Framing Innovation in Public Service Sectors

Rolf Rønning, Bo Enquist, Lars Fuglsang

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781134628483
• Edition: 1
• Topic: Business
• Subtopic: Government & Business
• Index: Business

Innovation is seen as an interactive process that involves many actors within and across organizational boundaries. In public sector services, innovation is a frequent, often holistic, and multi-layered process that involves many actors and many services at the same time. However, most of the existing literature on innovation in public sector services is based on the economics of innovation, which is heavily influenced by investigations of the private sector. Innovation in the Public Sector develops a more context-sensitive and rich approach in order to explore the different logics of innovation that prevail here.

Rather than presenting a general theory of innovation, the book specifies how innovation and value creation are interconnected with social and institutional elements. Analytical constructs, including dynamic capability, absorptive capacity, and practice-based approaches, are reviewed and anchored in the organizational context of public sector services. Such a perspective on innovation can help us develop new understandings of the process and history of innovation, contributing to processual organizational analysis in a broader sense, and further developing present theories of organizational change.

1 Introduction

Framing Innovation in Public Service Sectors: A Contextual Approach

Lars Fuglsang and Rolf Rønning

The need for innovation in public service sectors has been increasingly stressed by governments all over the world. One reason is that there are massive fiscal pressures on the public sector to save costs and use resources in an efficient way. Furthermore, citizens’ expectations of public services, such as the expectations of high quality education and heath care, are steadily growing. In addition to this, public service sectors often have to deal with complex “wicked problems” that cannot be solved in a simple way (e.g., crime). Finally, the changing environment of public services as a result of new opportunities resulting from information and communication technology (ICT) create a constant need for scanning opportunities and considering change and innovation.

We know from research that innovation in public service sectors is different from innovation in private services. Innovation in the public sector takes place in a special context of government and governance with special requirements concerning public ethos and democratic steering and special concerns for citizenry. To some extent it may be relevant therefore to pursue a “demarcation” or “differentiation” approach to public service innovation investigating its specificities. Yet we should also strive toward more integrated understandings of private and public sector service innovation (Gallouj 2010) to facilitate learning across sectors.

This book is an attempt both to investigate specificities of public sector innovations and to apply more integrated approaches to understanding public sector service innovation. On the one hand we try to take into account the changing public context of innovation, which is beginning to be explored in such theories as public value theory (Moore 1995; Benington and Moore 2011; for a critique see Rhodes and Wanna 2007) and theories of new public governance (Osborne 2010). On the other hand, more integrated understandings are pursued in the chapters of the book, examples being evolutionary or practice-based approaches to innovation. We try to build understandings of innovation that take account of the particular contextual problems that actors are struggling with in public service sectors while also developing more integrated ideas of innovation as context bound and co-acted by many actors in a more general sense.

In particular we seek to develop integrated understandings of public sector service innovations that see them as contextual, co-acted, and evolutionary practices. This implies that we understand innovation as something that emerges from practice rather than inferred from general management models that can be applied universally. To develop a more integrated approach to innovation does not mean that we develop a general management model of innovation, but we try to develop an analytical model that may hopefully be applied in different contexts.

An overall ambition with the book is to produce knowledge of how new service and innovation logics are applied to public service sectors. The service logic is a customer-centered approach, and the innovation logic is an interactive and nonlinear logic, which is complicated to both steer and manage. How far can these approaches be taken in the public sector? Several of the cases show that these logics actually do exist in the public sector. Citizens are treated as customers and employees, and managers take strategic initiatives to improve services. So how can these logics be combined and balanced with the need for government and governance?

In the following we first discuss what innovation is. Then we briefly outline the two approaches to public service innovation: specificities and integrated contextual. We then discuss how the purpose of public sector innovation may be defined, and we finish by presenting the chapters of the book.

What is Innovation?

There is no consensus in the literature about how to define innovation, but the concept is usually understood to refer to two processes (Edquist 2009; Sundbo 1998; Toivonen et al. 2007; Drejer 2004; National Audit Office 2006): (1) creating something new and (2) developing this into goods or services that have economic and societal value or impact. The latter is what distinguishes innovation from creativity.

