President Donald Trump’s memorandum establishing the White House Office of American Innovation sounds great. It appoints his son-in-law, Jared Kushner, as its head and aspires to “bring together the best ideas from government, the private sector, and other thought leaders to ensure that America is ready to solve today’s most intractable problems.”
We hear lots of talk in the business community about the need to innovate to stay ahead of the competition. But what does “innovation” really mean? Merriam-Webster defines it as “a new idea, device, or method.” If Trump and Kushner intend to import the private sector’s ideas, devices, or methods into government, we should take a closer look at how innovation works in the business world.
The federal government is a large organization; in fact, it is the largest employer in the U.S. followed by Walmart. So if innovation is going to work in the federal government, it would need to follow the same model of innovation at large private sector organizations.
But the tough truth is that it’s really hard to innovate in large private sector organizations. There are really only two ways to do so effectively: acquire those that innovate or innovate internally.
Large private sector companies have optimized their structures and operations to execute on known business models. They are good at cutting costs and creating efficiencies when they have figured out these business models. Startups, on the other hand, are often trying to find their business models. They have to be agile and experimental before they run out of money. Once they do, they are often acquired by large companies who then turn the crank and optimize them to scale.
What about the other way to innovate—internally? That’s incredibly difficult. It has to be done through experimental innovation projects, which have to be protected from the rest of the organization and measured and evaluated differently than other business functions. The culture of many large organizations is not welcoming to innovation, since most have optimized their operations and reward systems around doing predictable work over and over again.
Therefore, trying to apply private sector innovation to the public sector, with its overlapping and sometimes conflicting legislative mandates and a bureaucracy organized to execute on those mandates, is a gargantuan task. If Trump and Kushner want Washington to innovate internally, they’ll have to begin with experimental and small-scale efforts that large private companies have tried in the past.
Read the full post at Fortune.
Joseph Hadzima is a Senior Lecturer in the Martin Trust Center for MIT Entrepreneurship.