Demand- and User-Driven Innovation Management In Public Organizations

1. Niinikoski, Marja-Liisa – Aalto University, School of Economics, June 8, 2011, Helsinki
Demand- and user-driven innovation management in public organizations
Abstract
To a large extent innovation studies, and more precisely innovation management studies, have been
focused on innovation management and innovation systems to deal with innovations in the private
sector context. Recently public measures of national innovation policies, as well as innovation
studies, have started to expand to the field of public innovations. This paper aims to set up a
conceptual framework drawing on management and governance approaches in order to experiment
and explore innovation management in the public sector context. More particularly the paper
focuses especially on the questions of demand- and user-driven innovation management, its
practices and operational principles in public organizations. Finally, the paper highlights some
preliminary empirical observations concerning obstacles and enablers of public innovations and
their management in the context of public organizations.
Key words: public innovation, innovation management, demand-driven approach, user-driven
approach

2. 1 Introduction
Accordingly the expansion of innovation policy and its measures towards public innovations
(Niinikoski, 2011), also innovation studies concerning innovation activities of the public sector
have expanded (Jæger, 2009). Traditionally innovations have been discussed in the context of the
private sector. In the private sector innovations have been seen as potent levers of product
development, cost reduction, market expansion, higher sales and increasing profits (Sørensen and
Torfing, 2010). The role of the public sector and public policy has traditionally focused on
improving the conditions of private sector innovation activities. The role of public demand in
innovation has traditionally served this aim (see e.g. Dalpé et al., 1991). Recently more attention in
innovation policy and innovation studies has been paid how the public sector could innovate by
itself and how public policy measures could be used also in this respect.
Although public innovation as such has not been in the focus of innovation studies, Sørensen and
Torfing (2010) claim that there is a lot of innovation in the public sector. According to them
administrative reforms, policy changes and transformation of the content and repertoire of public
services are frequent. However, they see that in most cases public innovation is a result of more or
less accidental events. According to Sørensen and Torfing this accidental character of public
innovation demonstrates the need for a new innovation agenda that aims to turn innovation into a
permanent and systemic activity that pervades the entire public sector. The new agenda in this
respect is needed, since the citizens have rising expectations to the quality, availability and
effectiveness of public services; the professionals, the public managers and the elected politicians
have growing ambitions with regard to public governance; and a growing number of public tasks
have the character of wicked problems1.
In order to enter into constructing this ‘new public sector innovation agenda’ this paper explores the
nature of innovation management in public organizations, especially innovation management
practices and operational principles. More precisely the paper discusses the role of demand and
users in public innovation activities and in their management. By using the concept of public
innovation, and locating it in the recent approaches of demand- and user-driven frameworks
especially in the public sphere with the integration of governance theories, this paper aims to set up
a theoretical and conceptual framework for public innovation management in order to later on
experiment empirically and examine innovation management practices in public organizations. It is
assumed in this paper that innovation management is one crucial factor to enable permanent and
1
According to Koppenjan and Klijn (2004) wicked problems are ill-defined, difficult to respond, require specialized
knowledge, involve a large number of stakeholders and carry a high potential for conflicts.
2

3. systemic innovation activities in the public sector. It can be also seen a way to increase resilience 2
(Välikangas, 2010) in public organizations and in the public sector meaning to take timely action
before a misfortune has a chance to wreak havoc.
The whole study, which this paper is a part of, is carried out as a co-operative inquiry, which means
that representatives of public organizations act as co-researchers. The study is initiated and
facilitated by academic researchers but the actual process is carried out co-operatively where
representatives of public organizations can take part in decision-making of the study. This
conference paper tries to set up a theoretical and conceptual framework for the study, which in turn
can be specified and defined through the empirical case studies. We focus to examine two
questions. Firstly, we are interested to figure out what kind of innovation management practices can
be used in the public sector, more precisely in the framework of demand- and user-driven
innovation management practices. Secondly, we ask how these practices can serve both the
operational performance of public organizations, as well as democratic legitimacy of public sector,
its operations and policies.
