Category: Management

Market churn, innovation, and the experience curve

Churn

There are a lot of articles about savings in local government about how much has been delivered and just how much more can be done? Has local government really been innovative in redesigning services or is local government reflecting its journey along the experience curve and there just isn’t much more room to save more.

The other common topic today, economic development, might hold some clues. National and Local Government often measure the success of their economic development strategies on the numbers of startups that are created. If we build a new business park they will come. If we fund startups more employment will result. This will be good, this means more confidence in the economy. The presumption is that more startups means more entrepreneurs seeing opportunity, which means more jobs, which means the economy is growing. Or does it?

Research suggests that his approach mainly produces market churn and it is only a small number of businesses that create most of the jobs. New companies set up and create jobs and these displace jobs in other companies who are less competitive. Churn is a mechanism by which labour markets reallocate workers towards more efficient ends. In this way, the churning of the labour market contributes to growth in the potential output of the economy. Or at least it would if those businesses were in a growing market. It doesn’t mean there a more jobs, or even that disruptive innovation is happening and new models of business or services are being found. When the market is maturing, or even reducing, businesses learn to do things more efficiently. That generally begins with making successively larger improvements and then successively smaller ones.

The exception to market churn, those businesses that create more net jobs, are those that are innovative and disrupt exising markets. They do something radically new that is significantly more efficient and/or meets the market’s needs more effectively, or even creates a new market. Interestingly evidence suggests these businesses are also more resilient though a downturn.

But how does this apply to local government and the impact of austerity? Have we seen a similar journey in how local government has delivered savings. A lot initially and then they get harder to find. The experience curve begins to flatten. What we may be seeing isn’t the creation of anything really different, we are just seeing market churn that pushes public services along the experience curve. Its just getting cheaper to do what has always been done. Costs are going down, salaries below inflation, jobs are being deskilled though the introduction of technology and changing practice, systems and processes are getting leaner. Simply, people doing fairly similar things for less and probably for a different employer. Will this improve services? If improvement means cheaper then probably not. If it means reducing demands, finding better ways of doing things then maybe, but its not looking promising.

This isn’t to lay the blame on anyone. NESTA, in their study on innovation in Whitehall found, for many valid reasons, public services have typically not been subject to the same kind of creative destruction seen in some private markets. The risks are high, decommissioning services isn’t cheap, writing off sunk costs is hard politically, and considerable social harm would result from the breakdown of the public services. Service closures could push demand elsewhere, undermining the actual efficiency and legitimacy of any cuts.

A lot is stacked against radical innovation, and so transformation, in public services. Is it just too much?

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How hard is it to do something differently?

This week I went to Brighton CityCamp #ccbtn to hear about the progress the winning entries have made. I was also there to get valuable help and advice on how we can develop Gig Buddies so it becomes the obvious thing to do.

We got talking about how things change in organisations or, more accurately, why they don’t. And often, despite what people think are the levers for change being pulled, still nothing happens. Sometimes they just don’t appear to connect to anything despite what even those pulling them think. All this often when the reasons to change and do differently feel overwhelming. It feels like inertia, even obstructiveness, or that we’ve failed to convince people of the case for change and our ability to deliver it.

Today, as is often the case, serendipity stepped in, and I had a conversation with Dr Josh Siepel about Path Dependence and imprinting effects.  I wont cover the latter (yet) but the former explains how a set of decisions faced for any given circumstance is limited by the decisions made in the past, even though past circumstances may no longer be relevant. Often its applied to a phenomenon where an economic outcome is the result of a historical path or series of accidents rather than current market conditions. It helps explain VHS verses Betamax, the Qwerty verses the Dvorak keyboard, and Britain’s small coal wagons.  It helped me to understand why doing something very differently, despite the obvious benefits, can be hard for organisations to do. It explains why we can all be uncomfortable with even doing, what others may perceive as, small things differently.

On a basic level its why I still have discussions about why putting a link on the Home Page of a website today doesn’t really mean more people will see it as it would in the past. Despite the evidence (thanks Google Analytics) they will still argue it needs to happen. The circumstances of the web and therefore SEO tactics have changed. Things that worked brilliantly years or even months ago don’t work as well now. Search engines know how to weed out the obvious SEO tactics to get at the meat of a site’s content. Because of this, old SEO tactics are becoming less and less effective. But nonetheless that link needs to be on the Home Page because that’s what we used to do.

