The Innovator’s Opportunity

A great deal has been written about innovation in the for-profit and nonprofit sectors, but too little attention has been paid to innovation in the public sector. In fact, many people think that the term “government innovation” is an oxymoron. But innovation does occur in the public sector, and the pace of innovation is accelerating. That is due to a variety of factors, including a shift to the right in the dominant ideology, fiscal constraints, globalization, advances in information technology, and the expansion of nonprofits and forprofits into heretofore public sector activities. As a result of these and other trends, innovative new programs are being tested and implemented at the municipal, state, and national levels throughout the world.

Government innovations such as park conservancies, charter schools, and most recently social impact bonds have been written about, but mostly on a case-by-case basis. What has been only lightly explored is the development of a theory that explains the general phenomenon of innovation in government. Our cover story, “Unleashing Breakthrough Innovation in Government,” does just that. The article—written by Nikhil R. Sahni, Maxwell Wessel, and Clayton M. Christensen—provides a framework for understanding innovation in the public sector and how to create conditions that foster it. (Christensen, a professor at Harvard Business School, is an acclaimed author on innovation and most noted for his best-selling book The Innovator’s Dilemma.)

In the for-profit sector innovation is driven by the free market. Entrepreneurs and investors are richly rewarded for creating new products and services that outperform outdated ones. By and large, they can easily create new companies or lines of business and offer consumers the freedom to choose new products and services. Just as important, outdated companies or lines of business are allowed to fold. In the public sector these market conditions don’t usually exist. There are no financial rewards for creating new products and services. Competition between government services rarely exists. And political forces often frustrate efforts to change or sunset outdated services (consider the current predicament of the US Postal Service).

The challenge is to find ways to replicate market conditions in the public sector. And that’s what the authors have done. Their framework should not be viewed as a playbook. Innovation is never that simple. Rather, it’s an approach that can help guide government innovators and provide a foundation upon which researchers, practitioners, thinkers, and policymakers can build.

For an example of an innovative approach to an existing government service, I encourage you to read Rohit T. Aggarwala’s feature article, “Why Nonprofits Should Operate Commuter Trains.” Even if you have no interest in mass transit, Aggarwala’s out-of-the-box thinking makes for a fascinating study.

Aggarwala believes that if commuter train lines were freed from the shackles of government control and turned over to a nonprofit to operate, the new operation would come up with creative ways to offer better service, increase ridership, increase revenues, and lower costs. A service that now requires large taxpayer subsidies could be financially self-supporting. Whether this approach will actually result in the expected benefits remains to be seen, but it’s one that is worthy of being tried and tested.

Read more stories by Eric Nee.