13 Realising value and diffusing innovation

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Innovation is not a goal in itself in either the public or private sector. Innovation creates added value for citizens and society, and more people should be able to utilise innovations that have proven to add value.

13.1 Realising benefits

13.1.1 The current situation

Innovation creates added value for society and its citizens by raising the quality of and providing services that are better suited to the public, new solutions to intractable problems or greater employee satisfaction and trust in the organisation. Innovation can also generate financial gains, for example by increasing efficiency or productivity, or reducing costs in the short or long term.

The most common benefits of innovation identified in the Innovation Barometer surveys for the central and local government sectors were enhanced quality in the local government sector and greater efficiency or productivity in the central government sector.1 Other benefits are greater employee satisfaction, citizen influence and added value for the business sector (Figure 13.2). At the same time, one out of five municipalities have attempted to implement changes that have not led to improvements.

The National Program for Supplier Development can cite benefits for public agencies that have carried out innovative procurements with support from the program. PwC’s study of the benefits of Asker Welfare Lab indicates that the lab was profitable during the study period, and that significant future savings for society are also possible (Box 10.2).

It is essential to have a good decision-making basis from which to choose the measure that will generate the greatest benefits for society. It also provides a good basis for the actual realisation of the expected benefits. The Norwegian Agency for Public and Financial Management’s (DFØ) guidelines stress that positive impacts for all affected groups in society, both qualitative and quantitative, must be included. The benefits of each project must be assessed, and the assessment must take into account that benefits can be generated later on and not necessarily in the same sector as where efforts were invested.

Deliveries and effects of innovation work must be followed up, evaluated and documented. This is about closely monitoring the use of public funds and gaining knowledge about the solutions that actually work and whether they should be more broadly utilised.

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The figure shows the effects of innovation reported in central government (marked with the Difi logo, now the Norwegian Digitalisation Agency) and the health and care, and education and training sectors in local government (marked with the KS logo).

Source Ipsos and Difi (2018) Innovation Barometer for the public sector 2018. Overall results. Report

In order to realise the benefits of an innovation, the changes or solutions must be implemented and incorporated in day-to-day operations. It may be necessary to carry out organisational changes and to restructure work processes. Implementation can be difficult without dedicated resources, activities and processes.2 Some things may have to be unlearned, and some workers may have to change their area of expertise or the tasks they perform.3 The challenges inherent in such changes are often underestimated. Succeeding with benefits realisation is largely about expertise and management, a culture of innovation, implementation and changing practice, follow-up of impact development and evaluation.

Implementation is most successful when it has been well studied and planned, with continuity from the start of the development until the change has been implemented. Among other things, This means involvement at the right level and at the right time, and continuously ensuring support for the work in the organisation. The participation and involvement of employees is essential to effectively implement the solutions.

13.1.2 Assessment of the situation

Those performing innovation work are often recommended to identify the need and the causes of the problem they seek to solve and to let the solutions be unknown when starting the work. In such case, benefits assessments prior to start-up must be linked to the expected benefits of solving the problem and not the expected benefits of a given solution. This leads to a different approach to risk and benefits than in projects and development processes in which the solution is known. The innovation process will be characterised by risk and uncertainty as regards the effect. At the same time, the objective of examining the need and testing several solutions is also to arrive at a solution that actually meets the needs and thereby genuinely resolves the challenge and provides the biggest possible net gains. Even if the benefits have been identified and quantified in a pre-project study, they can still be difficult to realise. It has also proven particularly challenging to realise benefits related to budget cuts. A number of rural municipalities state that they experience less flexibility in realising benefits through downsizing because staffing is already at a minimum level. In this case, benefits realisation is first and foremost about increasing the quality of services and laying the foundation for handling more tasks with the same staffing level.4

The effects of innovation may be seen after some time, in another organisation or in another part of society than the area in which efforts are invested. In such case, the expected benefits cannot be linked to the organisation or area of responsibility in question, and the innovation efforts must instead be seen as an investment in resolving common societal challenges. This is based on the assumption that both local and central government see development as something that takes place across sectors and entities., The Program for public health work in the municipalities (2017–2027) started up in 2017. Among other things, the program offers grants to municipalities that develop new initiatives within the scope of the program objectives and based on the challenges they are facing and their goals and plans. The program will help to increase cooperation between sectors at the central and local government level, and is an example of long-term thinking across sectors and levels of administration.

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Source Rambøll (2019). Utenfor-regnskapet. Dokumentasjon av investeringsmodellen (‘Outsider accounts. Documentation of the investment model’ – in Norwegian only).

Preventing social exclusion is a topic that clearly demonstrates the importance of assessing benefits in the long term. Innovations in preventive work can result in significant savings for society, but the relationship between the specific effort and the benefit can be difficult to demonstrate and quantify. Figure 13.3 has been developed for KS by Rambøll AS. It illustrates the consumption of public services, benefits and costs over the course of a working life (18–58 years) for the average population and for those who fall outside the labour market. The figure illustrates the potential benefit of preventing exclusion, both for individuals and society. This formed the basis for KS developing a calculation model known as ‘outsider accounts’ in collaboration with municipalities and county authorities (Box 13.2).

