Why D.I. (Disruptive Innovation) in the Public Sector and Community Governance

In the last post, a strategy of applying Professor Clayton Christensen’s Theory of Disruptive Innovation to the public sector and community governance was raised. More needs to be done but the question that needs to be asked more directly is “why?” What are the big problems that Disruptive Innovation or a D.I. approach has the potential to solve that will likely remain beyond our grasp without it? Does it even matter why one innovates, let alone disrupts in the public sector?

Several premises need to be set before addressing this question. The first is that numerous communities are in serious financial difficulties. The second is that a very sizable portion of those problems are due to decisions made in the past by leaders, both public sector and political, in city halls based on auto-centric and accelerated growth fueled by debt resulting in an overabundance and misalignment of retail space relative to the economic needs of communities, not to mention the problems that accompany that. Third, the economy is a complex system and becoming more complex not only with exotic financing mechanisms but the innumerable basic interactions of business transactions by autonomous agents across a global stage. Fourth, this complexity is feeding and is fed by the realignment of the economy to metropolitan areas around the globe, which do not have their own level of representative government. Fifth, that smaller local governments are, it can be argued, in too many cases doubling down on past bad decisions, and seeking to maintain control through overly complicated processes based on twentieth century management making them incapable of addressing complex, wicked challenges of the twenty-first century. Sixth, that as a result city halls can become entrenched over time in which, despite the appearance of democratic inclusion, community engagement becomes more and more of a whitewash, effectively disengaging, disenfranchising and disempowering people over time. The result is that our communities fall further behind. A follow up premise at seven is that due to the financial difficulties facing communities and the role that public sector pensions play, in large measure due to decisions made by those holding power in local government institutions, the nature of public sector employment will change and therefore the nature and essence of local community governance. The choices are between that which is most likely to be played out being local community services are provided in an increasingly commodified manner by McGovernment type institutions and constituents become customers hoping for resolution of problems through call centers with no real hope of meaningful input or alternatively a means is devised to instill community members with the capacity of being true co-creators of democracy and having a meaningful role in the creation of their communities.

This is an extensive list and communities don’t necessarily interact directly with the first three on the list but the shifting of economic concentration through what the Brookings Institute is calling the Metropolitan Revolution does have an impact upon smaller but far more numerous communities. The inability of community members to change the direction or enhance the ability of their community because of power held by a few is also of direct consequences. Individual communities will vary in the degree to which they see themselves falling under each premise, some far more so than others.

To innovate or not is one question and it seems logical that communities would want to innovate to optimize providing better services based on the wishes of the community while holding down costs. To disrupt, and to integrate and apply that disruption through a process of innovation is another question.

For the entrepreneur working for economic reasons, the answer why apply disruptive innovation is obvious, once you understand how disruptive innovation works. It permits one to build a company from nothing that can go on to dominate a market. It’s the most effective way to innovate as a means of generating tremendous wealth. In business it could be argued, the reasons to disrupt make intuitive sense. It may be more matter though of disruptive innovation being an inherent organizing principle in economics whether the entrepreneur or market entrant has a full understanding or not. System elements within a business environment if aligned properly, including the creation of ‘asymmetries of motivation,' or perhaps incentives would be a better term in this case, will more likely result in disruption of the market in question. This raises the hypothesis that disruptive innovation could be brought about by design.

The asymmetries ascribed by Christensen cause the creation of noncompetitive space between the entrant and incumbent. The entrant initially goes after customers that the incumbent has no interest in but that is not enough, the entrant must also continually attract those of diminishing interest. If the entrant is not able over time to pull away customers from the incumbent there will be no disruption, only a new niche market. The entrant invariably works from the bottom of the market up forcing the incumbent to circle their wagons around an ever smaller number of high-end users until they also jump ship and the incumbent folds. This process of progressively moving up, however, does not need to be readily apparent at the start.

It is the entrant, entrepreneur or startup firm, who is incentivized to move or to react to the different elements of the business environment moving them into alignment through management processes to result in the disruption. This is done though by incentivizing customers or users to adopt a specific solution to a specific Job-To-Be-Done or JTBD of the customer which the incumbent has failed to adequately address. Overall, this starts as a limited or narrowly focused solution meaning that only a small part of the market will choose the entrant over the incumbent but overtime through technical improvements, proper management, greater customer education and acceptance and most importantly that this occurs within a noncompetitive field due to the “asymmetries of motivation” there is a transformation from scarcity to abundance not only for the individual participants of the system, particularly the entrant and customers (incumbents, not so much) but for the economic system overall. If the right solution can be found for the true JTBD of the constituent as opposed to ‘it doesn't come in that size’ approach of incumbents, little outside motivation is required and users become co-marketers and in some cases co-innovators.

