Introduction
LONDON – Governments worldwide are attempting to reinvent themselves in the image of private companies. Elon Musk’s DOGE campaign in the United States and Argentine sawmill president Javier Milei exemplify this trend, as does the UK’s Minister Pat McFadden, who advocates for a culture of “experimentation and learning” and performance-based management.
The Fundamental Differences Between Governments and Startups
The core issue lies in the distinct purposes of governments and businesses. If public officials start mimicking entrepreneurs, they will weaken their ability to tackle complex social issues.
Startups prioritize rapid iteration, tech-driven disruption, and delivering financial returns to investors. Their success often hinges on solving a contained problem with a single product or within an organization. Conversely, governments must address interconnected and complex issues like poverty, public health, and national security. Each requires cross-sector collaboration and meticulous long-term planning. The notion of immediate profits in these areas is nonsensical.
Unlike startups, governments have legal mandates to fulfill and must ensure essential service provision and equal treatment under the law, especially now. Metrics like market share are irrelevant as there are no competitors. Governments should focus on expanding opportunities and promoting best practices rather than “winning.” They must think long-term while maintaining agile and adaptable structures.
Potential Pitfalls of Applying Startup Logic to Public Services
Introducing a new healthcare digital application into a flawed public health system might offer a specific improvement but won’t resolve underlying systemic issues, such as medical staff shortages or geographical challenges. Worse, applying startup logic to public services can create fragmented solutions that exacerbate existing inefficiencies. For instance, a city might quickly improve its citizen relationship through a pothole reporting app but won’t help study sustainable transportation systems or reduce carbon emissions impacting citizen health.
Learning from Public Sector Modernization Initiatives
Governments must study previous public service modernization and reform initiatives rather than blindly adopting startup culture. Several lessons can be learned:
- Economic Foundations: The public sector should shift from an efficiency-focused model that conflates “products” (e.g., subsidized school lunches) with “results” (nutritious, sustainable, locally-sourced meals). This oversimplified public vs. private dichotomy leads to excessive faith in superficial heuristics like cost-benefit analysis, which doesn’t necessarily advance desired systemic outcomes.
- Long-term Value Calculation: Improving public investment value calculation is essential. UK Finance Minister Rachel Reeves’ decision to prioritize public sector net financial liabilities over net debt is correct, as it better reflects public investment returns by including illiquid assets (government loans) and other financial liabilities (gold reserves). However, Reeves’ scheme doesn’t account for non-financial assets (e.g., public ownership of infrastructure and housing) or create long-term incentive structures.
- Diversity as an Asset: The public sector historically aimed for universality and uniformity in service quality, regardless of location. However, the delivery method matters too. A diverse workforce, continuous training, varied analytical perspectives, and a range of interventions are needed to create an adaptable, results-focused public sector.
- Balancing Policy Capabilities: Governments are not mere administrative machines; they require political leadership, purpose, and policy modification capabilities. Public sector reform often focuses too much on technocratic efficiency while neglecting the need to articulate and execute a vision supported by citizens.
Innovative Local Governments
Some local governments are introducing new models. For example, Barcelona and Bogotá have chosen leaders based on urban transformation platforms rather than grievance-based policies. Their success highlights the importance of balancing political vision with execution viability.
Six Capacities for Effective Public Sector
To address current challenges, governments (and what Mariana Mazzucato calls “public entrepreneurs”) must cultivate six capabilities for learning, adapting, and adjusting:
- Strategic Awareness: Proactively identifying emerging challenges and opportunities.
- Adaptive Agenda: Balancing priorities while responding to crises.
- Coalition and Partnership Building: Encouraging cross-sector collaboration and community engagement.
- Self-Transformation: Continuously updating public sector skills, organizational structures, and operational models.
- Experimentation and Iterative Problem-Solving: Conducting experiments and iteratively resolving public service delivery issues.
- Outcome-Oriented Tools and Institutions: Developing tools and institutions focused on results.
To foster these capabilities across the public sector, reconsidering civil servant training, competency frameworks, and organizational models is necessary. Primarily, rethinking public sector work measurement and evaluation methods is crucial. The Institute for Innovation and Public Purpose (IIPP) at University College London is creating a public sector capabilities index to assess local government capacities.
Conclusion
Governments should not be managed like startups, as their purposes, mandates, and time horizons are vastly different. Instead of chasing the Silicon Valley mirage, authorities should focus on creating agile, resilient, and effective government structures. (Besides IIPP’s work, authors like Jennifer Pahlka and Andrew Greenway at the Niskanen Center also demonstrate potential approaches.)
Public sector reform should be based on a deep understanding of its dynamics, not the misguided desire to imitate unicorns chasing the next big disruption. Moreover, real-time learning shows that disruption alone is a recipe for disaster.
About the Author
Mariana Mazzucato, Professor of Innovation and Public Value at University College London, is the author of The Big Con: How the Consulting Industry Weakens Our Businesses, Infantilizes Our Governments and Warps Our Economies (Penguin Press, 2023).
About the Author
Rainer Kattel is Deputy Director and Lecturer in Innovation and Public Sector Governance at the Institute for Innovation and Public Purpose, UCL.
