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Public accountability and innovation

Posted by Jon @ MaRS, June 18th, 2009

Tags: accountability, eHealth, electronic health records, governance, healthcare, innovation, Lisa Raitt, nuclear, policy, public accountability, public sector governance, public sector innovation, public sector transparency

Are we locking down on innovation?

The situations in which Natural Resources Minister Lisa Raitt and senior staff at eHealth Ontario have found themselves in recent weeks have provided the fodder for numerous public accountability headlines. Much has been said about the extent to which a politician must take responsibility for the actions of the civil servants within their portfolios. Absent from this discussion is the inevitable risk that accompanies the triumvirate of change, technology and innovation that is at the centre of these cases.

The danger is that the calls for public accountability encourage risk-aversion and conservative policies. Continuing further down this road would be most unfortunate for Canada.

Complex technologies = Risk
At the core of both cases in question are extremely complex technologies in the form of nuclear technology and electronic health records, both of which demand significant change within and the deployment of sophisticated technologies by the public sector. Whether the politicians or their civil servants are doing something that can be deemed inappropriate or worse in either case is irrelevant for this blog post. Instead, these cases here serve as a timely backdrop to something much more important in the relationship between Canadians and their government.

Rather than fixating on who is to blame and for what, it is long overdue that the public realizes that any complex technology deployment comes with inherent risks, some of which are known while others are not. Essentially, the presence of risk means that not everything goes according to plan all the time. (See our blogs on failure here and here.)

We – the media, voters and the political opposition – need to accept the presence of risk in the public sector. And not because we don’t want politicians and bureaucrats to do their jobs properly or to manage taxpayers’ money carefully.

Public sector must innovate
Instead, we must accept the presence of risk because we desperately need a public sector that has the appetite and capacity to confront the increasingly complex challenges with which we are faced. The capacity to innovate within government must be developed over time and part of that development must accommodate and learn from the inevitable mistakes that come with innovation.

While Canada’s lack of private sector innovation has been the subject of considerable scrutiny over the last couple of years, much less attention has been devoted to the need for public sector innovation. However, there are a number of challenges currently facing our public sector where innovation is key, including:

Delivering expensive health care to an aging population
Reducing climate change and its effects in a global economy
Ensuring secure borders
Transitioning from fossil to renewable energy sources
Providing quality education to a diverse population

This short list alone should make it clear how dearly we need a public sector capable of innovating.

So, why is this important to MaRS?
At MaRS, we help entrepreneurs with innovative ideas build sustainable companies. Some of the entrepreneurs who come to us only have a concept to work with, while others have a business ready to face the demands of the marketplace. Governments and their agencies around the world play a significant role in this marketplace as large buyers of technology. For instance, in 2008, the US Department of Defense alone made up over half of the overall market for RFID technology, which is still a relatively early-stage technology.

Several start-ups at MaRS are looking to the public sector to be early adopters of their technology, including defense, health care, emergency services. For this to happen, we need a public sector with a clear mandate to innovate as well as politicians and bureaucrats who are willing to take risks. In essence, entrepreneurs and their new technologies offer radically different ways of solving problems — it is the possibilities these new approaches entail that could be embraced by our public leadership and bureaucracy.

The trick to public sector innovation: Governance and Transparency

Now, this does not mean that the electorate and the media should give the public sector carte blanche as they go about and create the next generation of public services.The challenge is for the public sector and politicians to earn enough of the public’s trust that they will accept public sector mistakes in the pursuit of innovation. And how would they earn that? High levels of governance and transparency should create the climate of openness that might just allow the public to understand the challenges that governments face and thus the necessary ups and downs that accompany risk. This environment of openess, engendering understanding, mutually serves the market needs of entrepreneurs as well as public sector’s need to innovate.

Discussion

Jon E Worren

Thanks for your comments Jon - much appreciated!

/Jon

Jon

I agree with Jon Worren.

The government is in a precarious situation with trying to foster and yet make innovation more accountable. Innovation is often about unreasonableness. It is far easier to change yourself than to change the world around you. So entrepreneurs are trying to improve the world to some extent. Entrepreneurs do this with inventions and businesses to assist many different fields, including green energy, medical care, and ever increasingly complex technologies.

In the quest to develop strong companies that will lead the economy in the next bull market, and the next 100 years, we need to support innovation. But picking winners is a difficult task. Venture capital is a very challenging area of investments. Many investors have moved away from venture capital to pursue more developed private equity, and other alternative investment opportunities.

So now more than ever, innovation and government support for new and unproven technologies is an important service and public good. New sources of revenues and industry are necessary to continue Canada’s growth. New innovative companies will help the provincial and national economies grow. And at a time when GDP is shrinking it is critically important to invest in the future. The fall of major companies, such as Nortel, suggest that a new generation of entrepreneurs is needed to fill the gap. Canada’s GDP is down significantly on all fronts, with the sole exception of government spending:

GDP = consumption + gross investment + government spending + (exports − imports)

People are consuming less, investments have reduced, and the trade balance surplus is declining. With our most important and largest customers to the South hurting badly, this trend is likely to continue for some time. In the development of a healthy innovative economy our consumption should reduce, investments should increase and government spending should foster new job creation and industry, and innovation is critical to this. The question is how should Canada complete? Should we emulate China (low cost manufacturing), Russia (natural resources development), the US (a diversified approach), India (outsourcing and IT), or Germany (high tech, manufacturing and limited diversified)? To develop the skills, strengths and education of Canadians we should likely move to more developed economic strategies. Thus it is an important policy to avoid simple reliance on cheap manufacturing, natural resources exploitation, or low cost-based outsourcing.
What makes more sense is to attempt to emulate a more diversified economy with a backbone of scientific and business innovation.

Innovation is a critical part of developing our economy and the future competitiveness of Canada. Everyone likes winners. But in order to be successful we have to encourage more risk-taking, not less. And that means some of the promising advanced technologies which are funded will fail to become commercially viable for a variety of reasons. But it is far better that 10 innovative investments go bankrupt, if only one becomes the next Google, Facebook, alternative energy giant or successful biotech firm. Intelligent risk taking is to be encouraged. We will make mistakes, but this is far better than to sit back and drift into an uncompetitive, dwindling future where we never took the chance. As Wayne Grettzky said:

“You miss 100% of the shots you never take.”

Jon E Worren

Thanks for your comment Allyson!

I think your point about transparency is perfectly illustrated by the recent eHealth Ontario development: If the public had not been exposed to that information it is quite possible that Dr Hudson and his team would still be chugging along.

Two points I'd like to make about transparency in general:
1. Over time, transparency has a disciplining effect in terms of decision making
2. As mentioned above, transparency has to be accompanied by proper governance - for me governance is the mechanism that brings values to bear on process and decisions. It is where controls in terms alignment with procurement policies and strategic goals should be built in. It is where stakeholders have their say to make sure you have buy-in and support for what you are doing.

Allyson Hewitt

Jon, I recently read an article that talked about transparency in government and it offered an interesting perspective. Transparency is not enough if what we see is unacceptable. What we also need is a values base that guides how we are acting and clearly outlined consequences for violations. I would argue that transparency is nothing if not accompanied by these. How we create an environment that allows risk thus leading to innovation while faced with heavy levels of accountability would best be guided by an examination of all these issues.