motivations, which does not take into account what actually motivates public servants to innovate, or the balance between organisational and institutional cultures and individual motivations. (Casebourne 2014)
Public sector motivation is a powerful force in creating a risk-taking attitude. If public sector organisations better understand what inspires employees, they are better equipped to encourage innovation. While acknowledging there are some large gaps in knowledge on the subject, Casebourne illustrates a multi-facetted approach towards harnessing public sector motivation:

Table 2: Harnessing Public Sector Innovation

At the introduction of this review, it was suggested that being risk averse does not guarantee success, and that innovation needs to be fast and on a small scale to minimize the costs of failure. Jonathan Beckon addresses the advantages of being nimble and experimental in his paper, Better Public Services Through Experimental Government. The author explains that an “experimental, learning government is one that robustly and systematically tests things out, measures them and grows what works.” That means moving along the experimental government continuum from ‘seat-of-the-pants’ experiments with no rigorous learning or evaluation strategy – to experimental research that employs the best available research methods.
Experimental government is not about trying things out in a haphazard way. It needs to be done in a way where we can genuinely learn from those experiments and adapt. (Beckon 2015)
Beckon provides an insightful dialogue on the benefits and shortcomings of experimental government, offering numerous real-life examples. Throughout his arguments, it is clear that many of the conditions necessary to generate more experimentation reinforce themes espoused by others (embracing risk and prizing success). An overview of Beckon’s recommendations include: 
  • Government officials and researchers should set up more ambitious and bold experiments on nationally important issues, replicate experiments from other countries to see if they will work locally, and coordinate local-level experiments to ensure widespread benefits.
  • Experiments need the most robust available evaluation methods such as, if appropriate, experimental research designs to share learning about what worked or failed, and why. This includes ensuring government officials have the expertise to work with researchers using these methods.
  • Leaders in government need to embrace risk and reward success, by taking responsibility for failure, praising staff successes, and having a positive narrative and more training on risk management.
  • The right institutional support for experimentation needsto be created, such as a public strategic competitive fund, more skunkworks-type institutions with on-tap expertise, and sunset-clauses for government policies to create the space to learn and test out new ideas.
  • Researchers and government officials who understand each other’s realities need to work closely together to co-produce experiments.
  • Experiments should be devised that work within the grain of the current policy environment. Seize opportunities to experiment.
  • Policymakers at national or local level need to start policies that are not set in stone and allow some flexibility and opportunities to ‘learn as you go’.
  • The public debate about the importance of experimentation needs to grow. 

We know that for the public service to be truly innovative it cannot reap benefits associated with inventive policies and services without embracing an environment of intelligent risk-taking and the potential for failure.
Concepts covered include:
  • Acknowledgement that public sector realities differ from the private sector contributing to a heightened aversion to risk;
  • Conceptualisation of innovation as a virus that goes through the phases of infection, inspiration and implementation;
  • Improved understanding and action on what individually and collectively motivates the public sector to be innovative; and
  • On-going and incremental experimentation in order to minimize the impacts of failure.
The ultimate goal is to encourage a public sector that is increasingly thoughtful, creative and responsive. Many public servants have demonstrated a predilection towards these attributes. By investigating factors associated with innovation and risk, and committing to act on what is discovered, an innovative public service at all levels can be achieved.

1 The author describes New Public Management (NPM) as “government policies, from the 1980s onwards, which aimed to modernise the public sector and make it more efficient.” She states that the NPM is “characterised by efficiency, accountability, performance measurement and rational planning – based on understanding public servants as knaves, and using a market-driven model relying almost exclusively on extrinsic motivation to incentivise public servants.”


Breckon, J with foreword by Geoff Mulgan. 2015. Better Public Services Through Experimental Government. The Alliance for Useful Evidence

Bhatta, G. 2003. “Don’t just do something, stand there!” Revisiting the Issue of Risks in Innovation in the Public Sector. The Innovation Journal: The Public Sector Innovation Journal Volume 8(2), article 3:1-12.

Casebourne, J. 2014. Why Motivation Matters in Public Sector Innovation. Nesta

Mulgan, G. 2014. Innovation in the Public Sector. How Can Public Organisations Better Create, Improve and Adapt? Nesta

Stewart-Weeks, M. and T. Kastelle. 2015. Innovation in the Public Sector. Australian Journal of Public Administration Volume 74(1): 63–72.