Innovation is Essential if the Public Sector is to Remain Relevant

In Israel, the public sector succeeded in enhancing innovation in the private sector but has remained rigidly stuck in the past and lags behind OECD standards.

Israel is considered one of the leading countries in technological innovation (despite the relative slowdown of the high-tech sector in recent months), and it is widely known as the “start-up nation.” It enjoys a high rate of capital investment, and is ranked third in the world in terms of the number of registered companies traded on NASDAQ, after the global powers of the United States and China. There is no doubt that it provides fertile territory for groundbreaking developments and is considered a world leader in its number of unicorns (companies whose value exceeds a billion dollars).

This was not always the case. Historically, the State of Israel was founded as a country based on agriculture and manual labor, and for decades displayed no special talent in technology or entrepreneurship. In fact, it was the public sector that changed this state of affairs. Government support for technological innovation in Israel has played a significant part in the growth and flourishing of the Israeli innovation ecosystem. For decades, the State of Israel encouraged technological entrepreneurship and investment in research and development in the industry, via various programs operated by the Chief Scientist’s Office, and it continues to do so by means of the Innovation Authority. The State, then, is a highly significant—perhaps leading—player in the emergence of the start-up nation. Yet ironically, the public sector itself is often considered “the shoemaker’s son who goes barefoot.”

While other countries, which looked up to Israel during the 1990s and early 2000s to learn about innovation, have since applied and scaled those lessons well, we have rested on our laurels and failed to develop additional mechanisms and tools for innovation from within the public sector.

Back in 2010, the OECD recommended adopting a broad, government-wide innovation strategy to address complex social challenges. A year later, it launched the Observatory for Public Sector Innovation (OPSI), based on the idea that for the public sector to remain relevant, efficient, and effective in its services, it must incorporate innovation—not only technological, but also, and mainly, organizational and process-related.

The OECD is not alone, and fairly quickly, various member states formulated strategies and operational approaches (Britain, Finland, and Canada), opened innovation labs (Denmark, New Zealand, and Singapore), and created dedicated training programs for public servants in process innovation (the United States, Britain, and Australia). Soon other non-OECD and non-EU countries joined in: Qatar and the United Arab Emirates set up various agencies and research institutes focusing on the promotion of public sector innovation.

And Israel? Well, this is the Israeli paradox at its best. The same public sector that succeeded in enhancing growth and resilience to innovation in the private sector, is considered to be rigidly stuck in the past and unable to create innovation for itself. A 2020 OECD report on Israel noted that while there were buds of innovative initiatives in the public sector, they were not the product of a developed organizational culture but rather of sporadic efforts by highly motivated individuals. According to the OECD, Israeli public innovation is characterized by a “lack of systemic ambition,” and thus often fails in wide implementation and scaling.

Currently there is no reliable empirical data on the level of innovation in Israel’s public sector, nor about the gaps in skills among its employees. In order to address this gap, the Israel Democracy Institute has launched a research project to map the required skills and behaviors needed in order to promote innovation, the systemic obstacles inhibiting it, and existing and possible policy tools and solutions, with the aim of fostering a culture of organizational innovation in government. As part of these efforts, we held a session on Innovation in the Public Sector at the Eli Hurvitz Conference on Economy and Society, which took place in Jerusalem on May 30–31. Better late than never.

 

Adv. Rita Golstein-Galperin is the head of Public Sector Reforms Program at the Israel Democracy Institute and former economic diplomat and policy expert at the Government of Israel.