Disruptive Innovation in the Public Sector

How can innovation be cultivated in the public sector?  Consider defense, education, and healthcare.  These three primarily public sector systems are ripe for disruption and innovation. Enormous improvements of services and decreased costs are undoubtedly achievable. The key question is how to disrupt the status quo. Let’s first consider how a direct approach might work, and then discuss a different approach to influencing these systems.

Each of these systems includes deeply embedded processes that have long served vested interests.  These interests will aggressively work to thwart changes that strongly threaten heavily defended rice bowls. The fact that some constituencies are dramatically underserved and costs for those who are served are highly inflated will not deter the stewards of the status quo.

How can change be accomplished in the face of these vested interests and their strong intent to thwart change?  One has to change the value propositions for at least a few key stakeholders such that other key stakeholders are willing to compromise. Examples changes might include:

  • Defense contractors having to underwrite the risks of their investments
  • Government no longer backing loans to college students
  • Medicare no longer paying fee for service reimbursements

These changes, if actually implemented, would force key stakeholders to first fight these changes and then totally rethink their investment strategies.  Likely consequences include:

  • Defense companies will exit market. Given the monies available, this industry can be reconstituted much less expensively.
  • Universities will not survive without students subsidizing inefficiencies; education can be reconstituted without these enormous inefficiencies.
  • Health insurance companies will withdraw from market; centralized risk management will improve coverage and substantially lower costs.

Millions of jobs, primarily white-collar jobs will be lost.  However, as outlined below, millions more high-paying jobs could be created. Automation will replace white-collar administrative jobs. Augmented intelligence will lead to greatly improved services, greatly reduced costs, and human-focused high quality jobs.

To do this, a consensus will be needed to totally thwart lobbyists and their campaign donations. Then, the pushback from Congress, relative to Federal expenditures and jobs, will have to be sidetracked. Of most importance, a clear and significant upside has to be articulated and perceived to be compelling.  This will likely be an overwhelming challenge.

Nevertheless, the pandemic has offered significant insights. Education can be more efficient when you have no choice. Healthcare can be more efficient when you have no choice. Defense, with its long time scales and enormous contractual commitments, cannot change quite so quickly.

Consider the possible impacts of disruptive innovation. Defense employs 3 million employees; education 36 million; and healthcare 18 million. These three sectors total 57 million or roughly 36% of the US workforce.  Thus, changes would be overwhelmingly disruptive, yet potentially immensely innovative.

The consequences of such disruptive changes might eventually be very attractive.  However, the almost immediate psychological and sociological impacts would be overwhelmingly negative.  Millions of jobs would disappear.  This has happened before when machinery automated the textile industry in the Northeast.  Automation has continued to eliminate manufacturing jobs. The Erie Canal killed the stagecoach business almost overnight.

When I first entered the workforce as an assistant engineer, several of us shared a secretary who was an amazing typist.  Now my colleagues and I are middling typists and do all our own clerical work.  I have not interacted with a bank teller in years, or a librarian as I access most things online.  I do most of my shopping online and things that I order just show up, sometimes the same day.

It seems to me that people who become auto workers, clerical workers, retail clerks, etc. have a usually unspoken assumption that these jobs will persist and their skills sets will remain employable.  I think that many, but not all, of the jobs in defense, education, and healthcare noted above will remain, but the needed skill sets will change.

An increasing proportion of jobs will be augmented by technology, particularly assistive technologies that directly help people do their jobs.  They will interact with assistive technologies via keyboards, touchscreens, voice and gestures.  They will come to see these assistants as team members.  These assistants will learn much about their human team members and continually improve their support of the team.

Humans will need to be trained to understand and work with these technologies.  This will happen initially in conjunction with their education and then via on-the-job training, which will become a key element of life-long learning.  People will no longer assume that they learn a skill at a young age and then earn a living from that skill for their whole careers.  Continually gaining new knowledge and skills will be key.

K-12, or maybe even K-8, will need to prepare people to be life-long learners.  Everyone will need to successfully complete high school, but not necessarily in pre-college tracks.  Many will aspire to join the “skilled technical workforce” where enormous job growth is projected.  This workforce will keep our technology-laced economy functioning well and be able to cope with inevitable hiccups and upsets.

What about deeply the embedded and inefficient processes that have long served vested interests?  People who expect to continually learn and address change will morph these processes with the help of assistive technologies that can identify sources of inefficiencies, and perhaps even inequities.  To the highly skilled technical workforce, these processes will be transparent and their improvement will be inherent.  We will not need to battle Congress, lobbyists, and campaign donors.  These entities will still play their games, but the increasingly technologically intense infrastructure of society will readily absorb disruptive innovation with people who know what they are doing managing the changes.

Is this utopian or dystopian?  The idea that millions of well-educated and technically skilled people can constantly improve society for everyone’s benefit seems achievable to me.  The value of making society’s processes transparent in terms of both efficiency and equity seems easily arguable.  On the other hand, I can readily imagine that the 535 elected Members of Congress might perceive such a future as undermining their perquisites and hence dystopian relative to business as usual.  However, many might argue that business as usual has already become dystopian.

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