Public enterprise

The public sector doesn’t always get great press but, says Neil Stott, Chief Executive of Keystone Development Trust and Executive Director, Centre for Social Innovation at Cambridge Judge Business School, it just might surprise you.

Bureaucratic. Risk averse. Wasteful. Sometimes it seems no one has a good word to say about the public sector. And who can blame them when all the action is with the dynamic entrepreneurs – those creative, innovative risk-takers who bring efficiency and excellence with them as a matter of business life or death.
Or at least, that is how the cliché goes. But is it true? Does the public sector need clearing out with a therapeutic dose of creative destruction by opening it up to innovation that clearly only private sector or social enterprise can provide? I’m not so sure. Why? Because I believe that the public sector is – has always been, will always be – entrepreneurial.

How could it not be when each new government brings with it new ideas, new policy, new brooms? Anyone who has worked within a public body, as I have, can attest to the ebb and flow of inertia and innovation as policy entrepreneurs seek to change, innovate or carve out new resources or power bases. Change has become endemic in our public services. Leaving issues of ‘good’ and ‘bad’ innovation for another time, suffice it to say that public bodies have developed deep resources of intraprenurship to manage the changing demands of policy and policymakers.

“And from where I’m sitting, bureaucracy does more: it’s the means by which government delivers fairness, consistency and timeliness.”

But what about that classic bogeyman: bureaucracy? Even the most small-state fanatic has to accept that without bureaucracy no government could deliver anything – it’s the medium not the message. And from where I’m sitting, bureaucracy does more: it’s the means by which government delivers fairness, consistency and timeliness. This is not to say public agencies (or corporate bureaucracies for that matter) always get it right and are never prone to shameful inefficiencies and poor service. But, as they are public and within a democratic framework, we can take action. Not something that can be said about the average conglomerate, no matter how anthropomorphic their branding.

However the state is not just about fixing market or social failure. It is also about creating enterprise, shaping the environment and often taking the big risks no private sector company would consider. Some of the key, innovative technologies that are in everyday use today, for example, were built on risky, expensive research that was state-funded over decades. In the USA there are vast numbers of (often large) publically created enterprises producing and selling goods and services as varied as parking lots, utilities, transport, racetracks and conference centre. These public enterprises generate huge incomes, raise bonds for capital backed by revenue streams. The basic concept of public authorities having income generating enterprises is rarely challenged.

In the UK, university spin-outs, in both biomedical and information technology sectors, abound. The early, risky research is done within the public sector; products are taken to market under the auspices of the private. Entrepreneurial spirit is evident in both.

And on the high street, government is continually attempting – for better and worse – to shape, stimulate and invest in economic and social development. Enterprise zones, ERDF, SRB, New Deal for Communities, incubators – all are examples of the entrepreneurial in the public sector. Much of the vaunted social enterprise sector would not exist without conscious policy support and cash from public bodies – the modern sector’s origins lie in the significant support of early adopters such as Glasgow, Bristol and Sheffield. In short, public bodies have spent decades quietly becoming more efficient and effective, as well as commercialised or spun out enterprises long before it became fashionable.

So, driven by a combination of financial, social and policy drivers, public bodies are increasingly entrepreneurial and innovative. I believe now is the time to build on past achievements and experiment with new ventures, organisational forms and alliances. Of course, taking risks does mean accepting failure. But having learnt so much from enterprise, this last lesson shouldn’t be too hard to take on board.