Disrupting the Public Sector

by William D. Eggers and Ruben Gonzalez

Thanks to disruptive innovations, much of our world today looks radically different than it did just a decade or two ago. Remember flying in the old days? Air travel used to be inevitably expensive and cumbersome — until Southwest Airlines. Trips to the video store and looming late fees are now a distant memory, thanks to Netflix.

In industry after industry, disruptions deliver more for less and change everything from how we communicate with one another to how we work and shop.

But, there’s one major economic sector where disruptive innovation remains as rare as a sunny day in Seattle: the public sector. In industries where disruption is common — think computing and communications — consumers enjoy falling prices and improving services. Conversely, the public sector’s dearth of disruption results in ever upward-creeping prices paid by taxpayers without commensurate improvements in services.

Why does the public sector seem so completely immune to innovations that deliver more for less over time?

Loyal HBR blog readers may say the answer is obvious: disruptive innovation in government is an oxymoron. Government is a monopoly that lacks both competition and a profit motive. It’s an institution that deliberately protects incumbent producers and programs against disruptors. What’s more, policymakers and voters tend to be averse to both risk and failure when it comes to government.

To be sure, the public sector possesses structural disadvantages that make disruptive innovation more difficult, but difficult is not the same as impossible. In fact, offsetting these very real barriers are certain built-in advantages that policymakers can use to foster disruptive innovations that could produce meaningful cost savings in everything from defense to education to criminal justice.

To see these advantages, however, we need first to view the public sector in a much different way. Instead of a byzantine maze of programs and bureaucracies, government’s myriad responsibilities and customers can be seen as a series of markets that can be shaped to cultivate very different, less expensive — and ultimately more effective — ways of supplying public services.

Continue reading at http://blogs.hbr.org/cs/2012/03/disrupting_the_public_sector.html