5 Risks and Consequences When the Public Sector Doesn’t Innovate (Industry Perspective)

The public sector tends to be risk averse and avoids innovation. But with this comes several risks.

by Rich Foreman / July 13, 2016
Without innovation, the government agencies may meet the same fate as former private-center giants like Blockbuster Video. Flickr/Nicholas Eckhart

In the private sector, not being innovative can lead to the demise of an organization. Giants like Blockbuster Video and Kodak are recent examples of industry titans that became extinct or irrelevant by not being innovative and adapting to the current environment.

The public sector, on the other hand, tends to be risk averse and, unfortunately, avoids innovation. I’ve talked to several-public sector managers, and their mantra is to avoid doing something that will put them on the front page of the local newspaper. Hence the focus becomes maintaining the status quo. However, there are risks and consequences of not being innovative:

1. Not Meeting Customer Needs

The government is slow to adopt technology; the public, on the other hand, tends to quickly adapt to new technology. A disconnect can result where a public-sector agency fails to adapt to the public’s needs. For example, we are working with a public-sector client on a project, and a big issue is this organization is still using a website made in the 1990s. Therefore, this client isn’t meeting the needs of its population — whose primary Internet access is through mobile. (More about this problem can be found here.)

2. Being Unable to Scale

One of the main reasons the private sector strives to innovate is to meet the demands of a growing population at a lower cost. A great example is how the banking industry uses ATM and mobile banking to accommodate a larger user base at a lower cost. Compare that with a visit to the DMV: You have the choice of waiting in line for 45 minutes or scheduling an appointment weeks in advance. When a public-sector agency fails to innovate, it also doesn’t scale to a growing population.

3. Becoming Vulnerable

If a public-sector agency doesn’t keep up with technology, it becomes easy prey for bad guys who are creative and innovative. Case in point: ransomware where hackers will lock out an organization’s data until a ransom is paid. Ironically many police departments have been victimized by ransomware and were forced to pay a ransom to hackers in order to restore access to their data.

4. Increasing Cost of Legacy Systems

Many public-sector agencies still use legacy systems that are decades old. In doing so, there’s higher cost to maintain them because vendors raise the support charges when their knowledgeable employees become more scarce as they age.

5. Bankruptcy

Governments can, and do, go bankrupt. Detroit, Stockton and Orange County are spectacular examples. Had they been innovative, they might have been able to become more efficient in running their operations, reduce cost and avoid going bankrupt.

Rich Foreman is the CEO of Apptology, a Sacramento-based mobile application development and mobile marketing company. He also is the Sacramento director of Startup Grind. This story originally appeared on TechWire.