Promoting Innovation in the Public Sector: Concepts, Case Studies and

Challenges

by

K. Thiruchelvam UTM Perdana School

Presentation given on occasion of

MAMPU Sabah Open Day

February 17, 2015

• About innovation

• Public Sector Innovation (PSI) –

why and what is it

• Public sector reforms in

Malaysia and case studies

• Key Messages

Outline of Presentation

How do we cope with

complexity, uncertainties,

rising expectations, reduced

resources?

“We have to innovate. No

nation can be successful

unless they are involved

in innovative and creative

activities,”

Najib Tun Razak

"Not to innovate is

to die." - Christopher Freeman

"Innovation is a risky business, but not

innovating is even

riskier"

- Anonymous

5

WHY IS STI IMPORTANT FOR COUNTRIES

(EVEN FOR THE POOREST ONES)?

STI

Capabilities

make the

difference

between

Poverty and

Wealth

Changing dynamics of success

Socio-economic success =

fn (Innovation);

+ fn (Investments);

+ fn (Infrastructure);

+ fn (Institutions)

7

Proficiency in

STI is

imperative if

we wish to

escape from

the so-called

middle

income trap

6

8

(USD thousand)

4

22

20

2

18

16

14

12

10

0

Chile

Argentina

Thailand

Slovakia

Poland

Indonesia

Malaysia

HIGH INCOME BOUNDARY

GNI Per Capita 1990 - 2008; USD thousand

Korea

Czech Rep

Source : World Bank, NEAC Analysis

www.neac.gov.my

Why innovation matters

Strong STI capabilities

National socio-economic

sectors

High value added, inclusive

and sustainable society

Strengthening our STI foundations

for a high value added economy

About innovation

An innovation is a new or

significantly

improved service,

communication method,

process or

organisational method. (Innobarometer, 2010);

Innovation – generation and application of new ideas. It is

about creating value from knowledge. Important for economic

activities but also social inclusion and sustainability

Innovation

≠ R&D

About Innovation

•Innovation is not always a new

product, service or process.

•Innovation is not just about coming up

with ideas

•Innovation is a process

•Everyone has the capacity to be

innovative

Discovery

Development

Diffusion

Delivery

INFRASTRUCTURE

SKILLS

GOVERNANCE

CAPITAL

REGULATION

TAXATION

NATIONAL

CHALLENGES

NATIONAL

PRIORITIES PEOPLE

Innovation occurs within a complex

ecosystem ….

Government

Academia/

RIs

NGOs

Community

Linking the

4Ds

Industry

Linkages

Leveraging

Learning

Ideas - Source of wealth in

knowledge age

People who own

ideas have become

more important than

people who own land

or machines

An idea that is BOLD is

worthless until SOLD

CONVERTING IDEAS INTO INNOVATIONS – NOT EASY. MANY

IDEAS FALL THROUGH “THE VALLEY OF DEATH”

Bridging Support

needed for

accelerating ideas to

market..

Market Lab

CREATIVITY VS. INNOVATION: THE

DIFFERENCE

Creativity – is about coming up with the

idea;

Innovation – is about executing the idea

Innovation = creativity x execution

“This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in….” Schumpeter, 1942

Innovation is 1% inspiration

and 99% perspiration.

Edison

Several Dimensions to

Innovation

T – a new Technology;

A – a new Application in the form of a new product, process or service;

M – a new Market or market segment;

O – a new organisational form or a new management approach or a combination of two or more of these elements

Source: Janszen, F (2000)

Service Innovation – new or improved service (passport)

Service Delivery Innovation – new or different way of providing service (MyEG)

Administrative or organizational innovation-changes in organizational structures or routines (OSC)

Conceptual Innovation -a new way of looking at problems, challenging current assumptions, or both (Malaysian Inc)

Policy Innovation - a change to policy thinking or behavioural intentions. (NEM)

Systemic Innovation – new or improved ways of interacting with other organizations and sources of knowledge (portal)

Source: Windrum, 2008

TAXONOMY OF INNOVATION

Idea generation

Idea selection

Idea implement

-ation

Sustaining ideas

Idea diffusion

The Innovation

Process: Key

elements

Adapted from Eggers and Singh (2009)

1. Idea generation—finding,

adapting or creating the ideas

2. Idea selection—picking

which ideas to use

3. Idea implementation—putting the ideas into practice

4. Sustaining ideas—keeping

the ideas going

5. Idea diffusion—spreading

the ideas and the insights

about them

Innovation in the public sector has been

defined as the creation and implementation

of new:

Processes;

Products;

Services; and

Methods of delivery

which result in significant improvements in

the efficiency, effectiveness or quality of

outcomes. (Australia National Audit Office, 2009)

Generation and

application of new

ideas to produce

better outcomes

What is PSI?

