Government struggles to find solutions to both new and old problems. Does the public sector stifle innovation? How can we invest inand rewardinnovation?

We see innovation in action every day in our lives. Whether its listening to music on a cell phone, or taking the latest medication to help tackle an ailment, our lives are better and easier as a result of innovative products and services. Plus, innovation is not just about improving technologyStarbucks has transformed the experience of drinking coffee, and Walmart has altered the face of retailing beyond recognition.

Most of us think innovation only occurs in the private sector. Thats hardly surprising since private-sector innovation accounts for more than 85 percent of the United States growth in productivity, according to Nathan Rosenberg, a professor of economics at Stanford University.

But innovation is needed just as much in the public sector as we struggle to find solutions to both new and old problems. It is especially needed in information technology. A tighter fiscal environment heightens the need for innovation. With less money in their budgets, agencies must find cheaper ways to achieve better outcomes on 21st century problems such as climate change and childhood obesity and on such age-old challenges as underachievement in high schools or veterans homelessness.

Why do government agencies find innovation so challenging? What is it about the DNA of government that makes it more difficult to experiment with new ways of doing things and to invest in those ideas that are most likely to have transformative potential?

Rewarding or Risk-Averse?

The private sector offers strong financial rewards for innovation, but the public sector can be risk-averse, discouraging new thinking among its employees. New ideas almost always involve some riskand many in the private sector see risk as a necessary precursor to reward.

But if something fails in government, political leaders and staff know they are likely to be questioned about wasting funds. Often the real incentive in government is to keep doing things in the proven and safe wayeven if that means better, more efficient methods are never identified.

Budgets Dampen Desire

The way money is allocated to public-sector organizations can dampen the desire to innovate. The budgeting and appropriations process focuses on programs that are shrinking or growing, while little attention is paid to the stock of programs that form the baseline.

Programs with limited efficacy that fly below the radar are often left alone, so it can be easier as a program manager to maintain funding for the status quo than to devise better ways of running a program.

Popularity Wins

Political leaders are encouraged to push for ideas that are popular with voters, sometimes at the expense of less visible but more effective solutions. Politicians know how to get headlinesand they realize that voters like things they can see or feel.

Even if the best way to reduce crime is to invest in a better IT system, for example, there will always be pressure to invest in more police officers. And even if the best way to improve education is to build a better evaluation system for teachers, parents will often push for smaller class sizes.

Just Turning the Gears

Public-sector culture often rewards people for turning the gears of bureaucracy rather than improving the overall machinery. Government agencies display a strong culture of this is the way things are done around here, especially in functions that serve citizens or internal customers.

Private firms often feel they need to provide a constantly improving service to retain their customer base, but government agencies are normally insulated from competition. Also, strong labor rights can reinforce cultural barriers to innovation because unions often must ratify even small changes to their working practices. While the improved job security enjoyed by union-protected workers can help raise morale, it may also reduce their incentive to innovate.

Value Innovation

Government promotions rarely reward innovative staff. Government agencies value staff who excel at handling political crises, crafting documents that win headlines, or steering relations with key stakeholders.

These tasks are important, but they are not skills that focus on improving outcomes for society or citizens. Its hardly surprising, then, that junior workers think that if they are to succeed they should learn the competencies of the bureaucrat rather than apply the creativity of the innovator.

Collaboration Through Transparency

Outside government, much innovation happens through collaboration. Academics build on each others work to advance new ideas. So-called open source innovation where the building blocks of an innovation are publicly available forothers to build onis increasingly common in business, especially in the technological field.

Businesses have always looked to competitors for ideas of better products or services. Yet in government, there is the tendency to be secretive and develop new products in-house. Despite all the talk of transparency, few agencies have any real desire to work with outsiders to develop better solutions. Many agency leaders talk about the importance of their agency becoming more innovative, and think that words alone will lead to a culture change.

Unfortunately, that is not the case. Words do little to alter the incentives in the public sector, and as a result, little innovation emerges. Its time to pull down the barriers and open the avenues to collaboration.

Each agency needs a comprehensive plan to address and overcome these barriers to innovation. The plan should seek to replace the current anti-innovation culture in agencies with one that promotes innovation. In the next issue of The Public Manager, we will set out our practical tips for agency leaders who want to develop a plan to build a pro-innovation culture.