13.1.3 The way forward

Competence-raising, experience transfer and support

Benefits realisation is challenging and requires structured and continuous follow-up, as well as expertise and awareness on the part of both employees and management. The Norwegian Agency for Public and Financial Management defines critical success factors for successful benefits realisation as follows:

• recognise that responsibility for the realisation of benefits rests with the organisation’s management and not the project

• identify at an early stage the benefits of the measure and the prerequisites that must be in place in order for the benefits to be realised

• recognise that the benefits will not be realised of themselves and that sufficient resources must therefore be allocated to work on realising benefits

The point about identifying benefits at an early stage is challenging for innovations where the solution is not necessarily known during the initial phase of the project. Regardless of the choice of solutions, it is important to base the process on what problems or needs are to be addressed. It is necessary to improve expertise in and guidance on benefits realisation in general, and particularly in relation to innovation and digital transformation. This also applies in the ministries.5

For innovations to work as intended, the solutions must be implemented and the desired benefits achieved. If, for example, internal time-savings are identified as a benefit in the pre-project study, the benefits realisation work might entail realising the time benefits in the form of greater user satisfaction, budget cuts or the re-allocation of resources.

Realisation of gains in the co-funding scheme

A co-funding scheme for digitalisation projects has been established in the state sector. The goal of the scheme is to increase the implementation of profitable digitalisation projects, use common resources more efficiently and realise a greater share of the potential benefits of digitalisation. The scheme requires projects to submit a plan for realising gains before funding can be allocated (Box 13.3). The plan must show expected gains in both the organisation in question and in other local and central government agencies. The Government regards the co-funding scheme as a good example of how requirements should be made of planning and work on realising and repaying gains when the project has received funding, and will consider setting similar requirements for innovation projects in other contexts.

13.2 Diffusion of knowledge, experience and innovations

Innovation diffusion takes place when a finished and implemented solution that has generated added value in one place is implemented and creates value somewhere else.6 Upscaling is related to diffusion and is about increasing the use of a developed system or solution, such as digital solutions or innovative procurements. An alternative approach to diffusion is to include more actors from the outset of an innovation process. This has become more widespread in recent years.

13.2.1 The current situation

If an innovation is to have diffusion potential, the innovative organisations must dare to think that what they are developing could prove useful in other contexts. It is easier to diffuse successes than to diffuse lessons learned from what did not work as well. At the same time, there is much to be learned from processes that did not work.

The Digitalisation Council’s assessment, after having advised 55 projects in more than 40 agencies and 15 ministerial areas, is that public agencies can become better at learning from each other’s mistakes and successes. The Council underscores that learning from each other is a challenge it sees time after time.7

The Innovation Barometer surveys for the central and local government sectors show that eight out of ten of the most recent innovations involve the reuse of ideas developed by others.8 This can either be the result of being inspired by someone else’s solution, but making material adaptations to suit one’s own organisation (49 per cent), or of simply copying someone else’s solution (32 per cent). Norwegian public agencies use solutions developed by others more often than agencies in Sweden, Denmark, Finland and Iceland (Figure 13.4). The Productivity Commission nonetheless estimated a large rationalisation potential if solutions are taken into use by or adapted to suit more municipalities.9

The figure shows the percentage of innovations in the Nordic countries that are the first of their kind, inspired by others or copied from others, i.e. using something that has been developed by others.

Source Measuring New Nordic Solutions, Innovation Barometer for the Public Sector. Report 2019

Many diffusion activities, policy instruments and actors

The Innovation Barometer surveys for the central and local government sectors show that the diffusion of innovations most often takes place through networks and at conferences.10 An important objective of many both formal and informal professional networks is the diffusion of innovation. KS is making active efforts to establish and manage networks in fields relevant to the local government sector, and it has also established a partnership for radical innovation. The Norwegian Digitalisation Agency manages an innovation network comprising central government agencies, including KS. Both KS and the Digitalisation Agency participate in the Nordic Innovation Hub, a collaboration between institutions in the Nordic countries on public sector innovation.

Websites and databases such as the Norwegian Digitalisation Agency’s website Lær av andre (‘Learn from others’), the Directorate of Health’s thematic pages about welfare technology and the National Program for Supplier Development’s website, which has an overview of all results and implemented projects, aim to diffuse lessons learned, information and knowledge about innovation projects in the whole public sector. Good examples are also spread through articles in the media and trade magazines and can motivate others to make use of similar solutions. Many municipalities and public agencies also use their own websites to publish their results and experiences from innovation work. The municipalities also report on their use of the county governors’ discretionary project funding in the Ministry of Local Government and Modernisation’s search portal and database ISORD.11 In 2018, the county governors allocated around NOK 139.5 million to a total of 294 projects, and ISORD thereby functions as a database for innovation projects in the local government sector.