2 Public innovation and innovation management
2.1 Public innovation
Jæger (2009) has recently outlined special features of public innovations in relation to innovations
in the private sector. She sees that the differences derive from the role and tasks of public
organizations and the essence of the public sector. First of all, public organizations are engaged in
implementing the policies aiming to increase welfare, democracy, and legitimacy (at least in
Western-style democracies). Furthermore, they are based on the rationales of the legal state driven
by the ‘public interest’ including the equality of law, legitimacy, democracy, and a dignified
treatment of the citizens. The public sector itself is governed by political and bureaucratic
government in the first line, but also by the citizens who vote for the politicians at elections.
Additionally, the public sector has a much more complicated relationship with the user/citizens than
the private sector. According to Jæger these aspects constitute very different platform for innovation
in the public sectors from the private one.
Sørensen and Torfing (2010) call for a rigorous definition of innovation, also in the public sector
context, in order to avoid a risk that the concept of innovation loses it edge by becoming
2
Resilience is defined as a notion to mean the capacity to change without first experiencing a crisis, change without a
lot of accompanying trauma, and to take action before it is a final necessity.
3

4. synonymous with all kinds of change and transformation. Both Sørensen and Torfing (2010) and
Jæger (2009) see that the concept of public innovation is best understood, if the concept is defined
in the context of policy networks (Jæger, 2009), or through a collaborative approach (Sørensen and
Torfing, 2010). These approaches take into account the special nature of public innovation by
emphasizing its systemic and contextual character trying to serve different purposes of various
stakeholders, like elected politicians, public employees, users and citizens.
Sørensen and Torfing (2010) define public innovation “as a more or less intended and proactive
process that generates, implements, and disseminates new and creative ideas, which aim to produce
a qualitative change in a particular context”. Jæger (2009) in turn stems from the systemic
approach and defines innovation “as an interactive learning process between different actors in the
system/network within the institutional settings of the legal state”. By integrating these definitions
of public innovation this study develops and explores public innovation management in the context
of Finnish municipalities. More precisely the focus is in the demand- and user-driven approaches of
public innovation.
2.2 Demand-driven innovation management in the public sector
2.2.1 Public organizations in the first user role
Traditionally the role of the public sector in the demand-driven approaches has been seen through
its first user role. Government procurement has been identified as an important instrument to direct
and pace innovation in industry (Dalpé et al., 1991; Hebert and Hoar, 1982; Ponssard ,1981). In this
respect public procurement has served aims of technology policy (Dalpé et al., 1991) and
innovation policy (Edler and Georghiou, 2007), and so called demand-side policy measures have
been seen as an important intervention for the development of new technologies (Freeman 1978),
and recently strategic public procurement for the development of whole market areas in terms of
their importance in the economy (Edler and Georghiou, 2007). In these approaches the public sector
itself has not been seen as an innovator using innovations in order to improve its own performance.
In this paper we look the public sector and especially public organizations from the point of view,
where public organizations themselves will be seen as innovators or as co-innovators. At the same
time we acknowledge the role of the public sectors in relation to suppliers in the first user role, and
see the dualist role of public organizations in this respect.
2.2.2 Public organizations as innovators
From the point of view organizing and producing services in the public sector demand-oriented
management studies, and knowledge management studies emphasizing the interactive mode of
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5. knowledge construction, can be seen promising in order to outline demand-driven innovation
management and its practices in the public sector. Although it has been known about the theoretical
benefits of demand chain management (DCM) for many years, making it work in practice was
typically impossible before the Internet (Frohlich & Westbrook, 2002). Secondly, IT-based
Knowledge Management (KM) approaches have limited potentials for encouraging the knowledge
sharing that is crucial to interactive innovation processes (Swan et al., 2000). Swan et al. (2000)
argue that interactive innovation processes depend on the integration of knowledge across disparate
social communities and require the exploration (creation) of knowledge, rather than simply the
improved exploitation of knowledge. In this study demand-orientation in public sector’s innovation
management and in its practices conceptually draws, besides the market-oriented first user role, on
the DCM approach and the KM approach which acknowledge interactive innovation processes.
