Design thinking and innovation labs

by Jenny M. Lewis

In the past decade, public sector innovation – the process of finding new ways to create value through the production of public goods – has become an increasingly common topic of debate among governments and public authorities the world over. The impact of this shift has been two-fold: more and more public innovation labs have sprung up in an effort to help governments mainstream new approaches to public-policy design, and the public sector has turned to design-inspired methods as a policy development tool. In this article, the author questions why and how the public sector has adopted these new, innovation-driven structures and processes.

Until relatively recent times, ‘innovation’ was thought to be the exclusive realm of the private sector, populated by entrepreneurs with lots of ideas and a set of competitive incentive structures, where innovation is necessary in order to survive (Potts and Kastelle 2010). Over the last two decades, the idea of public sector innovation or social innovation has grown steadily. Innovation in this case equates to the process of producing a public good or creating new services that have value for citizens in terms of social and political outcomes (Harris and Albury 2009). For the purposes of public administrations and public officials, innovation means the application of new ideas which, in their implementation, produce benefits for the public.

In the private sector, innovation has been commonly defined in economic terms as a means of finding new ways to produce more for less, more efficiently, or in ways that create greater value or better outcomes. It is focused on the need to make profits by gaining an advantage over one’s business competitors, and the phrase ‘creative destruction’ is central. Schumpeter turned Marx’s ideas on the accumulation and annihilation of wealth into a theory of economic innovation. He claimed that it is a process of industrial mutation that revolutionizes the economic structure from within: ‘incessantly destroying the old one, incessantly creating a new one’ (Schumpeter 1942).

User engagement is also regarded as important in supporting innovation that produces better outcomes. This user-driven innovation perspective was developed by Eric von Hippel (1976) and is relevant here, since it focuses on the power and value of involving users (citizens) in the innovation process. It contrasts with earlier notions of technological advances as coming only from the research and development (R&D) departments of large firms. An innovation systems-perspective provides another important perspective on innovation. It revolves around user–producer connectivity, and systems thinking, pointing to the importance of knowledge flows in networks of mutually dependent actors to stimulate innovation (for example: Lundvall 1992; Freeman 1995).

Innovation in the public sector

Public sector innovation has become much more talked about by governments and public administrations around the world in the last decade but is often regarded as difficult. This is because it challenges the routines and practices of public sector organizations. Public organizations have formal hierarchical structures, which are heavily institutionalized, and lots of routines, which create path dependency. Innovation, conversely, involves risk-taking and experimentation, which may result in costly failures (Kobrak 1996). Organizations that seek to innovate, run up against the tension between ‘safe’ routines and ‘risky’ innovations. This is particularly the case in the public sector, where innovation can only take place within the limits that citizens expect of their public administrations. The notion that funds generated by taxation might be ‘wasted’ on risky experiments that do not work, makes the public sector a rather fraught location for innovation.

Public sector innovation—new ways of producing valued social and political outcomes and public goods—is also risky because of the need for accountability and the pressure to avoid public ‘failure’ that governments face. There is little evidence to suggest that individuals who work in the public sector are intrinsically less innovative than their private sector counterparts (Rainey 1999). Any such claims tend to be speculations based on stereotypes (Bysted and Hansen 2015). These present people who work in the private sector as more innovative because they are driven by competition, or posit that people in public organizations are less innovative because they are averse to taking chances with public money or fear losing their personal political esteem.

For civil servants in many nations, managerial over-regulation has the potential to restrict employees’ enthusiasm for policy innovation, producing inflexible workplace cultures. However, public organizations are assumed to be more willing to share ideas, information, and knowledge, rather than protect their ideas from market competitors as their private sector counterparts do (Hartley 2014). Network theory, which argues that more and diverse connections are strongly linked to innovation, suggests that this makes public sector organizations potentially highly innovative.

Before considering public sector innovation labs and their role in public administration, it is important to note that innovation covers three separate concepts. First, innovation can refer to a new product, process, or organizational change (outcome). Second, it can also mean the process of turning an idea into an innovation (process). Third, innovation can mean the support provided to facilitate such a process (support) (Nählinder and Eriksson 2019).

