Innovations need bureaucracy


By Rainer Kattel, Wolfgang Drechsler and Erkki Karo

What would a world without quantum mechanics look like? There would be no computers, no iPads, no mobile phones and certainly no satellites. Most 20th and 21st century electronics and, obviously, all the content that runs on them, from space communication to Ghost of Tsushima, would not exist. The birth and development of quantum mechanics required scientists, entrepreneurs and innovators, but it also required bureaucrats and bureaucracies. And it was not accidental. Behind the development of quantum mechanics was a complex bureaucratic web of public and private capacities and capabilities, able to envision, plan, iterate and deliver.

Innovation bureaucracy blueprint

We owe a lot of what came to be known as quantum mechanics to a rather obscure public organisation, the Physikalisch-Technische Reichsanstalt (PTR), established in 1887 in Charlottenburg, a small German town of 30,000 people. The main purpose of the PTR — to develop physical standards and measurement instruments — does not sound wildly exciting or innovative. However, the PTR played an important role not only in the pioneering work of Max Planck and others in quantum physics but also as a crucial cog in the rise of German industrial leadership, particularly for the electrical industry, and it helped to create technologies and global players that still exist today, such as Siemens and AEG.

It took more than fifteen years to establish the PTR, but its success was phenomenal. By the early 1900s, it was the global leader in its fields and helped win two Nobel prizes (Wilhelm Wien in 1911 and Max Planck in 1918). The PTR was one of the key drivers in shifting the global technology and innovation leadership from the UK to Germany.

In our new book, How to make an entrepreneurial state, we argue that the establishment of the PTR offers an almost perfect example of how (successful) innovations build on bureaucracies, and how such bureaucracies are established and how they evolve. The PTR was established on land donated by Werner Siemens, one of the leading industrialists of the time. Moreover, Siemens heavily lobbied for the PTR with the German government, covered initial construction costs and recruited its first leader in Hermann Helmholz, an outstanding German scientist and science organiser. Siemens also provided its organisational design, based on his own experiences, including the departmental division, hierarchy of authority and control — and guidelines on how to develop it. His idea was to find a charismatic leader who would then build up a ‘scientific bureaucracy’ — a blueprint of how to move from the agile and start-up phase of an organisation to a more stable delivery-focused one.

In our book, we build the case for why and how innovations need bureaucracy. We tell the story of such organisations, which we call innovation bureaucracies: public sector organisations tasked with fostering innovation by creating, funding, regulating and procuring those innovations. While it sounds like an oxymoron, ‘innovation bureaucracy’ is a real thing.

From agility to stability, and back

The role played by Siemens and others like him is that of a charismatic ‘bureaucracy hacker’: somebody, normally from outside, who is highly skilled at navigating the existing bureaucracy and political networks, with enough clout to open doors for new ideas. ‘Hacking’, solving problems and building ad hoc collaborations are very much part of innovation bureaucracy dynamics, providing agility to adapt to a changing environment or to drive needed changes in public organisations.

What bureaucracy hackers, who become the charismatic centre points of specific change movements, are extremely good at is creating ‘mission mystique’, a term coined by Charles Goodsell in 2010. Mission mystique is essentially a bespoke belief system, unique to the specific organisation. Mission mystique allows innovation bureaucracy to cope with the risks and uncertainties associated with innovation (failing in the public sector draws a lot of criticism) and lead on dynamic changes.

Simply put, we argue that successful government support for innovation rests not on a single type of bureaucracy but on a dance between different types of organisations. New agile innovation bureaucracy organisations are established to deal with emerging technological or socio-economic challenges, and over time these organisations, or rather the tasks they fulfil, are ‘socialised’ or institutionalised into existing public sector practices.

Perhaps somewhat surprisingly, this dynamic is predicted, by Max Weber, one of the most eminent social scientists of the last but one turn of the century. Often a strawman for bureaucratic, legalistic and rigid organisations, Weber described a variety of ways in which authority is generated and exercised, as well as how one type of authority (charismatic) becomes another type (bureaucratic), only to be challenged again by the initial type (charismatic).