Diffusion of innovation can be challenging

Using and adapting solutions developed by others can be challenging.12 Some innovations are more difficult to diffuse than others because they require more adaptation of an entity’s work methods or organisation. A solution such as upgrading a ventilation system, where children can remain on the school premises during the construction period, requires few changes to the school’s normal activities.13 Asker Welfare Lab’s investment approach to families with complex needs (Box 10.2), on the other hand, entails a change of mindset in the organisation, the authority granted to staff and relations between management and employees. It requires more of an organisation to make use of this kind of innovation. Similarly, experience from the National Welfare Technology Program shows that the implementation and diffusion of welfare technology solutions can be demanding when they take effect across local government sectors and entail establishing new patterns of collaboration and a new division of responsibility.14

A precondition for making successful use of innovations developed by others is that the circumstances and conditions that apply to the developers of the innovation are easily transferable to the organisation that wishes to utilise it. Different preconditions and local variations mean that innovations need to be adjusted and adapted. Such adjustments can also make the innovation more generalised and thus more suitable for adaptation by adding or removing certain elements.15

A researcher, Rogers, has summarised how and how quickly an innovation can be diffused, depending on

• the innovation’s characteristics, i.e. the advantage of implementing it, whether it is suitable in a new context, its complexity, how easy it is to test and how easy or difficult it is to see its effects

• time – the more time that passes, the more people will start using the innovation

• the parties that use the innovation, whether they have a tradition for utilising innovations and do it quickly, are hesitant or somewhere in between

• the social system and the context in which the innovation is diffused

• the communication channels through which the innovation is diffused16

Diffusion costs

Diffusion work can be costly in terms of both time and money for the organisation that shares its experiences. Several innovations in the Norwegian public sector have received both national and international attention. For some of the organisations, this means spending a great deal of time sharing their experiences.17

A lack of expertise in documenting the effects can result in a lot of tacit knowledge that does not generate benefits for others and can be a barrier to diffusion.18 The evaluation of the FORKOMMUNE program highlighted great variation in the municipalities’ work on diffusing innovation. The evaluation also described unsystematic work during start-up of the development phase, in part because many organisations did not have procedures in place for checking whether others had implemented similar projects. Bærum municipality has addressed these problems in its latest innovation strategy (Box 13.4). Small municipalities with limited capacity to innovate themselves can benefit greatly from others’ innovations, but also feel that they have limited capacity to make use of them. They appear to need process guidance in relation to the implementation work, among other things. Furthermore, solutions developed for municipalities with a large population may be poorly suited to rural municipalities, and it can be easier to utilise solutions they have played a role in developing themselves.19

13.2.2 Assessment of the situation

The purpose of diffusing innovations is to get maximum value out of each successful innovation. It is less costly to use innovations developed by others than to develop your own. The process of utilising and adapting an innovation can also improve and further develop the original innovation.

There are currently many arenas and opportunities for diffusing innovations in the public sector. Programs, initiatives and guidelines, secondments, procurements and cooperation with other bodies all contribute to diffusion. At the same time, the number of websites and databases aimed at diffusion can make the process of mapping and obtaining information more demanding than necessary for the target groups. It is also necessary to make existing web portals more accessible and user-friendly.20

Municipalities that make active efforts in relation to diffusion see a need for better infrastructure and platforms. Little support and relief is available in connection with diffusion, and this work can therefore be to the detriment of an organisation’s own development work. A lack of incentives for diffusion contributes to uncertainty about the extent to which an organisation that has implemented a public sector innovation is responsible for diffusing it.21

13.2.3 The way forward

Diffusion through joint projects

The challenges related to diffusion have led to more focus on the advantages of taking part in an innovation process from the outset. A number of municipalities, county authorities and central government agencies have cooperated on developing solutions based on common needs, through innovative and innovation-friendly procurements and in other partnerships with the business sector. These kinds of collaborations mean that more people can be involved in the experience and maturation process that takes place during the development phase. Partners can draw on each other’s expertise and reduce risk by jointly participating in the procurement.22

A similar approach to the diffusion of innovation forms part of the basis for KS’s partnership for radical innovation (section 5.3). The regional digitalisation networks (Box 6.4) and the DigiFin scheme (Box 6.3) also provide opportunities for diffusion through participation.

13.3 The Government’s aims

The Government will ensure that methods, expertise and guidance related to innovation work and benefits realisation are further developed. The benefits of successful innovations must reach more people.

The Government will:

• further develop the provision of competence-raising measures, experience transfer and support for work on benefits realisation in the area of innovation and digitalisation in the ministries

• assess whether some policy instruments for innovation should require a plan for the realisation of gains modelled on the co-funding scheme for digitalisation projects in the state sector

• facilitate learning from and the diffusion of experiences from innovation processes

• facilitate the benefits of innovation being highlighted and realised in the form of better services or lower costs.