But knowing this – how does it help? A strategy is to find new combinations of existing ideas and work through how to present them as solutions – all the time resisting the temptation to revert back to a previous behaviour or solution because of the security and relative surety that offers. This may feel safer for those who have investment in how things have been done and see a very different way of doing things as just a step too far. Its an incremental strategy. However, the risk is also that an incremental approach takes too long to get to the rewards. What is true, whatever strategy is taken, is that finding new ideas requires a range of voices to exist, a pluralism that can be absent when the risk of doing something differently feels so alien and threatening. Pluralism comes with the potential benefit of making organisations, markets, and sectors more secure and innovative, more able to find an appropriate answer to changing demands (that begs the question – does this exist sufficiently in the public sector, or really are we just seeing market churn?).

This is the sort of pluralism that City Camp brings by putting together, businesses, community organisations and academia to reimagine the ways in which collaboration and web technologies will shape the future. Its the sort of pluralism that helps to do things differently.

The Value of Social Networks – they are very helpful aren’t they.

There are a few things I’m working on at the moment. They are erm, interesting and challenging.

The value of the social networks I’m involved in is coming to the fore. The range of knowledge, expertise and experience is remarkable. But the real quality of those people is their willingness to share their knowledge – actively. But it doesn’t stop there. I’ve been looking for opportunities for people across my organisation to gain different skills and perspectives – and share their own but in a different context. It’s partly to build interest and motivation – but also so that those staff can improve what we do, and look outward more to benefit the communities and people we work with. So it’s not just about connecting virtually – it’s about just talking, shadowing opportunities, placements, mentoring – all stuff that takes time and investment. Those networks? The people in them? Still up for it. These are people across business, the public and voluntary sectors – who see sharing knowledge and experience as a mutual benefit.

I’ve a draft post I’ve been working on – I left it for a while and now I’m going to finish it – it looks at trying to shift organisational culture to a more networked one – where we have a better chance of connecting what we do, the people doing it and the communities we work alongside. Why? Lots of reasons and because isn’t it better to use all the skills and knowledge at hand? Isn’t that just a better place to work?

So if you are reading this and are helping – thanks it’s much appreciated – a lot more than I’ve probably let you know.

A word I hear a lot at the moment

Resilience.

Its often used by Senior Managers in times of change – or more accurately when jobs are being lost. ‘How can we help our workforce cope with the impact of all this? Lets help them be more resilient.’ It’s easy to dismiss this as just something to settle the conscience of senior managers – ‘lets give people a bat so they have a chance of hitting the stuff we throw at them.’ So you run a resilience workshop – that’ll do the trick, or you give people ‘Who moved my cheese?’ – ‘That will help people cope with the change. But it won’t work – not as much as it could anyway.

If resilience is the ability to adapt well in the face of adversity, threats, and from sources of stress such as work pressures, health, family or relationship problems, then a resilient person is not only able to handle the crisis more effectively, but they are also able to recover and get back on their feet more quickly.  It’s at times of significant change when any organisation needs resilient people to contribute and shape those changes. Lovely words, but lets be honest – it’s just not how people feel at those times. If your job is on the line then you feel ‘done to’ – you certainly don’t feel empowered to challenge and shape. So how can organisations or managers pull off this trick? Clearly many don’t. Some are either so set on the change, or nervous of showing perceived weakness, that they drive through changes at all costs. Others pull back and get into trouble delivering nothing and ultimately putting that service or organisation at risk. They are not resilient.

Obviously, it would be great to ‘not start here’ – ideally we want organisations and therefore people to develop and innovate – to keep relevant to what needs to be done and then big structural changes wouldn’t necessarily be needed. But sometimes things come at you that you just have to respond to and they are not incremental. If you have to take 25% out of a budget and it pays for people, how do you work with those people so that the remaining 75% can still deliver what’s needed – or ideally lead on what might be needed? How much better for those who remain to be a team proposing the next change or development rather than waiting for it. You probably can’t convince everyone this is a more positive way to go. But you can increase your chances the more resilient people you have – but critically that includes those who are ultimately accountable for the changes.

To gain organisational resilience you need the capability to respond rapidly to change. It is the ability to bounce back — and, in fact, to bounce forward — with speed, grace, determination and precision. It’s no different from personal resilience. It’s why managers have to encourage and support resilience in their teams. To actively ensure they encourage challenge, listen to it, and act on it especially in times of change. Not to shut it down. Some preferred options will change – suggestions will be taken adopted . Some things won’t change. Deftly managing this is hard and obviously not everyone will recognise it might help in the long run. To come through the other side with some people more resilient than before will help the organisation and those people significantly in the long run.

It would be great if those people were managers too.