2. Anticipatory innovation governance

Abstract

To reinforce governments’ capacity to tackle complex challenges, the OECD proposes an anticipatory innovation governance model. It enables governments to use tools, methods and information resources to anticipate and innovate in practice in the face of fast-moving change, and builds a public sector system that creates demand and validation for this work.

    

The anticipatory innovation governance model leverages and connects government capacity to anticipate emerging changes, set up visions for desired futures, and develop innovative solutions to achieve these. The OECD’s public sector innovation model sets the basis for this work. The theoretical framework underpinning the OECD Declaration on Public Sector Innovation (OECD, 2019[1]) is based on the notion of innovation facets (Figure 2.1) recognising that different innovative responses are needed in accordance with the type of problem at hand. As can be seen in the diagram below, the facet model identifies two central characteristics affecting the type of innovative response. These are the degree of uncertainty surrounding the problem, and the level of command over the response (its directionality).

Figure 2.1. Public sector innovation facets model

Source: (OECD, 2021[2])

The model outlines why governments innovate:

• to reach their goals and solve problems (mission-oriented innovation)

• adapt to their citizens’ needs and changing environments (adaptive innovation)

• run their current systems more effectively and efficiently (enhancement-oriented innovation)

• address future challenges, risks and opportunities (anticipatory innovation)

• These goals are inherently connected to public values governments are called to fulfil (see Box 2.1 below). Anticipatory innovation is particularly connected to transformational values meaning that countries are ready for future risks and uncertainties.

Box 2.1. Public sector innovation and a public value approach

Public sector innovation

The Observatory of Public Sector innovation defines “public sector innovation” as the process of implementing novel approaches to achieve impact (OECD, 2017[3]). In the broadest terms, public sector innovation has to fulfil three different criteria: novelty, implementation and impact. The starting point for the definition is Schumpetarian (Schumpeter, 1934[4]) meaning new combinations of new or existing knowledge, resources, equipment (novelty), and other factors with the aim of commercialisation or application (implementation).

Value approach to innovation

While in the private sector the aim is usually gaining a competitive advantage in the market, in the public sector the same metric cannot be applied. Thus, impact usually means a shift in public value (OECD, 2019[5]).

In general, public value represents a normative consensus of prerogatives, principles, benefits and rights that can be attributed to both governments and citizens (Jørgensen and Bozeman, 2007[6]) and can be linked to a variety of values like effectiveness, transparency, participation, integrity and lawfulness among others. Not all public values have a clearly distinguishable cost / monetary benefit dimension (Tangen, 2005[7]). Public value can be defined by both the values the public sector seeks to attain, but also the value added to the public sphere (Benington and Moore, 2011[8]; Moore, 2013[9]). A distinction can be made between “prime values” or “substantive values” of the public sector (values that can be pursued for their own right) and others that are instrumental in achieving other values. “Substantive values are different from transitory values, as they should hold true even if day-to-day missions and goals in the public sector shift (Rosenbloom, 2014[10]). Public sector innovation is connected to the following substantive values (OECD, forthcoming[11]):

1. 1. How can government achieve its ambitious societal goals that it is called on to tackle (political-social value)?

2. 2. How can government continuously improve and do things better with the public funds it has been trusted with (moral-ethical value)?

3. 3. How can government take on board and respond to evolving citizen needs and environmental changes (citizen-centric values)?

4. 4. How can government explore future risks and uncertainties, so it and its citizens are future-ready (transformational values)?

Source: (OECD, forthcoming[11])

Anticipatory innovation embraces uncertainty and experimentation to explore possible futures and steer towards preferred ones. Yet, it is difficult to create space for anticipatory innovation in government contexts. Evidence and literature indicate a number of reasons for this (Tõnurist and Hanson, 2020[12]). First, there is a tendency of governments to focus innovation efforts to present issues based on existing tools and mechanisms rather than engaging with future issues which require a change of paradigm. Second, even when policy makers talk about future issues, they tend to reduce them to categories of the present and to project present-day solutions to address them. Third, anticipatory innovation is often conflated with adaptive innovation, while the latter is directed to respond to the changes in today’s government environment, they are not designed to respond to those that can potentially impact the future (Box 2.2).

