On a Whim
If ever there was a topic which has been done, overdone and eventually cooked to destruction, it has to be innovation. We must innovate to survive; we must disrupt to gain leadership; innovation is the key to competitive strategy, to success. Innovate or die!
It’s a nonsense, of course, like almost any of the management dictums that have appeared over the past forty years. Management by objectives, Porter’s five forces, systems analysis, motivational theory, evidence based analysis: the field is littered with impressive sounding ‘models’ which are no more than commonsense dressed up to sound good, with little empirical support. I am especially fond of evidence-based analysis. That seems a good idea: we could look for evidence to help us decide what to do!
So what is the issue here? Clearly, we do have to acknowledge that systems, processes and activities become less well adapted to the environment over time, especially as the pace of change increases. If innovation means making changes to adapt to new or altered circumstances, yes, it is an essential if scarcely novel approach. Innovators will argue that their focus is on doing something new, of course, a novel or previously unused step, something that can be patented. While I am tempted to go into the increasingly confusing area of IP protection, that would require more space than a mere blog can encompass. Sufficient to say that innovators’ claims often exceed any reasonable definition of something ‘new’: no surprise there, businesses are well skilled in knowing how to look after and protect themselves! For an ‘evidence based analysis’, how about looking at Disney? Over time, they have extended the rules affecting ‘Mickey Mouse’, and copyright now continues for ninety years after the death of an originator!
Talk about innovation inevitably leads to ‘disruption’, where we are even more likely to be in the realms of fantasy. Let me be clear. There are innovations that have ‘disrupted’ industries, even the way we do things, but they are few and far between. The internal combustion engine? Yes, but it took assembly line manufacturing and many years of development for its impact to slowly change society and how we live: those effects continue to reverberate. The combination of the digitisation of information and the integrated circuit? Yes, the internet and ‘free information’ are already making changes, but here we are still at an early stage in trying to come to terms with the truly radical changes this disruptive technology is likely to cause. These examples aside, most of what is claimed today as radical or game-changing is simply improvements on a theme.
The idea of being ‘disruptive’ is even more worrying when we come to look at the public sector. One of the strengths of public administration, especially in countries like Australia, is that change is slow, government departments are cautious, and change is incremental. The systems are designed to ensure that radical change is almost impossible. Most who work in the public service in Australia are career public servants, ‘jobs for life’. However, heads of agencies and a few others can be appointed on contract. Even there, a head of department (a Secretary, a quaint UK bit of terminology) may be invited to move from his or her current position, but can remain on the ‘unattached’ list until they move to a new role, or decide to retire. When a minister in a new administration seeks to appoint a head more sympathetic to his or her views, that person has to work with a department full of career public servants. If political appointments at the top have become more common, departments are far from politicized.
This is very different from the situation in the US, where thousands of positions at Federal, State and local government level are filled by the government, or by the electorate. Public positions are often occupied by people clearly aligned with one political party or another. As a result, while the public sector acts as an effective ‘check and balance’ against the elected government in Australia, it position is weaker in the US. I’ll leave you to think about the consequences of the difference, especially as we watch the changes being wrought by the Trump administration.
Overall, in most countries that have adopted the so-called ‘Westminster’ model, policy change remains slow and innovation is incremental, even cautious. A good thing, too! I think most people would prefer a public sector that considers new initiatives carefully, slowly adapting to changing circumstances, and alert to the dangers of altering what has been successfully followed in the past. I am not against innovation, but I am advocating a more realistic perspective on what this means. Here are three stories which speak to the power of incremental change, and each of which has interesting implications for adaptation in the public sector.