Demand-driven approach through information of demand
In demand-oriented management studies the DCM approach has been developed to describe a
management practice that manages and coordinates the supply chain from end-customers
backwards to suppliers (Vollmann et al., 2000). DCM requires extensive up- and downstream
integration between all business partners in order to succeed and these types of connections have
only recently become possible due to the web. Web-based technologies now permit strong customer
and supplier integration for inventory planning, demand forecasting, order scheduling, targeted
marketing and customer relationship management. Real-time information travels immediately
backwards though these web-based, demand-driven supply chains while inventory flows swiftly
forwards. In this study we define the concept of demand-driven orientation of innovation
management first of all from the point of view of demand information, as the DCM approach
declares.
However, the empirical results of companies using DCM seem to be more relevant for
manufacturers than for service companies (Frohlich & Westbrook 2002), which has to be taken into
account when speaking about public organizations, since their products are first and foremost
services. Typically services are simultaneously produced and consumed. In services, the
materials/labor ratio is often the reverse of that in manufacturing and service supply chains
normally involve human skills over material flows (Cox et al., 2001). According to Frohlich and
Westbrook (2002) service stockouts are mainly driven by underestimating future demand and
lacking sufficient capacity (i.e. service providers) on the day that customers actually arrive in the
process. However, in public organization the question of demand typically returns towards another
direction where the optimization problem is sometimes to prevent the emergence of demand.
5

6. While no doubt staffing levels and queue sizes between partners in service supply chains are
important, they ask, whether sharing real-time demand data with suppliers and improving inventory
visibility over relatively few materials is really that strategic in services like it is in manufacturing
business3. Frohlich and Westbrook (2002) suggest that if there is a significant bullwhip in services,
then DCM probably makes sense in services, too. They claim that if the bullwhip is not a significant
factor, then service providers may have the luxury of only concentrating on the web-based demand
integration (web-based integration with their customers) 4. This suggests according to Frohlich and
Westbrook (2002) that demand integration is more driven by proactive rational efficiency factors
like performance and market share. Moreover, demand-driven strategies (web-based integration
with their customers and web-based integration coordinating the whole demand chain from
customers backwards to suppliers) were also strongly motivated by the rational access to new
markets. It seems likely that only when upstream supply pressures and downstream market
opportunities collide that companies take the ultimate step and implement DCM. This is an
important insight for managers—the time may not be right to implement broad supply chain
integration until upstream pressures and downstream opportunities are both present.
In the case of public organizations the proactive rational efficiency factors can be reverse compared
to companies. This means that the smaller the market share is, the better the performance of a public
organization is, and thus increases its efficiency. However, this also is a relevant point where we see
the different role of public organizations compared to private ones. Thus, only creating innovations
based on demand information in order to increase the rational efficiency of public organizations is
not enough. Policy-making processes and practices are used to define the scope of public
organizations. About innovation management in line with this definition function we will turn later
in this paper. However, we see that the DCM approach as such has value to improve innovation
management practices and operational principles when innovations are tried to create and
implement in the service of operational performance of public organizations.
Based on their empirical results Frohlich and Westbrook (2002) argue that for most services the
best approach right now is to focus on demand integration. They see that it may be a waste of
resources for services to chase either supplier integration or full-blown DCM integration. This
empirical result may apply for public organizations, as well. In this empirical study it is at least one
3
In manufacturing business is spoken about the bullwhip effect. The bullwhip effect is called a phenomenon when the
variance of orders may be larger than that of the sales, and the distortion tends to increase as one moves upstream (Lee
et al. 1997).