Box 2.2. Balancing anticipation with adaption

There tends to be some confusion between anticipatory and adaptive innovation (see Figure 1.1 in Chapter 1) especially in dealing with crises. Adaptive resilience or anti-fragility is meant to address the unexpected in the world as we know it, while anticipatory innovation focuses on preparing for and shaping the unexpected world (Nordmann, 2014[13]). One is about an isolated new phenomenon, the other about an entirely unfamiliar environment. In reality, governments need both: resilience and quick action when the current system experiences a shock (short-term, quick responses that help respond to crises with available means); but also anticipation, preparing for cascading effects, potentially transforming the system quickly to respond to new realities. This can be understood in simple terms as the difference between tactical and more strategic long-term responses to prevailing, complex issues. Hence, anticipatory innovation is more prospective and proactive than adaption; it invites governments to explore and take action towards desired futures.

Anticipatory innovation governance should consider uncertainty (not risk) over extended timeframes, and develop the capacity to mitigate uncertainty by changing actions today. There is a connection between anticipatory innovation governance and adaptive management, as there will always be risks that suddenly emerge, requiring government response. While adapting to changes in the current system, anticipatory innovation must explore options that may also challenge the current system and how it functions for example through agile management practices.

Source: OECD; (Nordmann, 2014[13])

As defined earlier, anticipatory innovation governance is a broad-based capacity to actively explore possibilities, experiment, and continuously learn as part of a broader governance system (Figure 2.2). The model is anticipatory in that the frame of interest is uncertain futures. Innovation is both the process and the strategy to explore these futures. Typically, OPSI defines innovations as implementing something novel to the context that has impact (positive or negative) such as the change in public value (OECD, 2017[3]). This becomes core to the anticipatory innovation governance model when governments develop a portfolio of innovation projects designed to work together to probe potential futures, with feedback loops that generate organisational learning. Anticipatory innovation has close ties to foresight and futures thinking. A new wave of “future-readiness” is entering policy making through the increased importance of foresight activities and futures thinking (School of International Futures, 2021[14]). Yet, this is not going to be enough to make a difference on the ground. Governments need to learn to anticipate – create the knowledge about futures ahead – but also make that actionable through implementing real innovation on the ground. For this to work, governments need a new governance approach to support future-oriented learning that is based on empirical experimentation.

Figure 2.2. Anticipation, anticipatory innovation, anticipatory innovation governance

Source: (Tõnurist and Hanson, 2020[12])

This governance model requires innovation to be built into the administrative system. This means developing a governance system to continuously identify, test and disseminate innovations especially with a particular aim of spurring on innovations connected to uncertain futures in the hopes of shaping the former through the innovative practice. Anticipatory innovation governance needs to be ingrained into the everyday practices of government so that policy reforms and structural changes can benefit from this capacity. It requires governments to steward innovation processes and policy making differently (see comparison of traditional and anticipatory innovation governance in Table 2.1 below). Rather than policy determining the activities of individuals and groups within a system, policies are shaped by the results of observations/experiments in a real-world environment – ideally with a subset of the individuals or groups that would be affected by government intervention – in order to determine effective policy and its potential unforeseen side-effects. This approach allows governments to move towards their ideal future not by simply anticipating potential outcomes and developing innovative policy approaches to address them in theory, but by taking action to ensure that these policy approaches work.