The concept of innovation was originally developed with the manufacturing of goods in mind, and it was associated mostly with technological changes. But the concept of innovation has also been applied to services and to public services (Bekkers et al. 2011; Gallouj and Weinstein 1997; Gallouj 2002; Sundbo 1998; Windrum and Koch 2008; Koch et al. 2005). Since services and public services comprise about 70% of the economy in many countries and since they seem critical to wealth creation and economic growth, it becomes pertinent and logical to apply the innovation idea to that sector, to analyse and understand how creativity and change in services are formed and to achieve economic and societal impetus.

Yet in services it may be more difficult to recognize and study the impact of innovation on the economy and society than in manufacturing because the output of innovation in services is more “fuzzy” (Toivonen 2009), and innovation may be concealed in the interaction with clients. Furthermore, service innovations have often been shown to be incremental, and they often take place in less systematic and more loosely coupled ways than development of goods in manufacturing (Ettlie and Rosenthal 2011). Finally, many new services are not repeated more than one time; they are ad hoc solutions to concrete problems posed by clients (Gallouj and Weinstein 1997) and can therefore hardly be called innovations (Toivonen et al. 2007; Drejer 2004).

In service research, value creation has become a central concept. It is understood as customer’s creation of value-in-use. Value creation can be distinguished from value generation, which is the whole process of designing and delivering a service, and value co-creation, which is when the service provider supports the customers’ value creation (Vargo and Lusch 2004, 2008; Grönroos 2011). Service providers can facilitate customers’ value creation by making available service resources that are suited for this purpose and by co-creating value with the customer. Therefore, in services, value-in-use should be included as a starting point for understanding the economic and societal impacts of innovation.

In public service sectors where innovation has also been studied more recently (Windrum and Koch 2008; Koch et al. 2005; Bekkers et al. 2011), the impact factor of innovation is multifaceted and complex. It may be misleading to stress value-in-use and value co-creation too strongly, because pub lic services respond to more general societal concerns. The output is not just the value-in-use created by the client but also the more indirect public (collective) value that is produced when a customer uses a service. When a person uses public transportation, it produces less pollution than when using a car. When an elderly person uses elderly care, it enables women to attend to the labour market. Hence, in public innovation, we must distinguish value in use and value by use. It is important to remember, however, that value in use may be a precondition for value by use. The less the public sector can facilitate value-in-use (for example, by providing good public transportation), the less it will be able to produce the desired public value by use. Therefore, the value-in-use must be taken as a starting point also in public services innovation.

Inspiration for innovation and value creation can come from many sources including private companies as well as social groups and social movements. Public organizations cannot ignore these sources of innovation. This would threaten their legitimacy. Public organizations are therefore under a steady pressure to improve and innovate new support structures for citizens. Meeting the challenge of innovation has therefore become a key problem for public organizations. But we know very little about how public sector organizations can develop their capacity to deal with these changes in an appropriate way.

The concept of innovation becomes important here, because the challenge for public organizations is not just to deal with specific well-defined development problems inside the public sector. It is not so much the case of developing a new well-defined service but to develop it in a way that supports clients’ value creation in a competitive way vis-à-vis alternative service offerings. For example, in health care, new technologies, new drugs, and new treatments are continuously provided from many sources inside and outside the public sector. The challenge for the health care sector is to draw on these sources in a legitimate and trustworthy way and to make competent choices and priorities.

Specificities and Values of Public Sector Innovation

Public innovations can be very different in their nature, and various categorizations have been used. However, we can find similarities between the different efforts. Bekkers et al. (2011) propose a categorization based on their study of the literature: product or service innovations, technological innovations, process innovations, organizational and management innovations, conceptual innovations, governance innovations and institutional innovations. This leaves us with more or less the same variations as in Schumpeter’s (Schumpeter 1969 [1934]) works.

New public management (NPM)-inspired scholars and politicians have argued that similarities between public and private sector are the most striking and that the reorganization of public sector toward a more efficient one then can use models from private sector and private businesses (Christensen and Lægreid 2011). Based on this literature it is even possible to see the focus on public innovation as a consequence of NPM; both phenomena turned up at the same time (Langergaard 2011).

Our starting point is that it sometimes may be difficult to see a clear distinction between public and private services and that there are similarities. But there are also some fundamental differences that have to be taken into account if public innovations are to be conducted in a way that contribute to the improvement of the services according to public standards.