An emphasis on innovation processes and supports in public sector organizations is the most pertinent to a consideration of public sector innovation labs. There is a widely held view that, to support public sector innovation, we need to move beyond focusing on innovations as outputs, and instead consider the structures and processes that promote innovation (see, for example: Arundel, Bloch and Ferguson 2019). The creation of public sector innovation labs is one particular response to this, with a new organizational form being created in order to advance innovation in the public sector.

The rise of public sector innovation (PSI) labs

Faced with increasingly complex social and political challenges, many governments around the world have turned to public sector innovation (PSI)  labs to address the shortcomings of other approaches and be more innovative in solving policy design problems. The number of these labs has rapidly expanded over the last decade, with more than 60 PSI labs in European Member states alone (Fuller and Lochard 2016).

The number of PSI labs has continued to rise in the last decade. In 2015 it was estimated that, worldwide, around 100 PSI labs had been established at various levels of government, with new labs being created at ‘a rate of at least one a month’ (Price 2015). Recent research suggests this is likely to be a gross under-estimation of the number of PSI labs worldwide, since 52 PSI labs have been identified in Australia and New Zealand (Mcgann, Lewis and Blomkamp 2018) and 41 in Canada (Centre for Policy Innovation and Public Engagement, 2018). In addition, many PSI labs are not formally part of the public sector yet work extensively with governments.

‘The latest trend in our quest to fix the global challenges of the 21st century is to “lab” complex issues’, as Kieboom (2014) observed. What PSI labs offer in this context are seemingly better ways of generating new ideas (Puttick et al., 2014) through an experiment-oriented approach to policy design (Fuller and Lochard 2016). The emergence of PSI labs directly follows on from previous public sector innovation trends and earlier reform attempts aligned with the New Public Management (NPM) ideas that have spread in many nations since the 1980s (see: Pollitt and Bouckaert 2011).

NPM advanced a more entrepreneurial public sector characterised by the adoption of private sector management practices and market competition in the delivery of public services (Hood 1991). One manifestation of this was an expanding role for external consultants to become important producers and suppliers of knowledge. Advocates of PSI labs claim that traditional public sector organizations lack the capabilities and skills ‘to develop the radical new solutions that are needed’ (Carstensen and Bason 2012: 3) due to their bureaucratic structure. Bureaucracies bring stability, but also foster organizational cultures that are risk averse and resistant to experimentation (Schuurman and Tõnurist 2017). As was already noted, public sector organizations tend to favour incremental over radical or systemic changes, a propensity that is further intensified by their political accountability and the public scrutiny they face from the media. PSI labs are argued to be a means of unlocking this risk aversion.

PSI labs come in many different forms and have varying relationships with governments. In a study that examined 20 well-known and long-standing labs from around the world, we found there was a variety of levels of government control over their funding, and different amounts of direct government oversight (Mcgann, Blomkamp and Lewis 2018). An overview of types is shown in the table below. We also found an array of approaches being used by labs, with design thinking being clearly favoured (in around half of these), and a focus on identifying and testing proposals and solutions as a way of contributing to the policy process. These findings were replicated when we surveyed 52 labs in Australia and New Zealand (Mcgann, Lewis and Blomkamp 2018).

Table adapted from Mcgann, Blomkamp and Lewis (2018).

What distinguishes PSI labs from earlier agents of public sector reform? Critical commentators, who view the proliferation of PSI labs as simply the latest fad in agencification would answer: ‘Not much!’ Based on our research, a stand-out difference is their emphasis on applying ‘design thinking’, or a designerly approach (Mcgann, Blomkamp and Lewis, 2018), inspired by the disciplines of industrial, product and service design. The unique characteristics of this is explored further in the next section.

Design thinking, labs, and policy making

Apart from representing the latest in a long line of NPM and other reforms responding to difficult policy challenges, PSI labs as a new player in the public sphere are related to various policy trends. These include a growing interest in evidence-based policymaking and the pursuit of ‘open government’ agendas that support making the data held by governments more accessible. ‘Design thinking’ approaches are a focal concern of many PSI labs. This interest in applying design thinking to policy has coincided with a social turn (Chen et al. 2016) within the field of design. Designers have sought to evolve design beyond product design into a framework for developing more participatory and cross-disciplinary approaches to social problems (Torjman 2012).