Table 2.1. Comparison between traditional policy making and anticipatory innovation governance
	Traditional policy making	Anticipatory innovation governance
Evaluation approach	Evaluation as the last stage in an often-multi-year policy cycle	Continuous evaluation and assessment; exploring future effects (e.g. changes in public values, ethics, intergenerational fairness)
Policy cycle	Long research and drafting cycles, with policy implemented accordingly	Recognition that cause-effect relationships are impossible to know in advance, and that the policy implementation itself changes the problem space
Research and analysis approach	Exploring the problem space through research and analysis	Exploring the problem space through small-scale real-world experiments and innovation
Research and analysis focus	Research and analysis focused on what has happened	Research and model development focused on a range of possible futures
Participation	Policy domain experts and primary affected population	System of related policy areas and affected populations, which changes over time
Source: OECD.

Anticipation is more about practising, rehearsing or exercising a capacity in a logically, spatially or temporally prior way than it is about divining a future (Guston, 2013[15]). Anticipation does not mean predicting the future; it is about asking questions about plausible futures, so that we may act in the present to help bring about the desired futures. It is a capacity to generate and engage with alternative futures, based on sensitivity to weak signals, and an ability to visualise their consequences, in the form of multiple possible outcomes. The main contribution of anticipation lies in the ability to shape people’s perceptions about the future and develop their capacity to make sense of novelty (see the difference with traditional policy making in Table 2.1 above). The important follow-up is to take that into practice – innovate based on the knowledge created through anticipation. This can involve future proofing or making current policy systems more resilient to potential change, but it can also involve more transformative shifts in government and testing them out in practice (e.g. how would a public sector organisation work if 20%, 30% or 40% of current tasks were no longer required?).

Strategic foresight is used to create functional and operational views of possible futures and the possibilities that exist within them in order to influence today’s decisions. This allows organisations and institutions to gather and process information about their future operating environment while creatively examining their current landscape for meaningful trends and then leveraging those insights to extrapolate or explore potential outcomes that can be used for planning purposes (OECD, 2017[16]). Foresight abandons the idea that the future is ever fully knowable, and accepts that there are always multiple versions of the future – some of them assumptions, some of them hopes and fears, some of them projections, and some of them emerging signals of change in the present. All of them are incomplete and still forming in the present. Strategic foresight makes it possible to make wise decisions in spite of uncertainty by generating and exploring different plausible futures that could arise, and the opportunities and challenges they could entail. Organisations then use those ideas to make better decisions and act now (see The Netherlands Armed Forces Futures: Scenarios in Action – Box 2.3).

Box 2.3. The Netherlands Armed Forces Futures: Scenarios in action

The Dutch Ministry of Defence has a long tradition of foresight activities, including through in-house generation and use for futures studies; and through partnership with external experts such as The Hague Centre for Strategic Studies and the Clingendael Institute. The report “Defensievisie 2035”, published in 2020, outlines a set of principles for action to prepare the armed forces for the possible futures in which they might have to perform.

Part of the process of developing these principles for action is the creation and use of scenarios. The scenarios were developed with a time horizon of 2025, and are intentionally fictional but with strong plausibility and potential for impact. From these exploratory, contextual scenarios, a number of potential future situations were derived, and analysed for the capacities and preparedness they would demand of the Dutch armed forces. As in all effective foresight processes, the scenarios themselves are less important than the insights derived from them. Some of the new insights to which these scenarios contributed include the following needs:

• Flexible performance: the ability to quickly mobilise, scale, and function independently

• Authority through intelligence and information

• Transparency and visibility with a social conscience

• Greater specialisation within EU and NATO partnerships

Source: (Government of The Netherlands, 2020[17])

However, often governments are facing an ‘impact gap’ connected to strategic foresight: the individual, collective, and institutional limitations that prevent the use of high-quality futures knowledge in innovation, policy, and strategy. Foresight approaches have not been systemically integrated within government contexts and there is an overall lack of awareness and capacity for strategic foresight. Because the common tools and structures developed to create and implement policy were designed primarily to react to past events, they are often ill-equipped to value and leverage the insights developed through foresight practice. Strategic foresight can inform decisions, but cannot tell whether these decisions will be successful in the future or how the context will respond or evolve in real life. Thus, the link between foresight, planning and systemic, continuous policy change is missing. Anticipatory innovation governance takes strategic foresight closer to acting (Figure 2.3 below). This involves identifying contextual awareness, sense making, reframing and problem solving, and ultimately acting and learning.