Public sector

contributes to high

proportion of GDP

(25%) – opportunities for

productivity improvements

for growth

Why PSI Matters

Substantial public sector

innovation has already

taken place but innovation

potential of public sector

is unrealized – need to

unlock

Public Sector: Managing in

Challenging Times

How to deliver improved services Higher expectations of citizens

Tight budgets

Growing complexities

Changing risk averse culture

Innovation

crucial for

productive, high

performing

public service

Value for money &

Value for many

22

Source: Eggers and Smith (2009)

Government

Innovator

Citizens/customers

Participative and

responsive

government

Internal Partners

Joined-up and

reinvented

government

External Partners

Partnered and

networked government

Employees

Collaborative,

outcome-focused

government

Sources of innovation

Barriers to Innovation

Poor framework conditions – organized for stability, restrictive approach to collaboration

Weak strategic innovation leadership – lack explicit innovation strategy, short term focus, resources not allocated for innovation

Lack of knowledge of methods – lack of skill sets, lack of proper metrics

Resistance to change – risk aversion, few incentives to change

How some governments are

responding

• Providing simpler processes and greater convenience

• Tapping new sources of information when shaping policies and services

• Sharing responsibility in delivery

Doing

Better

with

Less

Leadership

Resources

Networks

Culture

Competencies

Ideas

Learning

Organizational strategies

Requirements

for Effective

Innovation

Don Scott-Kemiss, 2009

Political push

Culture of review; of experimentation

Growing public expectations

Shocks/regulations/internal problems

Competition

Flexibility of finance

Rewards

globalization

Public Sector Innovation: Driving

Forces

Source: NESTA 2011

Measuring Public Sector

Innovation: EPSIS Methodology

• Human resources

• Quality of public services

Enablers

• Investments

• Drivers and barriers

Organisation Activities • innovators

• Effect on business performance

Outputs

ENABLERS

1.1 Human resources

1.1.1 Employment share of ‘creative occupations’

1.1.2 Share of employees in public administration with a university degree

1.2 Quality of public services

1.2.1 Government effectiveness

1.2.2 Regulatory quality

1.2.3 Increased efficiency of government services due to the use of ICT

1.2.4 Online availability of public services

1.2.5 E-government development index (EGDI) ACTIVITIES

2.1 Capacities

2.1.1 Share of service innovators that innovate in-house

2.1.2 Share of process innovators that innovate in-house

2.2 Drivers and barriers

2.2.1 Importance of internal barriers to innovation

2.2.2 Importance of external barriers to innovation

2.2.3 Active management involvement in innovation

2.2.4 Importance of external knowledge

2.2.5 Share of employees involved in groups that meet regularly to develop innovations OUTPUTS

3.1 Innovators

3.1.1 Share of organizations in public administration with services, communication, process or organisational

innovations

3.1.2 Share of ‘New’ services out of all services innovations

3.1.3 Public sector productivity

3.2 Effects on business performance

3.2.1 Improvements in public services for business

3.2.2 Impact of innovative public services on business

3.3 Government procurement

3.3.1 Government procurement as a driver of business innovation

3.3.2 Government procurement of advance

EPSIS

Scoreboard

Measurement

Framework 2013

Leadership

Governance

Culture Capability

Key Factors

for Public

Innovation

Enhancing Administration for development

Reforming administration for heavy industrialization

Enhancing reforms for innovation-Led economy

1957 to late 1970s

1980s to mid 1990s

Late 1990s to 2020

MALAYSIA’S

PUBLIC

SECTOR

REFORMS

High income nation;

sustainable and inclusive

We have made great strides in STI

Initiatives

Institutions and Integration

Infrastructure and Incentives

Investments

International Outreach

Our successes

in rubber, oil

palm and

petroleum

sectors fuelled

by proficiency in

STI

STI (Input) Indicators, 2001-2011

YEAR 2000 2004 2006 2008 2010 2011

Total R&D

Expenditure

(MYR million)

1671.5 2,843.7 3,646.7 6,070.8 8,510.7

9,422.0

R&D

expenditure

as a % of

GDP

0.50 0.63 0.64 0.82 1.07 1.07

Industry

share of

total R&D

expenditure

(%)

57.9 71.5 84.9 70.5 65.0 56.7

Number of

researchers

(HC)

15,022 23,092 19,021 31,442 67,412 73,752

Number of

researchers

per 10,000

labor force

15.6 21.3 17.9 28.5 55.4 58.2

Source: MASTIC (various reports)

BUT, we need to strengthen the

following:

People

Partnerships

Prioritization

Proficiency

Performance

Benchmarking our STI Performance

Country Global Innovation index 2014 (142 economies)

