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Johnny Hugill

Research manager, Public

Five steps for building the world’s most innovative government

Earlier this month, the government published its Technology Innovation Strategy. It outlines the government’s approach to people, processes, technology and data within government, to create an environment that facilitates genuine innovation and experimentation. Along with the release of the new cross-departmental Guide to Using AI in the Public Sector, and the launch of CCS’ new technology marketplace – Spark, this announcement represents the government’s strongest ever commitment to embracing innovation and cutting-edge technology.

This strategy, and every initiative that is described within it, is important. Today, there are very few policy priorities as important as ensuring that government is adopting the right technologies – and the right processes to make the most of those technologies. Every government department, local council, police force, emergency service, hospital, and school relies on digital products and services every day.

Given the pace of change in today’s digital economy, getting the best technology into government is difficult. Just as in the private sector, the most effective digital governments will be the ones that can best embrace innovation and new ways of working.

Our recent report highlights that, despite these recent initiatives, there is still a lot more to be done. In particular, we found that government is still failing to make the most of the UK’s emerging tech sector, with startups and entrepreneurs continuing to be locked-out from winning public sector contracts. We found that, in some central government departments, technology spend with SMEs is as low as 8 per cent (some way short of the government’s 33% target).

Governments around the world are waking up to the value of embracing innovation and cutting-edge technology in their public services. Below are five tips for how the UK can take inspiration from some of those efforts, and establish itself as the most innovative government in the world.

1. Introduce a target for 10 per cent of tech spend to go to startups by 2025

The UK government currently has spend targets with SMEs – pledging to spend £1 in every £3 with SMEs by 2022. It has no such target for spend with startups. This is an oversight, and is indicative of its failure to engage startups and new market entrants in the procurement process.

SMEs and startups are very different. To be an SME, a company needs to have fewer than 250 employees and an annual turnover under £45m. A company can have 200 employees, have international offices, have been operating for over 20 years, and still be an SME. In fact, the largest SME suppliers of digital and data services to the UK government are almost all companies of this type: they have almost nothing in common with modern-day startups.

It does not make sense, therefore, for government to conflate spending targets with SMEs and startups. The point of prioritising startup-led innovation in government is that startups are capable of delivering genuine transformation. If we can take one lesson from recent trends in consumer markets – from FinTech, to e-commerce, to food delivery – it is that technology startups have the potential to totally transform the delivery of goods and services. Government needs to undergo this digital journey too, and startups must be at the heart of it. A dedicated target for startup spend would represent an important first step.

2. Create Innovation Zones for priority tech sectors

The barriers to working with startups are not only cultural: they are also procedural. Procurement – the way that goods and services are bought by government – makes it difficult for both sides when trying to innovate. Our survey of GovTech startups found that only 6 per cent think working with government is easy, and 92 per cent find it easier working with private sector clients. There are many reasons for this, including long sales cycles, complex tendering processes, and stringent financial requirements, just to name a few.

An Innovation Zone would be a dedicated area of public procurement where governments would be encouraged to innovate, and startups incentivised to participate. This would involve government designating specific sectors to have more permissive procurement and commissioning rules that benefited new market entrants. This includes encouraging more direct award contracts (without onerous tender competitions) to innovative companies in these sectors and funding the cost of bids of new startups participating in tenders. Innovation Zones would allow government to pilot greater innovation in specific sectors and thematic areas, before scaling across the whole of government.

3. Think like a startup, act like a startup

To encourage more startups to work in the public sector, government has to do more to reach out to startups. Government’s current methods for engaging with the market – which usually involves listing a tender on a government website or procurement portal – are woefully out-of-date.

To reach the tech sector, government must use new channels, and be prepared to break out of its normal comfort zone. It should be willing to visit the places where modern day startups work (places like WeWork, Central Working, Google Campus), and advertise through meetups, startup channels, online groups, podcasts and magazines. It should do more to position itself as part of the country’s vibrant startup ecosystem, so that companies and investors start to see government as a viable, and attractive, area of business.

4. Have more secondments between the public and private sectors

Bringing fresh perspectives into government is a great way of driving greater innovation and creativity, as well as building important digital and data skills. This can be done by bringing new people into government, or by sending public servants out into the private sector, to gain new skills and insights.  

The Presidential Innovation Fellowship, run US General Services Administration, is an example of how effective the secondment process can be. During the fellowship, external technology specialists are brought into government to work on innovation projects across federal agencies. The programme is now one of the most competitive and prestigious in the world.

The UK government should follow suit, with a highly prestigious and well-respected secondment programme, helping to exchange ideas, people and processes between the public and private sectors. 

5. Set up a National School for Technology and Innovation

Secondments can only go so far, however. To build the skills needed to support the most innovative government in the world, we have to invest in a dedicated institution for training and upskilling.

GDS currently runs an “academy that aims to build digital skills across the public sector. We recommend something bolder and more impactful to fully harness the potential of emerging technologies. Government should set up a National School for Technology and Innovation, which offers technology training for individuals at every level of government. The training programme should include external contributors such as academics and researchers, but also workshops by startups, GovTech specialists and investors.

This will enable frontline officials to interact with innovators, understand their challenges and priorities, and develop an informed understanding of emerging technology markets.

Argentina has its own government-run school devoted to teaching public servants how to innovate. In just three years, 15,000 government employees have taken classes at the Buenos Aires-based Design Academy, funded by the Government Lab of Argentina (LABGobAr).

Implementing these five recommendations would allow the government to tackle some of the most significant barriers to innovation in the public sector. While its latest innovation strategy is a good start, for the UK to fully exploit the opportunities presented by emerging technology, it must go further and embrace bold and new ideas.

Johnny Hugill is research manager at the venture capital firm Public