The first comes from Finland. With a population of 5.5m, significantly smaller than either North Carolina or Victoria, it is a country that ‘punches above its weight’. The fall of the Iron Curtain in 1989 tipped the country into an unexpected time of economic turbulence; since then it has carefully focussed its resources and expertise. One choice made early on was giving priority to digital telephony, software and other supporting areas of information technology. That industry remains an important target, and a recent example is MaaS, short for Mobility as a Service:
MaaS brings all means of travel together. It combines options from different transport providers into a single mobile service, removing the hassle of planning and one-off payments. MaaS is a carefree, environmentally sound alternative to owning a car. It works out the best option for every journey – whether that’s a taxi, public transport, a car service or a bike share. From office commutes to weekend getaways, it manages daily travel in the smartest way possible. For extra convenience, MaaS can include value added services like deliveries for groceries or restaurant meals. It allows people to go places and live their lives with more ease than ever before.[i]
The world’s first ever MaaS solution, Whim, (what a felicitous name: a whim is defined as an “unusual or unexplained change of mind”) was launched in the Helsinki region at the end of 2016, and now also operates in two cities in Holland and two areas in the UK. There is nothing especially innovative, let alone disruptive, about Whim. Fans of intermediation forget it has a long history. Despite the hoopla about Uber, for example, fans seemed to miss the point that there had been non-traditional taxi cab operations for years (minicabs in the UK, for example), and various booking systems. Founded by the rather unsavoury Travis Kalanick (with Garrett Camp, who actually thought up the business), Uber offered yet another way to get a ‘taxi’, with the added bonus you could see where the vehicle was coming from to collect you and track its progress on a smartphone screen. A good idea, but scarcely ‘disruptive’.
Rather than starting a business with the clear intention of becoming multi-billionaires, the founders of MaaS, (Sampo Hietanen and Kaj Pyyhtiä), developed a system for the public sector, improving access to and choices between alternatives for travel: their objective was “to provide people an alternative to owning a car – an alternative that is not just equally good, but much better. By fulfilling people’s every travel need, complemented by attractive value added services, we are enabling a future of easy, efficient and sustainable mobility”. Innovative? Well, certainly a valuable improvement in making public transport easy to use, a significant step in addressing cost effective mobility, a major public sector concern. Today, enabling more efficient use of services has to be a priority: all we have to do now is infect more would-be billionaires to shift their focus from gaining personal profit to enjoying the value of the public good!
My second example relates to an issue of which I am sure you will be aware. It has to do with drug development. Finding new therapeutics is a very expensive business: estimates suggest the cost typically runs from $US1.2bn to $2.0bn. Given this, major pharmaceutical companies are reluctant to invest in a potential drug until it is already likely (perhaps I should say somewhat likely) to be effective. This has led to a development gap. Researchers developing potential drugs find it is increasingly difficult to get them through the first stages of assessment to be ready for clinical trials, achieving what is called IND (investigational new drug) status.
Typically completing this first stage involves animal studies, looking at pharmacology, safety and toxicity, as well as other tests to deal such issues as ensuring a compound is not a HERG inhibitor. Initial testing also has to look at chemical stability, manufacturing, and the ability to produce consistent product. Drug companies are no longer willing to do all this work. Even when a drug achieves IND status, they may balk at licensing the potential drug for the clinical stage, and Phase 1 trials to assess safety and dosage (requiring 20-100 volunteers over several months), and even not want to jump in until Phase 2 trials are completed (looking at efficacy and side effects, with several hundred people tested over several months and even up to two years).
I used the word ‘typically’. Now change is taking place, and some early stage drug testing is done by small specialist companies who work on the ‘quick wins, fast fail’ model.[ii] (I should disclose that I am a director of Encepheal Therapeutics, a US start-up evaluating a potential therapeutic to address cocaine addiction, which is using this approach.) What does ‘quick wins, fast fail’ mean? Quick wins can come from careful assessment of the molecular structure of a potential drug under review, and an analysis of how this should work at that level. Encepheal is assessing a drug affecting dopamine levels in the brain and could offer a treatment for cocaine addiction. Molecular assessment of the substance suggests it meets an initial ‘quick win’ test.[iii]
Fast fail is even more interesting. In this approach researchers can jump ahead on the evaluation process at an early stage (after checking toxicity etc.) by undertaking a small study well down the IND path. If it fails, no further research and expensive stages of evaluation are required. If it works in this small trial, then the rest of the IND testing can be completed. Others are working on fast fail ideas, (for example the NIH assists with panels for early stage Phase 1 and 2 testing).
