How to be a public entrepreneur

Political theorist Elinor Ostrom was the first to coin the phrase “public entrepreneur” in her 1965 UCLA PhD thesis where she proposed that government actors should be the makers of purpose-driven businesses. She later went on to surprise the world of economics by winning a Nobel prize.

To the economic establishment Ostrom was a social scientist and her theories of common goods and public purpose enterprise ran counter to the economic orthodoxy. 44 years later, at the same time that she was taking the stage as the first (and only) woman to win a Nobel prize for economics, another California-based thinker was positing his own vision for entrepreneurship… “Move fast and break things” was famously Mark Zuckerberg’s credo for Silicon Valley entrepreneurs. “Unless you are breaking stuff,” he said in 2009, “you are not moving fast enough.” This phrase came to epitomise the “fail fast” start-up culture that has seeped into our consciousness and redefined modern life in the last decade.

Public vs Private entrepreneurs

So which of these two types of entrepreneurship should prevail? I’d say that they’re not playing on the same field and barely even playing the same game. While the Silicon Valley model glorifies the frat boys who dreamt up tech start-ups in their dorm rooms and took the “self-made” financial gains when big tech took off, public entrepreneurs are not cast from this mold. They are the government actors taking on the system to solve social and environmental problems and the idea of “breaking things” won’t appeal to them. “Moving fast”, however, speaks to their ambitions for an agile government that wants to make change in a digital world.

Public entrepreneurs are socially minded — but they differ from social entrepreneurs in that they carry out a public or state role. In a Centre for Public Impact briefing paper entitled “Enter the Public Entrepreneur” the difference is clear:

“While “social entrepreneurs” are people outside government, public entrepreneurs act within government and, at their heart, are a blend of two different roles: that of a public servant, and that of an entrepreneur. The underlying premise is that these roles are usually distinct but the skill sets they require need not be. Indeed, the future public servant will increasingly need to think and act like an entrepreneur — building new relationships, leveraging resources, working across sector lines and acting, and sometimes failing, fast.”

Today we publish a RSA Lab report entitled “Move Fast and Fix Things” in partnership with Innovate UK. The report examines the role of Public Entrepreneurs who want to find ways to move fast without leaving a trail of destruction. It builds on the literature that makes the case for public missionsand entrepreneurship in government and acts as a kind of “how to guide” for those in the public sector who want to think and act like entrepreneurs, but sometimes feel like they are pushing up against an immovable bureaucratic system.

Acting entrepreneurially with procurement

A useful distinction of types of government innovation by the European Commission describes “innovation in government” as transforming public administration, such as the shift to digital service provision and “innovation through government” as initiatives that “foster innovation elsewhere in society, such as the public procurement of innovation”. Our report looks at public procurement — specifically the Small Business Research Initiative (SBRI) — as a route for innovation through government.

Governments have catalytic spending power. The UK public sector alone spends over £251.5 billion annually procuring goods and services which accounts for 33% of public sector spend and 13.7% of GDP. A profound shift in practice is required if government is to proactively use this power to stimulate innovation in the way that Mariana Mazzucato, author of The Entrepreneurial State calls for. As Director of the UCL Institute for Innovation and Public Purpose she advocates for “mission-oriented innovation” which can enable speed as it has “not only a rate, but also a direction” — purposefully using government’s purchasing power to stimulate innovation for good.

But getting procurement professionals to understand how to be entrepreneurial with public funds is no mean feat. Risk aversion runs deep, and the incentives to innovate as a procurement professional are weak. In the UK, the majority of public spend flows through traditional procurement which outsources projects through competitive tenders and issues contracts for services to major contractors. This has always been seen as a “fail-safe” process — big providers are selected on their capacity to deliver and government controls are in place to prevent the system malfunctioning. But fail-safe procurement is less secure than it once seemed.

Just consider Carillion, the UK construction firm that collapsed under a £1.5 billion debt pile in January. According to the Public Accounts Committee report into its failure, the UK Government “allowed a culture to develop in which a small number of large companies that believe that they are too big to fail pursued new business with little apparent consideration of their ability to deliver the right service at the right price.” The PAC said Carillion’s collapse had “brought to a head” concerns about the Government’s approach to procurement. Clearly, to direct public spend toward solving public problems, a new approach is needed.

Shifting from a culture of policing to one of value creation

Of all public actors, it is procurement that has the worst reputation for stifling innovation with “reasons why not” — as one RSA Lab research participant said: “we need to move from being procurement police to being value creators”. But the OECD “Fostering Innovation in the Public Sector” report found that the values of entrepreneurialism conflict with those of perceived good governance:

“Generating public value through innovation is complex and challenging for governments. Innovation runs contrary to the perceived role of bureaucratic organisations. Innovation is new, unknown and risky; by contrast governments have a statutory duty, democratic responsibility and political mandate to deliver public services in consistent and equal ways. Managing these tensions can be complicated for governments, where the risk of innovating appears far greater than the risk of maintaining the status quo.”

But by promoting public entrepreneurship, we are not opposing good governance. The two can and must co-exist. We also caution against championing the Silicon Valley notion of ‘fail fast’ in government — as the reality is that any concept of failure in public services is anathema to politicians and officers alike. Governance is vital when spending public money — but an important entrepreneurial shift is to move away from the redundant concept of “fail-safe” into “safe/fail” environments. These can also be described as “learn fast” environments that deploy an ongoing process of testing, development and learning.

From Invest to Save to Invest to Solve

In our report we give examples of safe/fail experimental spaces such as CivTech® in Scotland and the Helix Centre the digital health innovation Lab in a London hospital, both create fertile territory for adoption of enterprise innovation in government bodies. Our inquiry found that “tech for good” or “GovTech” scale-up programmes will have the greatest potential of success if they work closely with the problem owner to solve problems first, with the creation of new start-ups as a secondary feature. This is an “invest to solve” approach as opposed to a traditional “invest to save” one — the key differences being the collaborative environment, funds that are more “patient” and don’t prioritise immediate savings, and a focus on experimentation to find the solution to a public problem.

At the RSA we maintain that to make change, we need to ‘think like a system and act like an entrepreneur’. In our report we identify how Public Entrepreneurs can move fast and fix things with public procurement. We look at a range of case studies using SBRI that have shown to solve public problems with enterprise innovation. These approaches have the potential to scale and a key recommendation we make is that governments should pilot an open, collaborative and agile approach to mission-led public procurement, in an “Invest to Solve” hub working with partners in national, regional and local government, the devolved administrations and other non governmental agencies to provide support and direction for public investments.

As Elinor Ostrom once said: “There is no reason to believe that bureaucrats and politicians, no matter how well meaning, are better at solving problems than the people on the spot, who have the strongest incentive to get the solution right.” Ostrom’s vision was one in which public entrepreneurs and citizens and businesses worked together to get things done for the common good. This is a vision to hold onto today when so many of humankind’s most pressing problems — from climate change to global pandemics — need to be tackled collectively. As the New Internationalist put it: “Looks like the commons doesn’t have to end in tragedy after all.”

Download the report: Move fast and fix things: How to be  a public entrepreneur (PDF, 2.5 MB)

Follow Rowan on Twitter @RowanEConway

This report was produced in partnership with Innovate UK