How local government and the public sector disincentivise social innovation

Tenuous blogpost illustrations: Lemons from the market.

The reason that there is such a wide-ranging debate about what democracy is, and how it is likely to change in the coming years, is in no small part, down to the fact that technology is making new things possible. The technical infrastructure available to us is changing, and creative minds are being applied to find new ways to adapt it to solve old problems.

Those creative minds – the key to any success in this area – need incentivising to do their job properly. Or lets put it another way: They need to be able to earn a living doing it or they will turn their attention elsewhere.

A couple of years ago, Geoff Mulgan of The Young Foundation summed up the problems that ‘social innovators’ face.

“Although more policy ideas are now piloted than in the past, there are very few institutions devoted to social innovation, no widely accepted methods for doing it, no serious academic works analysing it and no widely used metrics for measuring it. Worse, there are strong disincentives to innovate in both the public and voluntary sectors. It is well known that the penalties for failed innovations are often high while the rewards for successful ones are slim…..”

And…

“… all new ideas threaten existing vested interests. Perhaps we shouldn’t be surprised that ineffective models survive far longer than they should – for instance, in fields as various as criminal justice (where recidivism rates remain ridiculously high) and education (where levels of truancy and the number of people not currently in employment, education or training have remained stubbornly high for a decade or more).”

I’d add another brake on social innovation: Anyone that comes up with a good idea, and finds a way of making it commercially sustainable faces the following hurdles:

The public sector likes the idea, and decides to ‘procure‘ it (i.e. decide to do it, they either work out ways that it can be done without outsourcing it, or ways that they can get an external supplier to help them ‘tick the box’ without being that bothered about doing it properly). And if you don’t know what you’re buying, the market for lemons comes into play – you reward an inferior supplier at the expense of the real innovators and establish a below-cost standard price in the process, thereby ensuring that no-one will ever do the job properly.

The other hazard is that the public sector likes the idea so much that they give an NGO the money they need to do it. Even though someone in the private sector has already invested in the idea and is trying to do it in a commercially sustainable way.

Now, I scrape a small proportion of my living working for some of those NGOs and QUANGOs so I’ll leave you to make your own list of examples – but I doubt if you’ll struggle to do so. But the lesson? If you have a bright idea, don’t invest any of your own time or energy in it, because the permanent bureaucracy will come along and balls it up for you.