Within the literature on PSI labs, ‘design’ is often portrayed as a tool for eliciting active community participation (Torjman 2012) thereby enabling better solutions through a richer understanding gained by involving citizens in reframing problems and in ideating solutions (Rebolledo 2016). While labs differ in the extent to which they meaningfully engage non-traditional policy actors in this process, their application of design thinking invites a more diverse range of voices and inputs into the policy process that resonates with principles of network governance (Lewis 2011) and, more recently, co-production (Voorberg et al. 2015).

‘Design thinking’ is based on a form of reasoning that moves beyond the analysis and problem solving we often associate with the policy process to create the end value desired, in the absence of knowing what to create and how to create it (Dorst 2011). It can be likened to an analysis where complex situations are distilled through a process of insightful invention, discovery and disclosure (Dorst 2011). For design thinkers, this orientation implies that policy making should be guided by the values of ‘empathy’ and ‘curiosity’, along with ‘rationality’ (Torjman 2012) and a focus on ‘crafting new solutions with people, not just for them’ (Carstensen and Bason 2012: 6).

Design approaches to policy move the focus towards creativity and are distinct from the alternatives of bounded optimisation and co-creation as logics underpinning the design of policy (Van Buuren et al. 2020). Design implies an iterative and ‘self-correcting’ approach to policymaking that proceeds through the connected processes of scoping, defining and reframing problems; ideating, prototyping and testing solutions; and learning by doing (Torjman 2012). Creativity is central to design thinking, but it is also often linked to participation (or co-creation), because creative design tools can be used to facilitate a collaborative approach that brings different people and varied knowledge into the policy process.

The evidence for action that is generated by design’s abductive and creative reasoning styles differs fundamentally from the ideal evidence base required for policy development (O’Rafferty, de Eyto and Lewis 2016) in more traditional models of policy making. PSI labs face challenges in speaking truth to power because of this (Lewis, Mcgann and Blomkamp 2020). There is little evidence that design thinking’s methods can be standardised and scaled up to an entire policy sector, or government, over long periods of time. Moreover, the development and dissemination of design capabilities both within and by labs remains a real challenge for public sector innovation. As other have argued, these new logics and practices require significant cultural change and capacity building to embed within government (Christiansen 2016).

While PSI labs might help drive a more participatory and design-oriented approach to public service innovation, they are rarely achieving wider impacts on policymaking (Lewis, Mcgann and Blomkamp 2020). Innovative, collaboratively proposed ideas must still be diffused into the larger policymaking process and ‘sold’ to decision-makers, within a broader institutional and cultural context which shapes the best fit for a policy purpose. Design thinking (and the work of PSI labs) may be valued simply as the latest novel way for generating policy relevant knowledge and increasing the pool of ideas available to decision-makers, without reshaping policymaking (Lewis, Mcgann and Blomkamp, 2020). The limitations of labs and design are further explored in the next and final section.

The future of labs in the public sector

Like other small organizations that work closely with government, PSI labs have an emphasis on organisational autonomy and capacity to provide expertise and legitimacy to the public sector. Research on PSI labs suggests that most of them work across government agencies and departments, traverse multiple policy sectors, are rarely subject to specific performance measures or strenuous evaluations, and operate with high levels of autonomy (Williamson 2015b; Tõnurist, Kattel and Lember 2017). These characteristics have led them to be described as new boundary-crossing organizational forms, or ‘innovation intermediaries’ (Williamson 2015a: 254), designed to overcome barriers that make innovation and cross-cutting coordination difficult within public sector bureaucracies. These include the policy sector specific nature of the public service, both administratively and horizontally, and the structure of public bureaucracies which fosters risk aversion and resistance to change.

