Innovation: For the Light Bulb There Was No Light Bulb Moment

Everyone in the public sector is looking for innovation, but where should we look?

The ‘adjacent possible’  sounds like a dreadful bit of jargon, but actually means exactly what it says.   It describes the place at the boundary between what we do now and an imaginable but as yet unachievable future. 

To take an illustration, Homo sapiens evolved about two hundred thousand years before the light bulb was invented.  Now, the light bulb would undoubtedly have been a particularly useful tool for our ancestors who spent a lot time in caves.  If the brains of Stone Age men were identical to ours, why didn’t they come up with the light-bulb?

The answer seems fairly obvious.  In order to build a light bulb, humans first had to understand electricity, that it existed and what it was, then how to harness it and then how to generate it at will.   Actually making a light bulb then depends upon knowledge and skill in a wide range of difficult technological processes – the ability to construct small, air tight glass vessels and fill them with gas, skills in making delicate metal filaments and so on. 

For the light bulb, Michael Faraday’s experiments in generating electricity in the 1820s and 1830s provided the spark for a period of innovation. In the space of twenty years in the mid nineteenth century, several different working versions of a light bulb were produced and a few were developed into models that could be mass-produced.  At last, probably a few hundred millennia after a human being first thought ‘Hey, wouldn’t it be cool if……’ ,  we reached the point where we could flick a switch and instantaneously light up a dark space.

This week, when the last typewriter was manufactured in the UK, it emerged that the first patent for a typewriter was filed in 1714, a full hundred and fifty years before someone managed to build one.  A similar story can be told for the computer. 

The lesson is that both the light bulb and the typewriter had to move into the adjacent possible before they became reality.

The adjacent possible is easiest to describe in terms of science and technology- things we can see- but it applies to everything, not least culture, ideas and (importantly for innovation in the public sector) politics.  

The notion of the adjacent possible is one of those simple and seemingly obvious ideas that turns out also to be more useful than it first appears. The more you think about it, the more you realise how useful it is.

For example, when looking for innovation it is vital to understand the adjacent possible.  The chap who envisioned the typewriter in the early years of the eighteenth century did a service to mankind, but was no help to anyone in 1714.  The experimenters and theorists who preceded Faraday set the foundations for what he achieved in the field of electro-magnetism, but the invention of the light bulb still had to wait.  

In a crisis, then, there is no point spending a lot of time looking for innovation in the space beyond the adjacent possible, but perhaps there is real innovation to be found in the space that last year was outside the adjacent possible and this year is within it.   What are the new things that make it possible to do things we couldn’t do before?

Because the adjacent possible – and our understanding of it- changes all the time.  Sometimes it is changed for us by a moment of individual genius as with Faraday’s experiment,  or it may be changed by collective effort over time as with much cultural change.   The consecration of women bishops into the Church of England, for example, while it has been moved closer, is still just outside the adjacent possible but with one further push – a change of governance or a new argument perhaps- it will surely move into that space before long.

Innovators need to understand how much they can influence the adjacent possible in the short term, a particularly interesting question when it comes to persuading politicians, who may have been elected on a clear manifesto to do one thing, that perhaps the innovative solution to their problem depends upon pursuing a different course. 

The lesson is that innovation can only be accomplished using the tools and resources that exist.   Once again, this indicates that true innovation rarely emerges from a light bulb moment of inspiration, but from hard graft- understanding the difference between what is out there and what is interesting but as yet tantalisingly beyond use.  

The Time Has Come for Finance Business Partnering

According to a recent survey by Deloitte, over 90% of public sector organisations are looking to increase their finance business partnering efforts over the next three years. 

As the public sector struggles with the worst financial crisis for decades, it is self-evident that we need finance folk who can add value to the business as never before. In many ways there has never been a better time to be a finance person in the public sector.

Magically, the shadows are all moving into alignment.  The new generation financial systems are quite capable of doing a lot of the stuff that used to fill the days of accountants, and that frees up a lot of time for finance teams to focus on the wider business.

That involves working with our organisations to understand the financial challenges facing services and devising new and better value ways of delivering them.  We need finance people to know how to encourage innovation,  to be commercially savvy, politically aware and to know how to build relationships and influence others.

