Why governments need to rethink spending post-Covid-19

This post was written by Frédéric Baervoets, manager of the Belgian innovation lab, Nido and part of the Federal Public Service Strategy and Support. This article reflects the personal views of the author.

• The problem: Governments spend too much money on projects that will not lead to desired outcomes, while civil servants get frustrated repeatedly receiving mediocre services offered by the same companies.

• Why it matters: Public finances should be used in a smarter manner in order to obtain better and more innovative solutions for the sake of the taxpayer.

• The solution: More extensive and better market exploration - including experiments.

"Civil servants often jump to the implementation stage of a project before having really explored all possible solutions."

As we start to emerge from the Covid-19 pandemic, governments are starting to examine how to fill the gap this massive crisis has created in our public finances. Are hard budget cuts inevitable? Or is it time to promote another way of doing things within government? How can we increase the value of our tax money and, at the same time, deal with government spending challenges? How can we deliver better services and better value for (tax) money for the sake of our citizens and companies?

One idea is to stop all current projects, to remove civil servants from their usual working methods, and to start over from the exploration phase. While tempting, putting this into practice would clearly require a rather radical approach. With over 20 years of experience in the public sector, of which five years have been spent working in innovation, I am persuaded that innovation is too often overlooked in our quest to continue with routine ways of handling projects.

Instead, at a time of limited government spending, more and better market exploration, including experiments, is an essential prerequisite for any successful strategy.

Current practice

Civil servants often work across many different sectors with broad areas of expertise. It is obviously impossible to be an expert in all possible solutions and technologies, today more than ever. As a result, civil servants often jump to the implementation stage of a project before having really explored all possible solutions. Moreover, the typically overly cautious and bureaucratic contracts we tend to favour in the public sector show that we do not really trust or fully understand the expertise of private companies. This explosive combination leads to a contradictory situation: public services do not trust private companies, yet we buy from them without testing their proposed solutions.

What has to change?

Stephen Shapiro and his notorious “baggage claim video” helps to crystallise this contradiction and to underline the need for effective innovation. Through this example, we understand the need to first obtain an in-depth understanding of an underlying problem before attempting to solve it. For me and the entire Nido innovation lab team, his video remains exemplary in understanding that innovation starts by correctly framing the problem upfront. However, in our work environment and culture, we are taught from an early age that effective problem solving means delivering quick-fix solutions. This behaviour is further intensified in the public sector by internal bureaucracy procedures which slow down business renewal.

We are used to starting projects with some research on possible solutions, such as (inter)national benchmarks and curiously checking what our national and international peers do. After gathering some inspiration we then start to write a tender in which we try to grasp the technology and requirements needed for successful implementation. On top of that, a procurement team will generally help to exclude all possible risks through elaborate procedures and strict advice. Only bigger companies, that have the capacity to understand regulations for timely delivery of a correct offer (including all demanded documents), will be able to routinely participate in such tenders. These “usual suspects” however disappoint us most of the time. The public tendering process has turned into something merely legal. Are civil servants really persuaded that writing everything in the procurement tender is the only way to success? We avoid dialogues with companies out of fear of not appearring neutral at all times. Yet in fooling ourselves to be bound by procedure and doing “the right thing” we kill innovation.

Another big issue for public services is money and budget management. We regularly spend big sums on projects that often are not as successful as hoped. We also tend to spend excessive amounts on products or services that can be purchased for less on the market. Being open to collaboration with newer, younger and more modern companies could help us leave this vicious cycle since they tend to be more enthusiastic and eager to suggest better and cheaper solutions. While the civil servant is usually well placed to know what is needed for their work, an expert party digging further can be of good help. The person looking for solutions is oftentimes unable to see the real issue or does not dare to point to the real problem. A problem normally does not persist due to lack of solutions, but the inability to connect the negative experience of an end-user with its cause. External third parties can help discover what is best to work on for effective progress.

In the light of all of these issues, I dare to venture the following: do not begin with clear plans and projects, start with market exploration and experiments. Allow yourself to be inspired by the variety of possible solutions to your problem. That process will help you to detect the actual problem(s) you want to solve. Build your business case with a limited budget. Only ask your management for more budget once you can demonstrate that a solution will work.

Starting a new project

Let me set out some suggestions on how to start a new project with some step by step advice:

Step one: Write a problem statement. Make a stakeholder analysis and ask the opinion of your audience/ clients/ users.

Step two: Send the problem statement to innovative companies, both small and big, requesting their feedback and inputs. Allow all to participate and input easily (e.g. a short phone call, an informal email). Make it clear that you want to know how they would solve your problem.

Step three: Ask the companies with interesting approaches for a short first solution proposal. You probably have a very good solution in mind. But given you have probably not seen all the possibilities yet, I advise you to keep an open mind and to put your ideas on hold.

Filter the solutions you discover by the following criteria:

• Will this solution solve my problem?
• How successful is this solution?
• Is it innovative or just more of the same?

Step four: Invite only the companies with the most interesting solutions for a pitch, presentation or dialogue. Ask questions and give them the opportunity to ask questions. Don’t forget to give honest feedback to the companies who have presented a solution you are less interested in. Thank them for taking the time to participate.

Filter the solutions accordingly; in line with these additional criteria:

• What is the rough estimated cost for full implementation?
• What can be tested during an experiment?
• What is the price of the experiment (although limited to a budget e.g. 30k - they might do it for less)?
• Is the team capable and motivated?

If you only want a strict market consultation, stop at Step 4 and draft your recommendation for the management board.

Step five: Invite only the companies with the best solutions to participate in the tender by submitting an offer. Give them extensive feedback on their pitch or presentation. This ensures that you will only receive interesting offers.

Step six: Grant the tender to the most innovative and interesting experiment(s). Don’t be persuaded to simply experiment with the offer that is most likely to succeed. Remember that you want to learn about new possibilities instead of simply having another test of a well-known product. Don’t forget to give honest feedback to the companies who have presented a solution you are less interested in. Again, thank them for taking the time to participate.

Step seven: Do the experiment. Remember that you are working with a limited budget. Only test what is really important and avoid losing time and money on gimmicks. Test the solution on end-users as their feedback is what really matters in the end. Focus on the MVP and the lessons you are learning.

Step eight: Draft a recommendation for the management board and, if you have a good working solution in MVP, ask for the necessary budget. If your experiment is successful, dare to take the next step. Make your business case to persuade your management. You now have many more arguments to convince with.

If the experiment fails, restart the process. You will have learned from the selection procedure and experiment and can now make wiser, more complete decisions. The first attempt is not a failure, but one step closer to your suitable solution. Remember that you have successfully managed to avoid a failing project. Always try to understand what exactly made the approach fail: Does the solution simply not fit? Did you not capture all aspects of the problem? Did the team not deliver?

Ultimately, the proof of the pudding is in the eating. You and the company you chose will test the most important assumptions with a limited budget.

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