Measuring Innovation in the Public Sector: a literature review

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Project 4 – Deloitte

This paper16 focused on developing a diagnostic tool to measure the levels of innovation in public sector organisations, including both the capacity to innovate and the results of innovation. It was suggested that organisations themselves can use such a diagnostic tool, with outside help, to assess and improve their ability to innovate.

Deloitte advocated a diagnostic tool which encourages public sector organisations to use innovation to increase public value. To achieve this aim, the tool will need to:

  • Make a persuasive case for action to improve levels of innovation – this means putting the measurement of innovation in the context of how it delivers results in the form of increased public value;

  • Successfully identify the key drivers and results of innovation in public services – so that public sector organisations can use it to understand what strategies can help them become more innovative;

  • Apply to a range of public sector organisations regardless of the nature of the public value they seek to create – this requires a tool that assesses key high level of drivers of innovation capacity such as culture, leadership or the applications of principles and strategies;

  • Produce recommendations that organisations can easily translate into delivery plans; and

  • Work in harmony with other diagnostic tools and incentive regimes to measure (or it’s integrated within) existing mechanisms to assess and reward capabilities in the public sector.

Deloitte defined innovation in the public sector as “…the adoption of new ideas that improve outcomes, make delivery easier or reduce costs to citizen, the delivery chain or the public purse” (p.9). Its work started with identifying key strategies that support stages of the innovation process, from idea generation, idea selection, idea implementation and idea diffusion, as well as the cross cutting enablers (or the cross cutting key drivers of innovative capability) that support each stage of innovation process.

To build a prototype diagnostic tool, Deloitte translated their research results into a series of questions that public sector organisations could ask themselves. This includes questions related to the adoption of strategies and approaches that support each stage of the innovation process, as well as questions related to the cross cutting drivers of innovation.

Key themes for the adoption of strategies were:

  • Idea generation (staff ideas, customer/user generated ideas, partner generated ideas, externally generally ideas);

  • Idea selection (clarity of purpose, fit for purpose processes);

  • Idea implementation (clarity, delivery, flexibility); and

  • Idea diffusion (incentive to share lessons, channels to diffuse lessons, incentives to adopt).

Key themes for cross cutting key enablers were:

  • Capacity (resources and skills available to innovate);

  • Priority (the extent to which innovation is prioritised and seen as important); and

  • Authorities and mandate (the extent to which an organisation’s mandate and rules support innovation).

Key recommendations:

  • Develop a prototype diagnostic tool – to assess the key capacities that support the translation of ideas into public value, based on the research findings on the elements of innovation capacity;

  • Test and evolve the prototype tool with a range of public sector organisations – to ensure the questions it asks or the approach it uses can apply to the work of a range of public sector organisations irrespective of the nature of the public value they create or the design of the delivery chains; and

  • Develop approaches to track the effectiveness of the tool – this could involve mechanisms to capture data on the correlation between the adoption of particular strategies and approaches and the creation of public value. This would be invaluable in ensuring the tool evolved in line with evidence from implementation.

Deloitte also identified a number of high level options for the design and delivery of a diagnostic tool, such as:

  • Whether it should be a stand alone voluntary diagnostic tool to measure innovation capability in public sector organisation, or fully integrated within existing assessments (any tools that might be used by Public Services Commission or National Audit Office, or others); and

  • Whether it is a survey for all staff, or leadership (or both), or an inspection.

Project 5 - Ernst & Young

Ernst and Young published a report17 in response to it’s objectives to develop an Innovation Index for individual public sector organisations based on scorecard approach and to develop a proposal for its application.

The assessment framework to be applied at a strategic level in an organisation, as a diagnostic scorecard tool was for use across public sector delivery organisations only (not policy organisations). The assessment framework contains four parts as summarised below:

Innovation Activities: the current innovation activities of the organisation which are most likely to impact future performance in the short-medium term. It includes:

  • Selecting and developing ideas – the process of selecting the best new ideas for development, allocating resources and working collaboratively during development;

  • Accessing new ideas – the process of accessing and identifying a sufficient number of different types of new ideas from a range of sources;

  • Implementing ideas – the process of converting developed and tested ideas to fully implemented solutions; allocating appropriate resources; and

  • Diffusing what works – the process of sharing and disseminating successful ideas within and outside the organisation.

Innovation capability: It contains the key underpinning capabilities that can sustainably influence innovation activity and performance in the medium-longer term.

  • Leadership culture – the behaviours and conditions required for innovation to flourish;

  • Management of innovation – the quality of organisation and planning for innovation activities; and

  • Enablers of innovation – the critical enablers of innovation activity within the control of the organisation.

Impacts: the impact innovation is having on the organisation’s current performance. These indicators are the ones that senior management and staff pay most attention to when managing innovation. It includes:

  • Improvement in outcomes – improvements in outcome indicators for consumers over the last year;

  • Improvement in output KPIs – improvements in output KPIs over the last year; impact of these on outcomes;

  • Improvement in services evaluation – improvements in services evaluation/feedback from consumers over the last year; and

  • Improvement in efficiency – improvements in key efficiency/productivity indicators for consumers over the last year.

System levers for innovation: how well the system in which an organisation operates helps it to innovate. The system contains policy levers that can help or hinder innovation. These policy levers are outside the control of the organisation but within the control of policy-makers.

  • Incentives – effectiveness and alignment of a system of incentives;

  • Leadership & culture – the behaviours and conditions required for innovation to flourish;

  • Autonomy – the responsibility and freedom to innovate; and

  • Enablers – Access to critical enablers of innovation.

Based on this framework, Ernst & Young proposed an organisational innovation scorecard to be used as a tool to help leaders of organisations to talk to middle managers and front-line staff in meaningful ways about the importance of innovation, the need for changes and attitude to risk. They developed survey questionnaires and a reporting format for the organisational innovation scorecard, which could be directly applicable to a public sector organisation. Initial testing provided useful early validation of the assessment framework and the scorecard principles and overall format.

The application of the scorecard should satisfy three critical success factors:

  • It needs to work effectively as a strategic tool to enable change and improve cultural attitudes to risk-taking;

  • It needs to be applied in a robust way for organisational and index purposes; and

  • It needs to be developed and rolled out in a way that catalyses take-up of innovation.

It would be most useful for an organisation if based on the following principals:

  • Voluntary – organisations can choose whether to apply the scorecard approach;

  • Developmental – helps build capability for innovation;

  • Engaging – simple, attractive and the benefits are self-evident;

  • Cost-effective – for individual organisations and the taxpayer;

  • Forward-looking – enables practical change; and

  • Enables useful comparison – facilitates cross organisational comparisons and dialogue.

The audiences of the index and scorecard were the main innovation actors in the UK including:

  • Senior economic policymakers;

  • Those responsible for the delivery of public services, the devolved administrations and local authorities;

  • Leaders of institutions that play a role in the UK’s ecology of innovation, notably university Vic-Chancellors, educators, business leaders, skills bodies, regulators and investors; and

  • Those responsible for regional economic development across the UK.

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