4
This parallels Watson’s (2001, p. 41) services finding that for insurance companies, while downstream customer
integration was straightforward, upstream integration “remains little more than an unfulfilled desire”.
6

7. angel which will be closer examined in empirical part of the study. If public organizations have a
low integration, the implementation of the web-based supply and demand integration may unlock
their operational performance based on Frohlich’s and Westbrook’s results. They acknowledge that
although it is a daunting task, the alternative of trying to compete without integration is worse since
organizations’ survival may ultimately be at stake. According to them enhanced competitiveness
requires that companies ceaselessly integrate within a network of organizations—manufacturers and
services ignoring this new challenge are destined to fall hopelessly behind their more Internet-
enabled rivals. Although the existence of public organizations is not determined through the market
competition, we see that their operational performance still plays a role when it is defined what and
to what extent public organizations can carry and implement public tasks.
From the point of view of public organizations DCM seems to be relevant what concerns services,
demand of services and co-operation with external service producers. However, we see that the
DCM approach is not enough but might help public organizations to innovate in order to improve
their operational performance. Web-based integration with suppliers and customers can create a
consistent information flow which can be used as a database in innovation processes, and can be
according to our understanding especially relevant when electronic and web-based service networks
of public organizations are developed. It can also be seen as one form of metagovernance which
will be discussed later on in this paper.
Knowledge construction and communicative processes
Interactive innovation process approaches argue that not only knowledge achieved through IT-
based tools is relevant but knowledge exploration is dependent on shared understanding (Swan et
al., 2000). It is very difficult where those involved are from different cultural and disciplinary
backgrounds. In these situations, knowledge has to be continuously negotiated through interactive
social networking processes. Based on community models of knowledge construction (Nonaka &
Takeuchi, 1995; Blacker, 1995) knowledge cannot simply be processed; rather it is continuously re-
created and re-constituted through dynamic, interactive and social networking activity. This is
especially important for innovation processes that are interactive. According to Swan et al. (2000)
the community model highlights the importance of relationships, shared understanding and attitudes
to knowledge formation and sharing within innovation processes. They argue that it is important to
acknowledge these issues since they help to define likely success or failure of attempts to
implement KM practices that facilitate innovation. The community model emphasizes dialogue
occurring through networks rather than linear information flows.
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8. Conceptually the integration of demand-based and interactive knowledge-based management
practices to foster innovations in the public sector can take into account two roles of the public
sector; its role as a service organizer and as a service producer. The DCM approach emphasizes the
role of information about suppliers and customers and its integration in strategic planning, while the
KM approach highlights the community based understanding in the construction of knowledge,
where IT-tools as such seem to be insufficient to fulfill the requirements of interactive innovation
processes. Before entering into the role of public sector as a service definer from the point of
democratic theories the recent conceptualizations of user-driven innovation in the public sector is
discussed in this paper. This in turn enlarges the perspective of suppliers and customers from the
passive knowledge providers towards active participants in innovation processes (see also Jæger,
2009).
2.3 User-driven innovation management in the public sector
Drawing on the criticism of the linear model of innovation processes and drawing on user-driven
approaches of innovation (von Hippel, 1998) and innovation system approaches (e.g. Edquist &
McKelvey, 2000; Lundvall, 1992) Jæger (2009) has depicted empirically the definitions of user-
driven innovation and users in the public sector context. Based on her empirical analysis she sees
that in the public sector context user-driven innovation covers products and services, organizations
and processes, and these have to be built on user’s needs, wishes and praxis. The role of users
seems to vary in the public sector context. In the narrowest sense it refers to the user’s role as a
customer and a consumer, in a broader sense user can also be seen as a participant in policy
networks, and even as a supplier of public services. In this paper we use the concept of user in the
broadest sense.
