Applying Disruptive Innovation within the Public Sector and Community Governance

In this post an argument for applying lessons learned from Professor Clayton Christensen’s Theory of Disruptive Innovation to the public sector and in particular community governance will begin to be developed. This has been on the back-burner for a good while and most of the work that resulted in this has come from discussions and readings provided through colleagues in the Disruptive Innovation group and more recently Disruption by Design group on LinkedIn.

In the previous Innovation Through Community; Innovation By Community post, the difficulty in generating more meaningful innovation within the public sector due to structural system problems with our current form of local institutions of government was raised. A means needs to be found that not only implements the change being sought but that also disrupts the elements of the system working to stop that change. Unlike past politically based forms of disruption which were usually disrupt first then innovate after, a way needs to be found by which the innovation and disruption occur simultaneously, that shifts the balance of influence through a process of innovation that entrenched institutions of government have minimal means to stop. The post following after made the case against Entrenched City Halls and why they can fail communities despite having the appearance of being democratic.

Developing a theory of disruptive innovation within the public sector will be difficult because disruptive innovation has become such a misused term, especially within the public sector. Most examples of disruptive innovation cited by the public sector are mislabeled either purposely or inadvertently, usually to make a more persuasive sounding argument for something. We are not looking for the next disruptive product or disruptive service or disruptive technological advancement but a continual means of innovation (which could include technical or management processes) by some form of disruptor, be it an entrepreneur or other change agent, that drastically bends the growth curve up, substantially shifting the value inherent within the system from one of scarcity to abundance and thereby disrupts the current system.

So it needs to be made clear that we are endeavoring to utilize the concepts of disruptive innovation as developed by Professor Clayton Christensen of Harvard University. A section of the New Community Paradigms wiki has been set aside to gather additional resources related to disruptive innovation. This will not be a comprehensive examination though. The stories of companies such as Apple, as a disruptor or Kodak, as the disrupted, are known and this post will leave telling the specifics of such stories to others. The intricate details of the theory will also be left to others. This post will focus on laying a foundation how disruptive innovation can be applied to the public sector by describing elements of the process and how and why it can disrupt certain components of a system in question and at the same time transform the relationship between scarcity and abundance for other components of the system in question.

Once that is established, we will then need to later determine boundaries as to where the theory can identify applicable factors that can be applied across different systems. As Professor Clayton devised his theory based on the workings of private free-market economics, its application to the public sector will be done by finding the most robust analogies between the two systems. Even if the application of disruptive innovation to the public sector is primarily figurative, it should still have the potential to have an impact upon the system and therefore able to cause meaningful change.

Another problem with explaining the concept of disruptive innovation as a process which could be purposely applied is that on the surface it is not intuitive and how it gets one from point A to point B is not readily apparent until one digs deeper. This is in part why it is effective because the industries or the companies within them being disrupted do not realize the threat and the resulting disruption seems to come out of nowhere. It is all the more effective though because after a certain point, along the path of innovation discerned by Christensen, little can be done to prevent the disruption and its inevitability becomes clearer in hindsight. This is also one of the ways the public sector misses the essential aspects of disruptive innovation. It is not just a matter of creating a brand new mousetrap for the world and everyone beating a path to your door. Someone or something finds itself being prone to being disrupted in the process putting organizations of all types in the position of being the guy at the poker table who does not know who the sucker is.

Stories of disruptive innovation can start off as the David and Goliath sort. Disruptors, entrepreneurs or startup firms, play the role of David with seemingly meager weapons and the incumbent, as in the well established, undisputedly in power, market leader, sometimes even iconic business with a long history of financial success and domination over the market assumes the role of Goliath. In some ways disruptive innovation may be more like stories of Popeye and Bluto when Popeye finds the spinach but what the spinach is changes with each new and different innovation. (I am a Baby Boomer, Google it if it’s not familiar)

The incumbent market leaders or the Goliaths and Blutos, once they are established, appear to remain unbeatable because they are the ones coming up with sustaining innovations, the ones proclaimed as new and improved in the advertising. This is when one most often hears empty claims of disruptive innovation being made as in not only new and improved but super new and improved. This means that their customers and especially high-end users continually get better service through features with better quality and improved reliability making them the safe bet. These improvements can be small and incremental or significant but they are targeted to the already defined customer base with the intention of making the base population larger at the price point set by the business or to raise the price point high enough so that even if less customers are added in numbers the overall profit for the company goes up. Customers that show loyalty by being able and willing to pay the price for the standard offering or better yet move up to the premium offering are rewarded. Those not included within this relationship are left behind to no obvious detriment to either the chosen customers or incumbent business. People get use to Goliath or Bluto being the biggest badass in town and assume it will remain that way.

Disruptive innovations or DIs, led by the Davids and Popeyes, are seen as overall inferior or underperforming solutions compared to those being provided by the market or sector leaders. Where DI agents are able to begin to compete is on a different set of benefits, such as simplicity, convenience, accessibility, significantly lower price, or ease of use that satisfy a need either not met or underserved by the incumbent market leaders. By doing so, they create what Clayton Christensen termed “asymmetries of motivation” and a new dimension of value.

This new dimension of value can be created in two ways, first through low-end disruption which means offering lower quality or performance, perhaps missing features, though at substantially lower costs making it appealing to users who can’t afford or can’t access, or new users, along with others, that don't need the full features of the incumbent market solution.

The new dimension of value can also be created through new market disruptions that provide the means to accomplish a new category of previously unrealized objectives or goals with which the incumbent has decided or defaulted to not compete. It is good enough though to meet the particular customer’s goal or what has been termed in disruptive innovation literature as the Job-To-Be-Done or JTBD. A DI directly addresses some JTBD of the customer at an acceptable price making them willing to put up with the lack of features or quality as compared to the incumbent offering.

The incumbents ability to offer sustaining innovations to its defined customer base only cements its position as long as it offers them at a pace that keeps it ahead of whatever competition it may have. Incumbents create the products or services to be bought and the market reacts within the confines of this solution choosing between better or worse alternatives. Customers adjust themselves to optimize their use of the solution offered, not the other way around. Incumbents over time mold customers expectations and train them to become dependent upon the incumbents offerings and stop seeing the possibility of alternative solutions. At some point though these sustaining innovations stop making a difference and buying decisions become based solely on price, the one providing the best offering at the lowest price becomes king of the hill.

There is, however, still those who are not being served, or are being underserved and sometime even over-served by the incumbent business. If the DI agent goes after these customers then the incumbent sees no reason to compete. Initial offerings to these customers can be seen as mere toys flying below the radar of the incumbent market leaders.

When David or Popeye start off, they and their customers may have no idea of the full potential of the innovation that they are offering. This is where the DI agent finds his sling or spinach. What it does is provide a track for continual, while still sustaining, innovation has the very important difference that it is within a noncompetitive arena with the incumbent business allowing Popeye to pop open the can of spinach unhampered.

This is where disruptive innovation has its greatest impact because this new dimension of value is what moves the value inherent in the system from a state of scarcity to abundance. It is at this point that truly meaningful change could start to be implemented.