I’m optimistic about the capacity of finance people to take this on board, and there are a few things the professional bodies can do to help.   Firstly we need to be clear about what business partnering involves:  it is a sea-change in approach and attitude, requiring us to do different things,  not just a relabeling of management accountants as business partners.  The professional bodies can help by spreading best practice. 

Secondly we need to redesign the way we train and develop accountants around the new model.  Business partners need top notch technical ability to deliver better outcomes as well as good balance of other skills.

And thirdly, and most difficult of all in a profession that remains divided in England between four accounting bodies, we need to break down the barriers between so-called ‘financial accountants’ and ‘management accountants’ and adopt a whole system approach.  Effective business partnering starts with the capture of transactional data and ends with the adopted solution to a problem.  Any step along way, the chain can be broken; at each stage the people managing the process need to ‘get’ business partnering.

All of these things will take time, which we don’t have,  So we also need our existing practitioners to see the challenge and the opportunity.   Fortunately finance people are smart enough and flexible enough to take this on board. It’s up to us to shake off the stuffy image and show our organisations what we can do. 

Small or large, it’s not a good time to be an outlier

This week, within hours of each other, two very different local authorities announced causes for concern about their future financial viability.

West Somerset (know to many from childhood holidays at Minehead) is the smallest District in England in terms of budget and population.  This week the Council published an LGA report that showed that its unavoidable annual budget growth bill of £150,000 dwarfs the maximum it can raise by increasing Council Tax in line with the 2% cap, which is just shy of £40,000.   With grants shrinking this is an arithmetical bind from which there is no escape and all the Council can do, the report acknowledges, is seek to put off the day when it holds up its hands and tells the world it can no longer meet its statutory obligations.   

Birmingham, on the other hand, is England’s largest unitary authority, with a population about 30 times larger than West Somerset.   Its problem is that it has to set aside at least half a billion pounds – and probably more- to cover equal pay claims from some of its women workers, backdated for several years.  Arguably the scale of Birmingham’s operations have contributed to the extent it unwittingly breached the Equal Pay Act.   There is much more Birmingham can do to balance the books than West Somerset can, but unless it is allowed to capitalise current these liabilities , it will have to find considerable additional savings this year on top of those brought about through austerity. 

As readers will know,  Chubby Cat frowns upon public sector bodies putting off for tomorrow what it should really be paying for today (or yesterday), but in this case the effect on current service users of mistakes made in the past would be very unfair unless the cost is managed over a longer period.

Part of the problem, of course, is the local government finance system does not deal very well with authorities at the extremes,   It is difficult to devise a system that doesn’t result in outlier authorities ending up with either too little or too much.     When the pieces of the system are being thrown up into the air,  as they are at the moment, the risks for organisations multiply.  From next year, market factors will decide some of the distribution of funding between local authorities and the system will become less easy to manage.  

Only the week before last an elected Member expressed to me his concern that more than one local authority would go bust as a result of austerity,  I intend to return to this issue in the future,  in particular the question of what happens next if such an eventuality arises. 

In the meantime it is enough to note that perhaps at the moment it is best to be medium sized. 

Random acts of localism risk damaging services

This week I found myself discussing localism at one of the UK’s local government representative bodies.  I think they found me slightly off message.

Localism is a major thrust of government policy, of course, enshrined in the Coalition agreement.   Accordingly the Government has devolved a lot of decision making to local councils over the last two and half years, not least responsibility for delivering a bigger than average share of the austerity package.

After thirty-something years in local government I am a convinced localist. I believe there are some decisions that should be made as close to communities as possible, and if possible by and within communities themselves.   It follows, I think, that we have to be prepared to accept some of what the media calls ‘the postcode lottery’ – although if local democracy works properly, ‘lottery’ is not the right word for it.  Postcode Fair and Transparent Local Decision Making doesn’t make for such good headlines though, does it?

There is also a strong argument that local government in England has become too reliant on central government and some transfer of responsibility down the line, along with clear accountability is not a bad thing. 

Where local government needs to be careful is around the growing idea – you might call it ‘radical localism’ - that localism is good for its own sake.  The reason is that along with the power and responsibility, devolved decision making comes a big slug of risk handed down from central to local government which local communities need to be able to take on and manage.

In English local government over the years we have had a ‘new burdens protocol’, which is supposed to make sure that newly devolved responsibilities are properly funded.  No surprise that austerity has seen that largely discontinued.   The new ‘Council Tax Support Scheme’ duty that now falls on Councils, which replaces the national Council Tax Benefit scheme, comes with a 10% grant cut. 