The idea of user-driven innovation approaches is related to the idea of relevant sources of
innovations. Based on several empirical case studies in different branches von Hippel concludes
that “empirical studies of the sources of innovation in both industrial and consumer goods fields
have shown that in many but not all of the fields studied, users rather than manufacturers are
typically the initial developers of what later become commercially significant new products and
processes” (von Hippel, 2002, 6). Now the question is what kind of roles users can have in
innovation activities in the public sector context, and how these types of activities can be managed
by public organizations.
Given the wide range of actors in user-driven innovation approaches, recognised by Jæger (2009)
not only in terms of end-users of product and services (see eg. von Hippel, 1998, 2002), Sørensen
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9. and Torfing (2010) have spoken about collaborative innovation in the public sector context, and the
type of metagovernance of innovation processes and their management. They define
metagovernance as the ‘governance of governance’ as it involves deliberate attempts to facilitate,
manage and direct more or less self-regulating processes of collaborative interaction without
reverting to traditional statist styles of government in terms of bureaucratic rule making and
imperative command (Sørensen and Torfing, 2009). Drawing on this understanding of
metagovernance they define metagovernance as a new kind of innovation management that aims to
enhance drivers and remove barriers while respecting the self-regulating character of the
collaborative interaction processes (Sørensen and Torfing, 2010). They see that the exercise of
metagovernance involves a combination of hands-off tools such as institutional design and network
framing and hands-on tools such as process management and direct participation (Sørensen and
Torfing, 2009).
To sum up, user-driven approach to innovation management practices deepens the viewpoint of the
role of various parties in innovation activities and in innovation processes. When looking at the
innovation cycle integrating generation of ideas, selection of ideas, implementation of ideas and
dissemination of new practices (Eggers and Singh, 2009), the relevant question is how innovation
management in public organizations take into account the various phases of the cycle and the role of
demand information, knowledge construction and users in various phases.
Before summarizing our conceptual model of demand- and user-driven innovation management and
its key functions areas in public organizations to be tested and expanded in empirical cases, we
describe the definition function of public organizations from the point of view of governance
theories.
2.4 Insights of democratic approaches: deliberative governance as a type of metagovernance
As discussed above, the sphere of public affairs is not defined through markets but through political
and policy processes. In this study we do not enter into the question of democracy or deliberate
democracy as such but open the forms and practices of metagovernance towards deliberative
governance and discuss through our empirical cases what type of metagovernance as deliberative
governance practices can be used in the context of the public sector’s user-driven innovation
management framework. We ask what can be innovated and how in order to increase and/or ensure
democratic legitimacy at the local level.
Deliberative governance can be considered as a derivate of deliberate democracy (Hendriks, 2009).
Deliberate democracy can be defined through deliberation, which signifies "debate and discussion
9

10. aimed at producing reasonable, well-informed opinions in which participants are willing to revise
preferences in light of discussion, new information, and claims made by fellow participants"
(Chambers, 2003). It can be clarified to mean a process which is participatory (Raisio et al., 2010),
and is based on public deliberation in which a reflective and mature public judgement develops (e.g.
Button & Ryfe, 2005). According to Friedman (2006, 17-26) with deliberation, citizens can mature
their opinions about the discussed issues, and as a result – with an improved recognition of political
manipulation – understand the issues better. Deliberative public engagement also helps to
strengthen democratic culture and practice. It especially gives new methods for democracy to
happen. Ideally, with public deliberation it is possible to build stronger communities and, in the best
case, deliberation precedes civic action; i.e. it creates more active citizens. In our case study this
deliberative starting point mean how deliberation can be used in public organizations and more
specifically how it can be integrated with public innovation management and its practices.
According to the ideas of governance and metagovernance public organizations represent one
stakeholder in multi-actor processes (see e.g. Bingham, Nabatchi & O'Leary, 2005; Sørensen and
Torfing, 2009). In deliberative governance the word ‘deliberative’ adds an imperative of
deliberation to it, resulting in "the application of deliberation and deliberative processes to the
activities of governance" (Scott, Adams & Weschler, 2004). Through our empirical cases we aim to
figure out what kind of deliberation has or can be used in the context of public innovation
management and how it relates to more representative forms of democratic practices at the local
level.