Singapore 7

Republic of Korea

16

Hong Kong 10

Malaysia 33

Source: INSEAD

Case Study on Public

Sector Innovation:

PEMUDAH

Established on February

7, 2007

Oversees regulatory

reforms

Inclusive Public-Private

Sector Collaboration

Reports directly to

Prime Minister

About PEMUDAH

The Special Task Force to Facilitate Business or better known by its Malay acronym -

PEMUDAH

Working

Group on

Efficiency

Issues

Various Focus

Groups

Working

Group on

Policy

Issues

Task

Forces

under

PEMUDAH

Various Task

Force and

Focus Groups

PEMUDAH: WORKING GROUPS,

TASK FORCE AND FOCUS GROUPS

PEMUDAH

TASK

FORCE

Public

Sector (13 members)

Relevant Ministries

Industry

(10 members)

Selected individuals

from industry

Registering a Business

9 procedures;

11 days;

RM 3000 fee

1 procedure;

1 day;

RM 1000 fee

Previous

Current

Mandatory online incorporation process via Malaysian Corporate Identity Number system (MyCoID)

Expediting Business Licencing

BLESS Business licensing electronic support system - A portal that provides information and services for companies to apply licences or permits to start operating business in Malaysia was developed

No. of licences issued by 23 Ministries rationalized/abolished

from 717 to 448 as

of December 2013; resulted in

cost savings estimated at USD 223 million since July

2011.

Resolving Insolvency

• Dedicated commercial courts established

• Amendments made to Bankruptcy Act 1967 to expedite the insolvency process

Resolving Insolvency

Expediting Construction Permits

One Stop Center developed to facilitate processing

Reduction in number of items required for building plan from 81 to 19

Certificate of Fitness of Occupation self-regulated by industry professionals

construction permits issued in less than 100

days requiring only 10 procedures from 140 days and 37 procedures previously

Registering Property

5 procedures;

41 days;

2 procedures;

1 day;

Previous

Current

Expediting Immigration Matters

Removal of age limit for expatriates;

Automatic approval for expatriates with salaries of more than RM 8000 per month

Automatic approval for Long-Term Social Visit Pass for spouses for 5 years

Introduced Resident Pass for up to 10 years

Year 2007 (n=175)

2011 (n=183)

2012 (n=183)

2013 (n=185)

2014 (n=189)

OVERALL 25 21 14 12

6 Starting a business 71 111 50 54 16

Dealing with

construction permits 137 111 113 96 43

Getting electricity

- 60 59 28 21

Registering property 66 59 59 33 35

Getting credit 3 1 1 1 1

Protecting investors 4 4 4 4 4

Paying taxes 49 39 41 15 36

Trading across borders 46 28 29 11 5

Enforcing contracts 81 60 31 33 30

Resolving Insolvency 51 57 47 49 42

World Bank Doing Business Ranking –

Malaysia (2007-2014)

PEMUDAH - Lessons

Holistic approach

Clearly defined deliverables

Co-ownership

Small membership

Strong secretariat and state level implementation

Political commitment

Sustained leadership

Learning, monitoring and evaluation

Urban Resettlement in Kuala Lumpur:

The Kampung Abullah Hukum Case Study

This case demonstrated importance of: •Experimentation; •Forging trust; •Sustained leadership; •partnership

Pressure to redevelop prime real estate

Community engagement with City Hall and developer for

better design

Win-win outcome for all parties

DBKL’s One Stop Centre for Building plan

approvals

Previous process involved several stages; delays and poor

tracking

Introduction of OSC involved e-submissions, parallel examination

and coordination of various agencies

Win-win outcome for all parties

PSDC- Dynamic Skills Training Centre

The PSDC (Penang Skills Development Centre) is the

first industry-led skills training centre to

be set up in Malaysia. PSDC’s success largely depends on

its ability to link with industry especially in developing

curriculum as well as in understanding the industry’s

demands.

The PSDC's tripartite model brings together the best of the

Industry, Academia, and Government.

PSDC website

Strengthening Technological Capabilities Through

Greater Coordination: The case of Vitrox

ViTrox Training Centre to help Local Firms Tap Global

Machine Vision Industry

The setting up of a ViTrox’s RM10 million Centre of

Excellence (CoE) for Machine Vision in Bayan Lepas Free

Industrial Zone enable local companies to strengthen their

technological capabilities to tap into the global machine vision

industries..

The centre is partially financed by the Domestic Investment

Strategic Fund, under MIDA to accelerate the shift of

Malaysian-owned companies in targeted industries to high

value-added and innovation-based industries.