Encepheal is following this approach. The company hopes to do some initial testing in monkeys within a year, as preliminary animal testing on rodents has gone well. If the drug fails, no further expenditure will be necessary. However, if this test succeeds, it will be a strong justification to complete all the IND tests, having increased confidence through this cost effective trial. Is this an innovation? It could be described that way. To me, it is traditional policy work, reviewing existing systems and processes in order to find more efficient paths to achieve key outcomes.
I hope my first two examples have made one thing clear. The government plays a central role in supporting change through re- assessing policy alternatives, whether they are in public transport or drug development. This is normal business, however, simply asking familiar questions: “could this be done more efficiently?”, and “with what cost consequences?”
My last example is often discussed, but I think there is a less familiar side to the story. Rolls-Royce manufactures jet engines. They are big, complex and very expensive items, costing around $US42m each. However, rather than buying engines, aircraft manufacturers and airlines typically lease so many hours of propulsion at a certain level of thrust. Leasing makes a small contribution to profits, while the real returns are made in maintenance, repair and overhaul. For Rolls-Royce, their ‘Total Care’ MRO package accounts for more than half their revenue.
I often comment on Rolls-Royce, and how their business model shifted from selling engines to leasing engines and selling services: shifting from the ‘things’ to the information. Their jet engines are on line to a data centre, ensuring maintenance and repair can be tailored to specific needs: by the time an aircraft is shifted over to a hangar for maintenance, the engineers already have a rich analysis to guide them. In the same way, when my car goes in for its service, the team has all the data they need from continuous updates from its On-Star system. It’s more than that, however: the data Rolls Royce collects is a treasure trove for future engine design.
Is this a story about the disruptive power of big data and analytics? If you teach in a business school, of course you will say ‘yes’, riding the wave of new thinking and the latest ‘theories’. Actually, it is an old story, using information to determine what kind of service an engine requires. Fifty years ago, the information was limited – oil levels, evidence of excessive wear and tear, and so on. Today the information is richer, but the process is just the same.
I said there was another, less familiar side to the story. Many years ago the mechanic who serviced your car ‘knew’ your vehicle: he (it was usually a ‘he’ in those days) would listen as you drove in, and would often tell you what was of concern before you said a word. In the early days of aircraft piston engines, it was the same. Each engine was known, its eccentricities familiar, its behaviour and needs understood. What I see now is that we are returning to that kind of individualised understanding, despite the enormous increase in the complexity of the turbofan jets themselves. All that complex monitoring and the wealth of data being produced are, slowly but surely, allowing engineers to return to looking after each engine individually.
This is a key issue for the public sector, too. We know business is in the middle of grappling with the concept of a ‘customer of one’: each person treated as a unique individual. With ever increasing data sets, so public policy will be taken down the same path: services and processes will follow general principles, but their application will be unique to each case, to each client.
Have I been talking about innovation? In some ways I see recent changes as part of a cycle. Many years ago and in a much simpler world, we treated each issue on its own merits, one by one, within a framework of agreed principles. Then mechanisation took over, allowing mass production and mass delivery of services. Now the cycle is moving back to individualisation, and with that, a re-examination of how public sector systems and services can be made available. That is going to change public policy, a rethinking of how to apply the principles to practice.
If innovation is in danger of being overdone and cooked to destruction, the need for re-examination and change never ceases. It’s a challenge that helps makes work enjoyable. If that is called being ‘innovative’, so be it. But it is innovation at the incremental level only, nothing more than that.
[i] <https://maas.global/maas-as-a-concept/>
[ii] Page 212 of How to improve R&D productivity: the pharmaceutical industry’s grand
challenge Steven M. Paul, Daniel S. Mytelka, Christopher T. Dunwiddie, Charles C. Persinger, Bernard H. Munos, Stacy R. Lindborg and Aaron L. Schacht. Nature Reviews: Drug Discovery, Vol.9, March 2010, pp 203-214.
[iii] Cocaine blocks the DAT (Dopamine Active Transporter) leaving higher levels of extracellular dopamine (and increasing its pleasurable effects). The analogues Encepheal is testing stop this process, by also binding to the DAT but without the same effects or dependency