Public interests differ, as mentioned, from private interests in having to take into account a broader set of values (Christensen et al. 2004). These values include democratic principles and rules for procedures aimed to secure peoples rights and justice. To take these values into account can imply procedures and rules that can be seen as inefficient from another point of view. Public innovation must be concerned about the realization of collective interests, or the public will (Habermas 1996; Langergaard 2011). Public interests include the handling of wicked problems, which are characterized by having no simple and definite solution, but rather temporary and partial solutions. These problems can include crime, unemployment, or priority of resources in the health sector. They cannot be easily defined (or solved) once and for all (Langergaard and Scheuer 2008). Political constellations can vary over time and may disagree about the solutions, and their opinions may vary over time. The legitimacy of public sector depends of how they can handle these wicked problems (Bekkers et al. 2011).

The public sector is responsible to people as citizens where their opinions are expressed through democratic elected bodies, not to special groups or customer interests (Christensen et al. 2004). And we may behave differently as citizens and consumers. It is important to have in mind that the public sector is an arena where conflicting opinions should be handled and solved according to prescribed rules (majority rules, etc.). Public innovations and discussions of improvements have to be understood in this context.

We still find that the essential values described in Weber’s ideal type (1964) to be valid for the employees in public sector; decisions should not be in personal favour for the decision makers, and the procedures should be a guarantee against corruption. A decision favouring a friend can in a private company be quite legitimate, while it is totally unacceptable in public sector. The legitimacy of public sector depends on the trust people have in fair treatment from public employees. The public sector has to be public, or open, in the meaning that people can read and see the decisions and arguments used. Fairness, equal treatment, and predictability are important values for the public sector and are an important part of the “public ethos” (Rønning 2009).

While private service providers can concentrate on the quality of their services, many public agencies have to combine service delivery with control of the clients. This is true both for tax and social service agencies. This ambivalent situation may complicate the service approach and the users’ experience of the received service.

Efficiency is very important for private firms, because the profit comes from the difference between the incomes and the costs. Efficiency is not the only goal for private firms, however; they have to adjust to public values about treatment of employees, pollution, rules, and so forth. Corporate Social Responsibility (CSR) is used as a term to indicate expectations to firms as actors in society.

Efficiency is important for public services as well, because there always will be scarcity of public money compared to all the demands we have to public services. But efficiency is not a main goal for public sector. Public agencies are established for realizing public goals, and therefore effectiveness (realizing goals) is the premier goal. Rehabilitating people and making them able to go back to work is the goal, and not to reduce the costs in itself. Sometimes, as in the courts, the procedures obviously increase the costs, compared to an efficient decision-making process used in regimes we do not admire in this case.

We may say that according to efficiency, public sector operates in a quite different institutional setting, compared to private interests (Bekkers et al. 2011).

Toward an Integrated Contextual Approach to Public Services

In a seminal paper, Brown and Duguid (1991) argued that work practices can often differ from the way organizations describe work in manuals, training programs, organizational charts, and job descriptions. At the same time, organizations often rely on the latter when they try to improve work practices (p. 40).

Brown and Duguid conclude that “reliance on espoused practice (which we refer to as canonical practice) can blind an organization’s core to the actual, and usually valuable practices of its members” (p. 41). Closing that gap can help reorganize organizations to improve working, learning, and innovating.

In a similar way, manuals and theories about innovation that are advocated as a result of an increasing interest in innovation may constitute an ideal of canonical practice that nevertheless blurs actual innovative practices. By contrast, real innovative practices may be overlooked and even hidden away, because they do not seem radical or proactive enough, or they seem insufficiently systematic or legitimate.

This is one reason why this book calls for contextualization of research. In this book, contextualization means case studies. It ...

Table of contents

• Cover Page
• Half Title page
• Title Page
• Copyright Page
• Contents
• Figures
• Tables
• Preface
• 1 Introduction Framing Innovation in Public Service Sectors: A Contextual Approach
• PART I Value Co-creation and Service Logic
• PART II Innovation Logics
• PART III The Powers and Political Dimensions of Innovation in Public Service Sectors
• Contributors
• Index