Figure 2.3. Strategic foresight as part of an anticipatory innovation process

Source: (Tõnurist and Hanson, 2020[12])

Anticipatory innovation governance mechanisms

Recent OECD research (Tõnurist and Hanson, 2020[12]) has pointed to the enabling environment and conditions for government to embrace anticipatory innovation governance. Anticipatory innovation governance operates within established government core architectures and acts on a variety of inputs to manage emerging challenges. It is enabled by a set of mechanisms related to the following categories (see Figure 2.4):

• Agency defines the tools, methods and information resources that enable public servants and organisations to anticipate and innovate in practice.

• Authorising environment is the system within the public sector that validates anticipatory innovations – provides feedback that there is demand, value, and use for the work.

Figure 2.4. Anticipatory innovation governance mechanisms

Source: (Tõnurist and Hanson, 2020[12])

The categorisation is based on an extensible literature review of different core components and factors associated with transformative change from organisational studies, innovation and futures thinking literature.

To operationalise anticipatory innovation governance, it is key to explore how changes in authorising environments and officials’ agency can create opportunities and habits for experimentation, learning and innovation. Governments seeking to authorise anticipatory innovations can create learning loops, evidence and evaluation, legitimacy, and networks and partnerships; and will address vested interests and cognitive biases, and public interest and participation. Public servants need to have agency to work with anticipatory innovation on the ground: the tools and methods, institutional structures, and organisational capacity to support this work. This would require examining the traditional functions of government, including human resources, budgeting, decision-making processes, strategic planning and working methods, etc. The anticipatory innovation mechanisms are summarised in Table 2.2. These mechanisms often intersect and interact with traditional government functions (human resources, budgeting, procurement, evaluation etc.). More case-based research is needed to explore in depth the functioning of the enablers of anticipatory innovation governance and their relationship with established function to assess which ones act as enablers and which as barriers.

Table 2.2. Agency and authorising environment in the anticipatory innovation governance framework
Mechanisms of agency	Mechanisms of authorising environment
Alternatives exploration and experimentation Ability to consider different alternatives that may conflict with current strategic intent	Vested interest and cognitive biases Ways to address incumbents’ interests and biases in thinking about the future
Data and measurement Reading and interpreting signals in time	Public interest and participation Involving a variety of stakeholders and new perspectives, and facilitating discussions around values
Sense making Uncovering underlying assumptions and making sense of trends	Networks and partnerships Working together with leading organisations and individuals with transformative ideas
Organisational capacity Organisational structures that give autonomy and resources to explore transformative ideas	Legitimacy Creating trust in government, experimentation and explored futures
Tools and methods Approaches to create new knowledge about possibilities, creativity of thought, and operationalisation of innovations	Evidence and evaluation Evaluating future options based on value and accounting for opportunity costs
Institutional structures Institutions that make room for experimentation and testing	Learning loops Creating feedback loops from experimentation to dynamically inform policy choices
Source: OECD.

Agency – the capacity to act and reflect on potential for future actions – is partially based on actual competencies available (e.g. tools and methods used; skills and capabilities present), but also on the collective belief in the usefulness of these skills and methods in specific situations. It is not only about the individual agents, but the processes and structures that support their actions. Agency is often dependent on constraints, resources and opportunities in a given setting, but also on public servant’s belief that they are able to act. For such agents to engage with the future in a productive way, it is important to look at how organisations and teams explore alternatives, which tools and methods they use, and which structures and resources are in place to support taking action.