PSI labs contributions to policy systems lie in their capacity to develop creative policy solutions using design approaches and methods, ‘outside’ traditional public sector bureaucratic structures. They are experimental sites for solving social and public problems in three related senses: in their organizational forms; in their approaches and methods; and in relation to policymaking (Lewis, Mcgann and Blomkamp 2020). Each of these has benefits, but also costs in terms of their scope of impact and their longevity.

First, labs are predominantly small-scale and nascent structures rather than mature entities (Fuller and Lochard 2016). For example, the 35 (largely North American and European) PSI labs surveyed by Tõnurist and her colleagues (2017) had an average of just six to seven staff and a life-span between three and four years. Among the 26 government-based labs we surveyed in Australia and New Zealand, 50% had less than six staff and more than half were established within the last two years (Mcgann, Lewis and Blomkamp 2018).  The small size of PSI labs means they have a degree of agility that allows them to act as change agents. Those who work in these labs see them as distinct organizational forms that have an outsider position, non-traditional structures, and more fluid ways of working (Mcgann, Wells and Blomkamp 2019).

However, this small scale, novelty, and unique positioning also makes them comparatively easy to shut down (for internal labs), defund, or ignore (for external labs) compared with more established public sector organizations. Their survival depends on ongoing political patronage, as was illustrated by the closure of the longstanding MindLab, following a change in the Danish Government’s political priorities (Guay 2018). They need the support of politicians and high-level civil servants to act as champions if they are to survive. They are not integral to the policy system, and their smallness (limited authority, few staff, low budgets, minimal oversight) is a virtue regarding their agility, which also makes them an easy target for closure (Tõnurist, Kattel and Lember 2017).  Big labs, on the other hand, run up against existing structures and standards and central control. Whether they are large or small, or internal or external to government, they struggle to survive long term. Those with high organizational autonomy and research capacity will likely have a greater impact but they face more uncertain conditions because of this. Labs that work on policy change tend to not be successful, encountering more resistance inside and outside the public sector (Tõnurist, Kattel and Lember 2017).

Second, PSI labs are experimental in applying methods. They typically employ a toolbox of innovation approaches that combine a hybrid of ‘digital, data science, and especially design-oriented methodologies’ such as human-centred design and user ethnography. Their authority and influence lies in their claims to methodological rather than subject-matter expertise, as they work across agencies and policy sectors (Fuller and Lochard 2016). Some define PSI labs in terms of their commitment to taking a design thinking approach to public problem solving. For example, La 27e Région’s overview of public policy labs in EU member states defines them as ‘emerging structures that construct public policies in an innovative, design-oriented fashion, in particular by engaging citizens and companies working with the public sector’ (Fuller and Lochard 2016: 2). Not surprisingly, labs’ roles are often in demonstrating new ways of working with citizens using ethnographic and interview research that are then taken back to the commissioning government agency (Mcgann, Wells and Blomkamp 2019). The prototyping and iterating that should follow on from this, is an integral part of a design approach, that takes this beyond the more usual and formal paper-based reports. But this seldom happens.

As Kimbell and Bailey (2017) reported, design-based ways of generating and communicating ideas by visual, performative and material means, struggle for legitimacy against the formal written texts that are conventionally used to communicate policy. The playful and immersive nature of problem re-framing and the physical making of prototypes is likely to look unproductive to those who are accustomed to seeing proposals presented as reports with tables and graphs. Further, while design thinking is currently in a state of high fashion with governments, which are continuing to create internal labs and units, and expressing ongoing demand for consultancies and other agencies that can ‘do co-design’ with them on specific problems, this is unlikely to last forever. Methods for tackling societal challenges through policy and service design are generally in a state of flux. While design approaches are at a high-water mark currently, it would be surprising if this, like other approaches and their associated toolkits, did not fall out of favour at some future time.