We do not ask how to make deliberative governance a continuing practice, where the part of the
answer is how public administration creates an environment favorable for deliberation to take place
and blossom (Scott, Adams & Weschler, 2004), but how this type of governance can be used in the
context of innovation management practices occurring in public organizations, in public
administration. As examples of deliberative governance have been mentioned 'citizen deliberative
councils' (Atlee, 2008, 169), which can be for instance citizens' juries, deliberative polls and
consensus conferences (Fung, 2003). According to Raisio et al. (2010) deliberative practices have
not yet established their position in the Finnish context, although several university- and NGO-
driven examples can be identified.
We speak about deliberation in a very specific context, and refer especially to deliberative mini-
publics, as defined by Goodin and Dryzek (2006). They highlight the role of lay citizens and non-
partisans in the forums, and discuss how to link this type of micro level democratic practices to the
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11. macro5. Goodin and Dryzek define mini-publics as designs in which small groups of people
deliberate together. They do not mean statistical representativeness, nor electoral representation.
They mean that the diversity of social characteristics and plurality of initial points of view in the
larger society are substantially present in the deliberating mini-public. They see that social
characteristics and viewpoints need not be present in the same proportions as in the larger
population, nor need members of the mini-public be accountable to the larger population in the way
elected representatives are.
2.5 The conceptual framework of demand- and user-driven innovation management in the
public sector
Drawing on the metagovernance type of public sector innovation management and integrating it
with DCM and KM approaches and with deliberative governance approach we define in this paper
innovation management to occur at two distinctive but interrelated levels in the public sector
context. According to our understanding public organizations can use innovation management in
order to define their tasks and services. In this respect democratic innovations enhancing
deliberative forms of democracy beside of representative democratic models seem to be promising,
to increase experiences of citizens in democratic legitimacy of public policies and public
organizations. On the other hand public organizations can use innovation management in order to
improve their operational performance. These various levels of innovation management of public
organizations and their focuses integrated with the ideas of metagovernance have been described in
the figure below.
5
By macro Goodin and Dryzek (2006) mean the larger political system and its need for collective decisions.
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12. Collaborative, Innovations
Democratic
Legitimacy
interactive
innovation
arenas
DEFINING
Demanding Demanding end-
demand user demand
Suppliers, producers Public organization Customers, users, citizens
Degree of supply Degree of demand
integration integration
ORGANIZING AND PRODUCING
Collaborative,
interactive
innovation
arenas Innovations Operational
Performance
Figure 1. The conceptual framework of demand- and user-driven innovation management of public
organizations used in the study
Based on the given conceptual modeling we will focus on our empirical case studies on the both
angles of innovation management in the public sector in order to explore and experiment innovation
management practices in public organizations. The case examples of this study are described in the
next chapter.
3 Research methods and preliminary empirical material
Methods used in this study are based on the idea of co-operative inquiry (Heron, 1998), which
means doing research with people. Here representatives of cities have been invited to be full co-
inquirers with the initiating researchers and to become involved in operational decision-making.
There is a requirement that they are committed to this kind of participative research design in
principle, both politically and epistemologically. Ontologically the selected research methodology
affirms a mind-shaped reality which is subjective-objective. It is subjective because it is only
known through the form the mind gives it, and it is objective because the mind interpenetrates the
given cosmos which it shapes. Epistemologically the research methodology asserts the participative
relation between the knower and the known, and, where the known is also a knower, between
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13. knower and knower. Knower and know are not separate in this interactive relation. Thus, in this
research we do research with people not on them or about them.