The authorising environment sets the legitimate limit of autonomy to shape the future (e.g. what is meant by public value), and thus, can constrain what is possible in terms of anticipatory innovation in the public sector. The authorising environment influences accountability and trust in public organisations and indicates the legitimate limits of the public manager’s autonomy, set by individual and collective values of the multiple stakeholders (Benington and Moore, 2011[8]). Authorising environments can be internal or external to the organisation, formal or informal, and in many cases they overlap and interact to produce authority and legitimacy in complex ways. An authorising environment is needed to fulfil the innovation potential and guarantee buy-in to anticipatory innovation. The need for authorisation is especially pronounced during priority setting, as decisions tend to carry considerable emotive and political weight (Tõnurist, 2021[18]). It is also important during funding allocation where strong justifications are needed to shield them from competition over funding. After initial funding decisions have been made, anticipatory innovation tends to be slightly shielded from broader communities inside and outside the organisation in practice (thus the efforts to create structural ambidexterity – the ability to explore and exploit knowledge at the same time – in organisations). Together with agency, the authorising environment determines which types of anticipatory innovations get explored, and how the overall governance system works.

The OECD’s initial work across different country projects shows several issues and challenges for anticipatory innovation in the public governance system (see Box 2.4). The following work in Finland helps to explore how anticipatory innovation governance could be incorporated with a broader government system and which challenges need to be overcome in a practical setting to make things work.

Box 2.4. How anticipatory innovation governance can challenge traditional governance functions and structures

These areas include, but are not limited to:

Human resource planning. Allowing diverse sets of skills and capacities to enter the public sector. Building up teams with multi-disciplinary skillsets and supporting competencies in futures thinking and foresight to accompany innovation capacities. In smaller governments, this may involve more mobile movement of anticipatory innovation capacities between teams.

Strategic planning. Strategic planning is traditionally based on past actions and linear models of change. There is a need to counter the linear and closed idea of the future. Allowing a variety of futures and possible scenarios to co-exist in strategic plans and continuously stress-testing approved strategies against alternative future contexts. Accounting for long-term visions and intergenerational fairness, but allowing for flexible changes when conditions alter. Signal and trend detection should be integrated as core tasks of strategic planning and should be upheld continuously. Anticipatory innovation governance mechanisms should help balance directionality and potential lock-in in strategic planning, in order to read and capture weak and strong signals of new paths and models. This is crucial because, in fast-changing environments, targets may change so rapidly that traditional instruments could lag behind and become irrelevant.

Structures of government. Creating competence centres for anticipatory innovation governance building capacity for futures thinking and radical innovation, but also allowing for decentralised alternatives exploration. Creating autonomy for anticipatory innovation with time, space, and resources to explore different ideas on the ground, so that business as usual and short-term goals do not overshadow anticipatory needs.

Budgeting. Resource planning that allows for testing and experimentation beyond traditional fiscal structures, countering short-termism, but also allowing challenges to existing strategic aims.

Risk management. Governments tend to file new developments under threats and do not see them as opportunities. Having a closer connection to strategic futures, risk and innovation approaches in government could broaden this approach and also help take into account uncertain scenarios where risks are incalculable.

Procurement. The possibility to create partnerships, building networks within the ecosystem from common future narratives, and building testbeds for new ideas. While the possibilities to support early innovations exist in international procurement regulations, they are far from commonly used.

Evaluation and auditing. As anticipatory innovations are uncertain by nature, it makes sense to evaluate the practice of government from a portfolio perspective: allowing for failure, but also expecting successes. Anticipatory innovation may also require longer time frames than the current government evaluation and audit models allow. Audits should also take into account the cost of not following opportunities to encourage more experimentation and risk taking in the public sector.

Open government and participation. Governments should include the future (of policies, services) as a subject/area of engagement with the public. This can help incorporate public values and concerns, mitigating potential public backlash against new developments, or making the various value trade-offs visible. This can also help set better boundaries for technological development and discuss ethical and moral issues in a democratic manner.

Source: OECD; (Tõnurist and Hanson, 2020[12]; OECD, 2021[19])

References

[8] Benington, J. and M. Moore (eds.) (2011), Public value: theory and practice, Palgrave Macmillan, New York.