The outcome of all this risk transfer is extra cost for local authorities. But dealing with risk is not cost free, and when the Secretary of State for Communities and Local Government muses that local authorities have increased their reserves since his party came into power, a big part of the answer, I’m afraid, is government policy.  Risk has to be deal with somewhere within the system and if not by central government, it falls to local government to pick it up. 

That is exactly the opposite of the view of central government as the funder of last resort, and if the government bats problems to local government that are too big for it manage efficiently, then a lot of much needed funding will remain tied up in reserves and contingencies, to the potential detriment of local services. 

Within my own local authority, I have a number in mind which I think will be the level of cash savings we need to make over the first six or seven years of austerity.   I also have it in mind that that number could be 20% bigger if some big risks land, and the larger ones are to do with government policy – such as welfare reform and school places for 2 year olds- rather than directly to do with world economic conditions. 

We need localism, because we need clear accountability over services that respond to peoples’ needs: we need central government because some problems are too big for Councils to handle.   But between the two parts we need a proper localist protocol; a settlement that makes it clear (or at least a lot clearer) who is responsible for what under what circumstances.   Random acts of localism obscure accountability, add to the funding problems of local authorities, and in so doing risk taking more money away from local services than the government intends.  

Making Room for Innovation in the Public Sector

We all want innovation in the public services- it’s an essential recognition that the world in which most of our public provision came into being has gone, perhaps never to return.

Several commentators have drawn attention to Schumpeter’s creative destruction theory and its applicability to the current situation.  Creative destruction is the theory of the market that shows how entrepreneurs displace old-fashioned and unprofitable activity in a process that continually creates new markets and closes off obsolete ones.

We have seen this happening this week with the electrical retailer Comet formally entering administration, frozen out reportedly by internet shopping. In the media’s eyes, Apple has been labelled as the main 'creative destroyer'. 

The theory of creative destruction doesn’t apply perfectly in the public sector, because here it is usually the same organisations who have to do both and creating and the destroying.  As we know it’s a whole lot more difficult to shut down bits of your own organisation- there are psychological, emotional and cultural barriers in play as well as the inevitable costs.

What is more, users of services in the public sector have both a louder voice and a reason for expressing it.  It is unlikely there will be too many placard-waving protesters outside the local branch of Comet, but contrast that with the closure of a local library or leisure centre.    And yet curiously my local branch of Comet always seemed to be so much busier than the library.

Libraries are a good example  of how creative destruction applies – or doesn’t apply – in the public sector.  Local authorities have been reinventing their library ‘offer’ over recent years and in addition to the traditional book lending and reference libraries, many now provide CD and DVD lending, internet access, adult learning and even a café. Some are even getting into lending e-books.  You might say that innovation is not the problem so much as mission creep - which would be fine if local authority budgets were expanding to keep pace but presents a problem when they are not.  

But before I fall a victim to the militant wing of CILIP (for the uninitiated, the Chartered Institute of Library and Information Professionals), let me just say that I am using libraries only as a convenient and familiar example of a wider issue.  

Two years ago, NESTA suggested that the way to creative destruction in public services was to focus on outcomes, changing funding to incentivise delivery of results, reforming procurement and commissioning to deliver outcome-based specifications and introducing lighter touch inspection arrangements to facilitate.   

It cannot be wrong to ask ourselves what exactly we are getting with the services we provide, but none of these solutions address the fundamental issue that ultimately closing things is a matter of political leadership. This week we saw Stoke City Council leader Mohammed Pervez on BBC4 grappling with this problem as he set out to close old peoples’ homes, libraries and the city farm in order to preserve Sure Start children’s centres in his city.   He came across as a serious and concerned politician doing his best with a difficult situation, but he knew as we did that this was just the start of the attrition.  

The point is we can be as innovative as we like in the public services, and we frequently are,  but the logic of the market does not apply in the way it did to poor old Comet.  The problem is learning how to turn off those services that no longer offer value for money while persuading people that it’s the right thing to do.   It is the destructive bit of creation that’s almost the bigger challenge. 

Philosophy for Finance Folk

"Without a continual falsification of the world by means of numbers, mankind could not live"  

Friedrich Nietzsche 

And now the football results....