Source: New Straits Times [Available at http://www.nst.com.my/node/29335, accessed on October 29, 2014]; The Edge [Available

at http://www.theedgemalaysia.com/business-news/305606-vitrox-training-centre-to-help-local-firms-tap-global-machine-vision-

industry.html, accessed on October 29, 2014]

CREST-Promoting Industry Relevant

Talent Development for E&E Sector

Source: New Straits Times [Available at http://www.nst.com.my/node/29335, accessed on October 29, 2014]; The Edge [Available

at http://www.theedgemalaysia.com/business-news/305606-vitrox-training-centre-to-help-local-firms-tap-global-machine-vision-

industry.html, accessed on October 29, 2014]

Industry-led initiative on

development of industry-

relevant talent with

relevant curriculum and

projects, and seeding for

industry-driven post-

graduate research

projects

Promoting Innovation in the public

Sector: Key elements

Leader-ship

Competencies

Governan-ce

Collabor-ative Execution,

Monitoring and

Evaluation

Culture

Everything rises and

falls with leadership John Maxwell

https://www.google.com.my/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=https%3A%2F%2Ffivenonblondes.wordpress.com%2Ftag%2Ffloating-houses%2F&ei=3gPiVPLLLYi2uASRo4L4Cg&bvm=bv.85970519,d.c2E&psig=AFQjCNFWASkBcMrcFAWqrPcYKVeEuqMBKA&ust=1424184668315366

Summary: Key Messages

Everyone

can

innovate

Public Sector needs

innovation

Innovation not

easy

Leadership vital for

innovation to

happen

Selected References •ANAO (2009) Innovation in the Public Sector: Enabling Better Performance, Driving New Directions. Better Practice Guide. Canberra: Australian National Audit Office •Bason,C. (2011) Public Sector Innovation: Driving Forces and Barriers [Online] Available from: http://aliainstitute.org/blog/2011/06/02/public-sector-innovation-driving-forces-and-barriers/ (Accessed August 17, 2013) •Bason, C. (2010) Leading public sector innovation: co-creating for a better society.Bristol: Polity Press •Eggers, W. D. & Singh, S. K. 2009, The Public Innovator’s Playbook: Nurturing bold •ideas in government, The Deloitte Member Firm Public Leadership Institute & Ash Institute for Democratic Governance and Innovation at Harvard Kennedy School of Government, Deloitte Research. •Mulgan, G. 2007. Ready or Not? Taking Innovation in the Public Service Seriously. NESTA Making Innovation Flourish. •NAO 2006. Achieving innovation in central government organisations. National Audit •OECD 2012, Innovation in Public Services: Context, Solutions and Challenges. Paris: Organisation for Economic Co-operation and Development. •PEMUDAH Annual Report 2012 Ministry of International Trade and Industry •Smith, K.R. (2006) Building an innovation ecosystem: Process, culture and competencies. Industry and Higher Education 20 (4) pp.219-224 •Thiruchelvam,K,Chandran, V.G.R, Boon-Kwee, Ng and Chan-Yuan, Wong (2013) Malaysia’s Quest for Innovation Progress and Lessons learned Strategic Information and Research Development Centre: Petaling Jaya •Windrum, P. 2008. Innovation and entrepreneurship in public services. In:Windrum,P. & Koch, P. (eds.) Innovation in Public Sector Services.Edward Elgar, Cheltenham.

Suggested Reading

This book argues that the

government has been behind

the boldest risks and biggest

breakthroughs from the

Internet to the green

revolution.

How Stella Saved the Farm is a

simple story about a farm in

trouble, and how it innovates to

get out of trouble.

This book shows how government agencies

can use co-creation to overcome barriers

and deliver more value, at lower cost, to

citizens and business. Through inspiring

global case studies and practical examples,

the book addresses the key triggers of

public sector innovation.

http://www.mckinsey.com/insights/public_sector/g

overnment_designed_for_new_times

Govt designed for new times

You Tube: TED Lectures

Steven Johnson: Where good ideas come from

https://www.youtube.com/results?search_query=steven+johnson+in+ted

Vijay Govindarajan on Reverse Innovation https://www.youtube.com/watch?v=ztna1lt_LZE

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Reports on

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ECONOMIC COMPLEXITY

PERSPECTIVES

FOR MALAYSIAN ECONOMIC

TRANSFORMATION FINAL REPORT

Sector Report prepared by

K.Thiruchelvam UTM Perdana School October 16, 2014

OECD Science,

Technology and

Industry Outlook

2014

OECD Policy

Questionnaire 2014

Report for Malaysia

prepared by team

led by K.Thiruchelvam,

UTM Perdana School

Collaborations

between HEIs

and Industry

Strategic Report

for RMK-11

Dr Nur Naha;

Dr K. Thiruchelvam;

Dr Angelina Yee

Additional Information

Kindly contact the following for additional information:

Prof Dr K.Thiruchelvam (Dean) kthiru53@gmail.com

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