[17] Government of The Netherlands (2020), Defensievisie 2035, Ministerie van Defensie, https://www.defensie.nl/downloads/publicaties/2020/10/15/defensievisie-2035 (accessed on 20 June 2022).

[15] Guston, D. (2013), “Understanding ‘anticipatory governance’”, Social Studies of Science, Vol. 44/2, pp. 218-242, https://doi.org/10.1177/0306312713508669.

[6] Jørgensen, T. and B. Bozeman (2007), “Public Values”, Administration & Society, Vol. 39/3, pp. 354-381, https://doi.org/10.1177/0095399707300703.

[9] Moore, M. (2013), Recognizing public value, Harvard University Press, Cambridge, Mass.

[13] Nordmann, A. (2014), “Responsible innovation, the art and craft of anticipation”, Journal of Responsible Innovation, Vol. 1/1, pp. 87-98, https://doi.org/10.1080/23299460.2014.882064.

[2] OECD (2021), Public Sector Innovation Facets: Innovation portfolios, OECD, Paris, https://oecd-opsi.org/wp-content/uploads/2021/10/OECD-Innovation-Facets-Brief-Innovation-Portfolios-2021.pdf.

[19] OECD (2021), Towards a strategic foresight system in Ireland, OECD Policy Brief. OPSI, https://oecd-opsi.org/wp-content/uploads/2021/05/Strategic-Foresight-in-Ireland.pdf.

[1] OECD (2019), “Declaration on Public Sector Innovation”, OECD Legal Instruments, OECD/LEGAL/0450, OECD, Paris, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0450.

[5] OECD (2019), Strategic Foresight for Better Policies: Building Effective Governance in the Face of Uncertain Futures, OECD, Paris, https://www.oecd.org/strategic-foresight/ourwork/Strategic%20Foresight%20for%20Better%20Policies.pdf.

[16] OECD (2017), Developing an integrated policy approach to risk management, High-Level Risk Forum. Public Governance Directorate. Public Governance Committee., https://one.oecd.org/document/GOV/PGC/HLRF/RD(2017)1/en/pdf (accessed on 20 June 2022).

[3] OECD (2017), Fostering Innovation in the Public Sector, OECD Publishing, Paris, https://doi.org/10.1787/9789264270879-en.

[11] OECD (forthcoming), Public consultation on the draft OECD Recommendation on Agile Regulatory Governance to Harness Innovation, https://www.oecd.org/gov/regulatory-policy/public-consultation-on-the-draft-recommendation-for-agile-regulatory-governance-to-harness-innovation.htm.

[10] Rosenbloom, D. (2014), “Attending to Mission-extrinsic Public Values in Performance-oriented Administrative Management: A View from the United States”, in Public Administration and the Modern State, Palgrave Macmillan UK, London, https://doi.org/10.1057/9781137437495_2.

[14] School of International Futures (2021), Features of Effective Systemic Foresight in Governments Globally, https://www.gov.uk/government/publications/features-of-effective-systemic-foresight-in-governments-globally (accessed on 20 June 2022).

[4] Schumpeter, J. (1934), The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle.

[7] Tangen, S. (2005), “Demystifying productivity and performance”, International Journal of Productivity and Performance Management, Vol. 54/1, pp. 34-46, https://doi.org/10.1108/17410400510571437.

[18] Tõnurist, P. (2021), Towards an anticipatory innovation governance model in Finland. Intermediate Report, OECD, Paris, https://oecd-opsi.org/wp-content/uploads/2021/09/Anticipatory-Innovation-Governance-in-Finland.pdf.

[12] Tõnurist, P. and A. Hanson (2020), “Anticipatory innovation governance: Shaping the future through proactive policy making”, OECD Working Papers on Public Governance, No. 44, OECD Publishing, Paris, https://doi.org/10.1787/cce14d80-en.