At the first reflection phase the study was initiated by university researchers, and the cities of
Mikkeli and Espoo were invited to participate in. The specific case examples were selected together
with the representatives of the municipalities. The city of Espoo established a project team where
civil servants representing the various operational fields of the city are members. In the first
meeting of the project team key concepts of the study were discussed and instructions were given
by researchers to prepare proposals to be concrete case examples. Three proposals were made to be
selected as a case example in the study. The final decision about the case was done in the second
meeting of the project team by using the following criteria: the coverage of all operational areas of
the city, the strategic focus of the case according to the existing strategy of the city. The case
example is described in the next chapter.
As will be described in the next chapter, the city of Mikkeli diverges in many respects from the city
of Espoo. Therefore, also the case example to be selected in Mikkeli reflected its urgent issues, as
well acknowledged in the current strategy of the city. The case example was selected in the meeting
between the initiating researchers and the representative of the city.
Furthermore, in the first reflection phase a national seminar was organized where the research
design and case cities were presented and reflected with the same type of ongoing research projects.
The discussions in the meetings with the city representatives were recorded by researchers as
descriptive notes. These notes were discussed in the next meeting in the case, where organized. The
data was gathered in the national seminar in two forms, as descriptive notes and as ‘table notes’
produced by working group members. Results of these discussions will be described in Chapter 5
where preliminary findings of the study will be presented.
Documentary research material has been gathered of case examples. Through this material more
detailed plan of the first action phase will be organized. Since the research aim is to experiment and
explore new innovation management practices and operational principles in two dimensions in the
next phase citizens’ juries will be carried out, as well as focus group –oriented ideation and
innovation arenas, where collaboration and interaction between various partners are enabled.
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14. 4 Case examples
4.1 The location and the size of the cities
Two cities in Finland, Espoo and Mikkeli, are research partners as empirical cases in this study.
They represent public organizations at the local level. According to Finnish law both the state and
municipalities, as the cities as public organizations as, have the right to tax. Compared for instance
to Germany the regional level of public administration is rather weak.
Espoo is located in Southern Finland, the Helsinki Metropolitan area, whereas Mikkeli is set in
Eastern Finland. The Helsinki Metropolitan Area has been one of the fastest growing city areas in
Finland in terms during the recent decades, whereas Eastern Finland has lost inhabitants. The future
expectations concerning the studies cities in terms of their population seem to vary between cities. It
is expected that the population will increase by 13,9 percentage by the year 2020, being now
244 330 inhabitants. In Mikkeli it is not expected big changes in population in next ten years. The
amount of population in 2020 is expected to be almost the same, as in 2010 being 48 720
inhabitants.
Espoo has budgeted about 1,4 milliard euros for public services and public administration in the city
for the year 2011. It means 1,3 percentage increase compared to the previous year. For the coming
years the city suspects not to increase its operational costs, although its population is expected to
increase by 3 450 inhabitants per year. According to Espoo’s strategy this ‘optimization problem’ is
solved by the productivity growth.
Mikkeli has budgeted about 340 million euros for the year 2011. In the previous year operational
costs of the city were about 292 million euros. The actual economic performance in 2010 was better
than expected in the operational and financial plan for the last year. There are not expected
significant changes in the amount of population in Mikkeli. The target of the city is to increase the
number of inhabitants with 100 persons per year.
4.2 The electronic service network in Espoo
In Espoo the case to experiment and explore public innovation management focuses on the
electronic service network targeted for the citizens of the city. As a part of the service structure and
network the city aims to improve the electronic service network. In this study the aim means that
not only information about services and their location or information about demand and suppliers is
achievable through e-services and web-based solutions but also users, citizens and customers could
innovate, get and even organize and produce e-services by themselves which they need and want to
get through electronic service network.
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15. Currently there are about 50 e-services available through the city’s electronic service network.
Typically the services are information services, booking services, application services, feedback,
reclamation and evaluation services, use of social media, electronic content, like electronic books,
and electronic channels for citizens’ initiatives. The ideation and development of e-services and the
electronic service network is currently to a large extent done from the point of view of various
spheres of authority, and in the co-operation with service providers. A part of current e-services
have been developed based on the feedback and preferences of inhabitants, but the electronic
service network and its role in the whole service structure is not discussed in detail in democratic
decision-making bodies. However, co-operative ideation and development between various parties
is not well-established practice in the e-service development.