The value created for the customer in fulfilling the JTBD does not exist before the disruption and is great enough to substantially improve the economic value of both the customer and entrant and especially the monetary assets of the entrant, all of which in combination are greater than the loss of economic value of the incumbent which are for the most part transferred to the entrant and customers.

What about in public service and community governance? There is a long list of specific issues that could be addressed to consider. Do we first prioritize? Which is more important, introducing more self-service options for government, building community engagement, changing how we select representatives and the rules of engagement for their terms, fixing a corrupt tax system, or figuring out a way to get our debt under control? Is basic infrastructure, roads, bridges, or is border control more important or the social safety net? Why are we unable to balance the books? Why are people disengaged or feel they aren’t empowered and that government is the enemy? Are there limits to good governance?

There is very unlikely a D.I. magic bullet which addresses all of these but then that should not be expected. At this stage, it is not even necessary to directly determine the means of addressing any of these and even if we did, it would likely be a sustaining innovation without an organizing principle of disruption behind it. Much of the success of D.I. in the private market is more apparent in hindsight and solutions to JTBD are only fully understood after they have been adapted and adopted for some time. No one should assume limits to what could be created as possible solutions in the future. It can also be proposed that the list of issues raised above are in reality more from or in reaction to an incumbent led perspective and that what is needed is to take some time to apply design thinking methodologies to create better JTBD solutions focused directly on the perspective of the community and its members. Without a D.I. perspective, the more likely approach is to simply wait for the next sustaining innovation to appear which in reality does nothing to change the nature of community governance and especially not that of entrenched community government institutions. What should be examined more closely are more general factors defining the application of disruptive innovation to the public sector.

There should be expected to be fundamental differences between using D.I. in the private market economy and the public sector. The driving incentive of private market disruptive innovation is the personal motivation of the entrepreneurial entrant. D.I. can also, however, be viewed from a systems perspective made up by the relevant components of the economy or business environment in which the D.I. could potentially occur.

The organizing principle of D.I. is admittedly not as great within the public sector or community based governance as it is within the private market economy. It could not be assumed but instead would have to be purposely applied. The intention is to argue that this is needed to bring about the desired paradigm level changes needed by our communities.

Would it be possible to create something similar to the “asymmetries of motivation” within the public sector and at the same time address relevant community based JTBD or civic issues that could be scaled? Could a comparable shift from scarcity to abundance be made within an environment, with which community governance was concerned, by the community itself?

If the answer is even a possible yes, if the deliberative design of disruptive innovation could be applied to the creation of new community paradigms then this strategy should be pursued. There is no expectation of quick fixes by sudden bursts of D.I. insight. Community advocates, those incentivized to take on a D.I. perspective, could though raise the potential of innovative disruption shifting, at a community level, a field of scarcity and abundance over time. At first through disrupting innovations as opposed to disruptive innovations in that the former do directly challenge the incumbent or through basically outside sustaining innovation efforts of organizations such as Code for America. The public sector incumbent can then choose to oppose or adopt the specific innovation. One example of disrupting innovation is the Building a Better Block approach initiated often through a Tactical Urbanist perspective. These, by themselves, may not though result in the paradigm level changes that are coming but that will not be defined in a manner of our choosing if left to their own devices. Going beyond these though is not something that can be done after the fact. An approach featuring an organizing principle of natural community inclusion which did not require the blessings of any entrenched city hall would be arguably optimal.

An outside of city hall, grassroots generated from the community approach which incorporated a disruptive innovation perspective would have the potential to take these ideas, recombine them, re-adapt them, re-apply them through better focused JTBD solutions in an environment of imposed 'asymmetries of motivation’ with an overall long term objective of establishing far more expansive use of radical, or as recognized by this effort fundamental, community engagement. What needs to be developed next is who and how and what determines them? The particulars of this theory of disruptive innovation in the public sector and community governance, such as JTBD or how incumbent businesses and entrenched city halls have equivalent roles in a system of disruptive innovation, despite having no other commonalities, needs to be developed further.