In our book, we argue that these Weberian notions reveal themselves in the context of innovation bureaucracies through two typical categories of organisation — charismatic networks and expert organisations — and that their evolution is often an oscillation between the two extremes, within the same organisation, or leads to the emergence of new ones. Charismatic networks provide agility for innovation bureaucracies to search for new directions, while expert organisations bring long-term focus, predictability and stability to deliver needed policies and results. Both are key to the success of capitalist systems. We call this symbiosis agile stability. It is this contradictory, once-again counterintuitive combination that creates the success of the entrepreneurial state.

Lessons for today

What can we learn from the history and theory of innovation bureaucracies for the challenges we face today? We can speculate that out of the ashes of the COVID-19 crisis, war, cost-of-living crisis, and climate catastrophe, the idea of 21st century innovation bureaucracies is emerging. Such organisations seek to combine both foci on long-term capacity building (e.g. building a professional workforce or functioning public digital infrastructure) as well as on dynamic capabilities for agile response to and active steering of contextual events (e.g. developing capabilities for agile public procurement or user-focused analytical tools for analysing the use of public services). These organisations aim to be both dynamic and resilient by design. We can justifiably call these neo-Weberian agencies.

Let us briefly look at two examples, Vinnova in Sweden and Government Digital Service (GDS) in the UK. The Swedish innovation agency Vinnova has attempted to change its way of working recently, inlcuding by creating a new post for strategic design director. This is an attempt to bring in new capabilities nested in human-centric design and, as a result, Vinnova’s work is being reframed, from focusing primarily on technological issues to tackling socio-economic challenges and transforming related socio-technical systems. This has meant considerably enlarging the circle of key stakeholders and changing the way of working at Vinnova. For instance, one of the missions it has chosen is rethinking food systems to provide healthy, sustainable food in Swedish schools. Vinnova is working with the entire food delivery value chain, from producers to users (children and parents) and spurring innovations (via funding), creating markets and aiming to transform existing systems from energy production and transportation to waste management. It attempts to combine a relatively long-term view of investing in new technologies with short-term changes in day-to-day habits . Vinnova is trying to develop agile stability. While Vinnova is only at the beginning of its transformation, its blueprint is increasingly being copied.

The UK’s GDS, created in 2011, is another fascinating example. GDS radically changed the government’s digital transformation mindset and digital procurement through spending controls on procurement contracts and creating a new digital marketplace for bids. This has enabled thousands of SMEs to win public tenders, break existing oligopolistic markets and create new, more open, IT markets. At the same time, GDS also radically changed the government’s digital presence by creating a unified website, transforming the user experience. This is based on user research and design practices to make information and services user-friendly. In its initial years, GDS offered a vision and practice of a highly dynamic and agile government agency. It is worth noting that many of the people hired by GDS outside the civil service did not come from the private sector but were from the BBC and other similar public or third-sector organisations. The value system underlying GDS was inspired as much by post-war British modernism, with its focus on public space, as by the open web movement and hacking in a positive sense.

In the last few years, GDS has become the standard-bearer for the digital and design profession within the UK government. The hackers and doers have become the new mandarins, or at least the mandarins have co-opted some of the capabilities brought in by GDS. Its user-centred design capabilities have become increasingly part of the routine skills many departments and agencies have in-house, rather than relying on a central agency.

The need for innovation bureaucracy

These examples show how today it is not enough to attempt to face technological challenges by focusing on creating agile organisations to replace an existing bureaucracy — nor is it an option to retain the latter for routine, equitable deployment, but without a new emphasis on risk-taking, and contemporary and future competences. We need both, at the same time — and increasingly within the confines of the same organisation. It demands high-level judgement power, resolve, tenacity and funding to develop such an innovation bureaucracy — but if this sounds difficult and expensive, the alternative is not meeting the challenges of our times.

More information

Interested in the concepts in the book? Join us at 17:00 GMT on Tuesday 31st January 2023 for ‘Why Innovation needs Bureaucracy’, a panel event bringing together global leaders to explore the concept of the ‘entrepreneurial state’.