by GK Strategy 28th January, 2016
3 min read

The public want innovation: the Government need to let them have it

We speak to disruptive tech businesses all the time. Their ability to innovate is second to none and the problems they can solve often seem so simple, yet nobody comes up with them until they do. They introduce new ways of providing daily services which benefit the consumer, facilitate social exchanges and make our lives easier. With this, we have seen start-up after start-up revolutionise sector after sector, often wiping out the competition in its journey, or throwing down a serious challenge to the old hats.

Most sectors have been partial to some level of disruption to the normal way of doing things, except largely for the public sector.  Lengthy, expensive tender processes often mean SMEs and start-ups with precious capital investment get drowned out or bought out by the big players. The requirements for the Government’s digital tender processes for SMEs are often lengthy and require years of financial records from entrepreneurs who may have only operated for a year or so. The net effect of this is that the public services we consume everyday do not receive the same level of innovation as other sectors. The way our hospital records are stored and shared, how welfare payments are distributed and the infrastructure projects our authorities choose to invest in could be assessed using better, more powerful data. We know the Government is keen to embrace innovation in the public sector, having made pledges to turn the NHS paperless and the rolling out of universal credit.

So what progress has been made to diversify the pool of candidates for public sector contracts? It is three years ago now that Lord Francis Maude set out his plan for 25% of public sector procurement to go to SME and start-up businesses in the UK. This was a bold, impressive target to start a revolution of innovation in procurement. Well-intentioned perhaps, but the reality has fallen far short of the mark.

The Cabinet Office announced in late 2015 that this target had been hit, but there remain big questions over the validity of this claim. When you break the figures down, only 10.9% of the Government’s target was achieved through direct procurement. We’re calling this the ‘real figure’. The remaining 16.2% falls into the category labelled indirect procurement. This largely means third-party procurement through larger companies. Often this is met through sizeable companies helping the Government to achieve their targets by giving SMEs faux contracts. If the Government are serious about SME procurement, they ought to consider adopting models for public services such as those used in Barcelona, for example, where consortia of entrepreneurs club together to provide public services at lower costs.

After speaking with Steffan Aquarone, CEO of Droplet Pay, a mobile payments app, it is clear what can be achieved if sectors are open to change. He said, “Consumer payments in the retail sector have seen huge levels of innovation in the last 10 years – we’ve largely moved from cash to contactless, and from cardboard loyalty cards to data driven apps that have transformed marketing. This has empowered customers to make better decisions about what they buy and made the industry more efficient.” These consumer benefits of choice and value could be realised in the public sector. The case is certainly compelling.

The Crown Commercial Service’s recent strategy for Smart Tech Buying is another example of the Government’s supposed commitment to this market. It cites the Government’s drivers as economic growth, driving better business outcomes for customers and savings and to improve the service CCS provides to departments and the wider public sector. This sits within the Government’s digital transformation agenda to deliver better public services for less. Strategies to achieve this include, creating “Government as a platform”, “Digital by Default” and “Cloudfirst”. So while in reality the Government have not gone the full distance in supporting SMEs and disruptive tech companies, they are attempting to speak the right language and in time, this will shift the equilibrium.

For those that give it a shot, the potential prize is significant, both in terms of return on investment and the opportunity to create and develop more innovative services that we can all benefit from. The challenge is ensuring the approach, message and pitch you take to government is developed and credible enough to answer their problems. Not only this, but government procurement is a minefield and so understanding who to talk to is key, and what those key decision makers are looking for in tendering processes.

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