Friday, January 22, 2016

Innovation Strategies: Centralized and Dedicated or Distributed and Open?

by Nick Charney RSS / cpsrenewalFacebook / cpsrenewalLinkedIn / Nick Charneytwitter / nickcharneygovloop / nickcharneyGoogle+ / nickcharney

A while back I was in London speaking at Nesta's Global Labworks Conference. The panel was examined the differences between centralized and dedicated approaches versus distributed and open approaches. What follows is a piece I originally wrote for my fellow panelists in the lead up to the event, it roughly represents my contribution to the panel discussion. It's worth noting that I was asked to attend the panel as a critic of labs and spur debate.

On Comparing Approaches

While Westminster parliamentary democracies are widely credited with a high capacity to keep pace with the times, the realities of digital society are increasingly putting those claims to the test. Digital technologies and governance challenges are colliding, the landscape is shifting, and giving rise to new questions. Concurrently, policy-makers, civil servants and citizens are increasingly looking for innovative ways to smooth out the governance landscape. But how governing institutions can best innovate in an era where no one owns information, power is dispersed and authority and accountability are being constantly re-conceived is still a mystery. While there has been a recent surge in the popularity of innovation labs – centralized innovation spaces and dedicated teams tackling specific problems – it is still too early to judge their success or failure relative to the status quo or any other alternative innovation strategies.

The rise of innovation labs is hardly attributable to any single set of drivers but the consensus – at least in government circles – is that traditional bureaucratic hierarchies are anathema to innovation. This is why leadership is willing to circumvent hierarchies to better accomplish their goals, why civil servants embrace flattening communication technologies to reach across their reporting structures, and why citizens co-create solutions to public problems outside them. But the irony here is that at its core, centralizing the innovation function in a dedicated innovation lab, could be considered an inherently bureaucratic approach to problem solving. After all, labs may centralize rather than diffuse the innovation function, create new institutional costs, situate those costs firmly within a subsection of the hierarchy, and reinforce the status quo of situational power structures where access and information are the ultimate sources of influence. As a result, labs are vulnerable to the same bureaucratic pressures that slow innovative forces in the rest of the organization. It may be argued that they are inherently exclusive and prestigious because not everyone can work in the lab — that would after all undermine its very essence. To some degree this can be useful and positive as a way of raising the profile of the lab’s work and using the skills and knowledge of the best and brightest to contribute to its success. But it also introduces potential challenges, like the risk of attracting those who are more concerned with career progress than mission success. In addition, labs tend to be task specific and thus more focused on building and diffusing a particular innovation or series of innovations rather than building enterprise wide capacity for innovation. Importantly, they may also take the responsibility for innovation out of the hierarchy and consolidate it into a single place alongside it. Centralization may not only send a strong signal about where innovation happens in the organization and where it doesn't but may also make the lab's output vulnerable if there is insufficient receptivity to the innovation within the hierarchy at the point of re-integration (e.g. death by a thousand cuts). Finally, establishing formal innovation labs can make governing institutions vulnerable to the sunk cost fallacy. Bureaucracies are often criticized for throwing good money after bad and may be unwilling or unlikely to walk away from established labs even if they are failing. Ironically, the sunk cost fallacy – the bureaucracy's unwillingness to walk away from structures that produce sub-optimal outcomes – is likely one of the contributing factors to the rise of innovation labs themselves. As a result of all this, lab practitioners may have to contend with lower than expected risk tolerance, less experimentation, lower rates of abandonment, and a push (or pull) towards early and easy wins. This suggests that centralized labs alone cannot yield the successes we demand of them. A receptive organizational culture will certainly be a critical success factor. This brings us to the second innovation strategy I want to consider.

By comparison, distributed and open approaches such as Adobe’s Kickbox diffuse the innovation function, avoid additional institutional costs, invoke minimal hierarchy and create incentives for wider collaboration (See: Why Governments Would Never Deploy Adobe's Kickbox and Why Maybe They Should). As a result, these approaches aren’t as vulnerable to the bureaucratic pressures that typically slow innovation. Because it is universally accessible (or at least accessible to broad swaths at a given time) the distributed and open approach is more likely to attract more diverse talent and people genuinely looking to try something new. Open innovation approaches also send a clear signal about the need for, and the ability to, innovate anywhere in the organization and ameliorate the culture by building a more widespread organizational understanding of, and capacity for, innovation. Because open approaches allow innovation to bubble up from within, a given innovation that arises within this culture is more likely to be accepted by those around it who are critical to its success. Finally, distributed and open approaches to innovation allow governing institutions to walk away from sunk costs more easily. The staged methodology of something like Kickbox is not only built to promote good ideas through the innovation cycle but also provide frequent off-ramps for ideas and early concepts that ought to be abandoned while avoiding either great expense or consequence. As a result, innovators in open systems are less likely to have to contend with issues of risk intolerance and can engage in more genuine experimentation; they can walk away as required and test hypotheses that would otherwise go untested.

That said, the true test of innovation strategies, be they centralized and dedicated or open and distributed, isn't what goes into their deployment but rather what results from that deployment. Too often bureaucracies put their best and brightest to work on matters of process rather than substance and – given the magnitude of the challenges – any innovation strategy that puts more smart people next to hard problems is worth pursuing. Furthermore while the two approaches may seem dichotomous, they need not be mutually exclusive. Innovation isn't black or white but rather an exploration of all the shades in-between. In fact, organizations may wish to pursue both strategies concurrently, incent a little friendly competition, and – to the degree possible – A/B test the results against the baseline of the status quo. What they are likely to find is that centralized and dedicated approaches produce sustaining innovations (meaning they will help governing institutions make the things they already do faster, better and cheaper), whereas open and distributed approaches – like Adobe's Kickbox – produce disruptive innovations (meaning they will help governing institutions do different things in fundamentally different ways). Ensuring the continued health of our Westminster systems likely requires some mix of concurrent centralized and distributed innovation strategies that allows for the serendipitous blend of sustaining and disruptive innovations born of both dedicated and open systems. Therefore knowing which strategy to pursue when and for what purpose is invaluable intelligence for governing institutions – invaluable intelligence that is on the verge of being within reach.

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