Third, PSI labs are often explicitly linked to a shift towards more participatory forms of policymaking – which emphasise the empowerment of citizens in driving public and policy innovation (Carstensen and Bason 2012; Schuurman and Tõnurist 2017). Involving those citizens affected by policy problems can help to reframe public problems in more accurate ways than professionals acting alone (Fung 2015) by overcoming information asymmetries between public administrations and citizens. There are benefits from involving citizens throughout all stages of the design process – in the definition and framing of problems, in the generation of new and creative solutions, and in the implementation of effective solutions. Non-government labs tend to see themselves as providing an alternative to consulting firms in providing new approaches to problem solving that is centred on the lived experiences of service users. They are uniquely positioned to provide a conduit to government for those who would not otherwise have a voice in the decisions that directly impact them (Mcgann, Wells and Blomkamp 2019).

But not all problems can be addressed by engaging a diverse and ever-expanding range of those affected. And in practice, design approaches vary according to the degree to which they consider citizens as active participants in designing the solution (Blomkamp 2018). When citizens begin to suspect that their involvement in co-design exercises are mere ‘window dressing’ rather than genuine attempts to involve them in designing solutions, or when governments begin to question whether the costs are reflected in the benefits, it seems likely that this approach might lose favour. The long history of governments using citizen participation in unhelpful and non-genuine ways – particularly as merely means of education (and manipulation) and involvement (and placation) (Damgaard and Lewis 2014) – suggests that the application of co-design by labs will not always be about gaining meaningful input.

PSI labs appear to be walking a fine line, with many challenges facing their emphasis on innovation and the co-production of solutions to problems through citizen participation. An in-depth study of five labs in Australia and New Zeland, based on interviews with staff working in them, found that they face loss of political support with ministerial changes and departmental staff turnover, a resistance to new ways of working from mid-level civil servants, and an important tension between the resources needed to (genuinely) use design approaches to generate solutions and the political pressures to deliver these quickly (Mcgann, Wells and Blomkamp 2019). For example, these staff described how the high turnover of staff in both political and administrative positions promoted short term actions and created an environment where staff were impatient for change and keen for (fast) innovations that ministers can announce. They also reported that public bureaucracies have powerful traditional administrative traditions that stop new ways of working, particularly via the ‘permafrost’ of middle managers who are able to block change.

A recent turn in thinking about public sector innovation, beyond the ‘labification’ of public problems which is the signature of PSI labs, is the notion of innovation bureaucracies. In line with the preceding discussion about the need for PSI labs, they argue that public sector innovation is stuck between the need for change and the need for stability. Public bureaucracies must somehow succeed at the balancing act of unleashing innovations, while maintaining socio-political stability at the same time. Kattel, Drechsler and Karo (2019) argue that states need to support ‘innovation bureaucracies’ – constellations of public organizations that are capable of delivering agile stability. According to them, if governments create new organizations (like labs) led by charismatic outsiders, but these people and their networks do not become part of the routine of government, innovation in the public sector will not be sustained.

This is a system-level approach to understanding public sector innovation. It usefully takes us beyond the idea of small and agile units with a new (design) toolkit being capable of acting as a panacea for the difficult terrain of innovating in a public, publicly funded and publicly accountable space. As other system-level studies of public sector innovation have argued, what is needed is the tilting of whole systems towards new ways of working that will make them more open to innovation (Lundvall 1992).

Previous studies of public sector innovation that have focused explicitly on understanding what supports innovation inside government from a systems-like perspective are relevant here. In one of these, my colleagues and I examined Australian local governments and found that networks both inside and outside these governments were important in shaping local cultures and promoting innovation (Considine, Lewis and Alexander 2009). A second study compared three European city governments, and we demonstrated the importance of each of governance structures, networks, and leadership styles in supporting innovation capacity (Lewis et al. 2017).

These and other studies indicate the added value of thinking about innovation in terms of networks/systems and beyond single organizations, in order to build robust systems that can create and sustain public sector innovation. The introduction of new design-led approaches seems particularly helpful in reframing the policy problem and finding a broader set of potential solutions, which also involves including voices that otherwise might not be heard. While PSI labs are currently in vogue and do have an important part to play in the generation of innovative solutions to address policy problems, they alone are not able to solve all the complicated societal challenges that nations face. Their role as ‘outsiders’ is important in introducing new ideas. Yet our research on labs in Australia indicates that they face many challenges in introducing design to policy systems (Lewis, Mcgann and Blomkamp 2020).