4.3 The vital rural city – Mikkeli
The city has expanded by its physical size and the number of inhabitants, since two municipalities,
Anttola in 2001 and Haukivuori in 2007, were merged with the city of Mikkeli. These two parts of
the city are physically in the longest distance from the city centre, and their image look more like
countryside than a traditional city image. The identified challenge, especially in terms of its
population in the city and in its various parts, as well as the challenge to organize and produce
public services, created a background for the case decision in Mikkeli. The case theme in Mikkeli
was formulated around the idea to increase the vitality of the city.
Currently the population in the Haukivuori district is about 2100 inhabitants, and it is expected to
decrease in coming years. The situation in the Anttola district is the same, the population being
currently about about 920 inhabitants. Public services of health-care, day care, comprehensive
school, library, sheltered homes and waste management are available in the Haukivuori district.
Furthermore, there is a joint service point of various public services in Haukivuori. Typically these
services are information, application and cash services. Besides these public services there are also
public services of a library, a public veterinarian, supervision of building in the Anttola district.
After the city fusions special district boards were established as a part of representative democratic
system in the both districts. According to the existing ordinance the task of the boards is to develop
welfare of inhabitants in the district, support and enhance development projects in the district,
promote local activities and culture, and carry out the tasks of the board of the elementary school.
Five of the listed tasks of the board are related to the school affairs, and thus the main emphasis of
the working of the board is in these issues. Furthermore, the board gives statements of operational
principles of the earlier described service points and other significant municipal activities. It also
15

16. prepares a plan of available funds given by the municipal council and decides about aids targeted
for local development projects and activities which activate and serve local inhabitants, and foster
culture.
The vitality is integrated with the issues of the number of population, as well as the coverage of
service network. In this respect the question of concerning the districts and their boards is whether a
new type of role for the board could be identified and how local inhabitants and other partners, like
private enterprises and associations, see their role as co-developers both in defining the coverage of
services, as well as in their arrangement and production.
5 Preliminary observations: current obstacles and identified enablers
In the first meetings with the city representatives the current status of innovation management in
public organizations was discussed. It was acknowledged that innovation activities have been
carried out for a long time in city organizations but it seemed to be that structures, models and
practices of managing these practices at least at the city level were missing. The city representatives
pointed out that there are significant differences for instance between schools in terms of their
innovativeness, and they argued that these differenced can be explained by missing innovation
management.
Clear obstacles for innovation activities and their management in public organizations were
recognized. One of them is the practice of annual budgeting, which creates frames which are
followed in a regimented way. There are too little international and national co-operation between
public organizations and other type of organizations. Especially at the national level city
representatives argued that the current structure between municipalities and in relation to the state
prohibit well-functioning co-operation. Currently innovation activities are poorly linked with
strategic management. Existing organizational structures do not support innovation activities widely
in the organization. From the point of view of the innovation cycle new ideas come up but there are
problems to further develop them. Furthermore, attitudes towards co-creation and co-
implementation seem to be negative. The city representative called the phenomenon like a ‘not
invented here’ attitude.
A kind of basic dilemma in the embedding of the user-driven approach was recognized to be in
attitudes and culture. It was claimed that the new approach requires a new type of thinking. Instead
of calling for change and forcing pressure on decision-makers everyone should see him- or herself
as a resource.
16

17. Economic scarcity seems to be one driver for public innovations. This relates especially to the
operational performance of public organizations. Furthermore, in cases where new premises have
been planned and constructed they have also opened a way to plan and develop public services
stemming from not so traditional perspectives. However, there seems to be many factors which
could create preconditions for innovations and innovation activities in the public sector context, like
development of innovation capabilities, constructing innovation dynamics inside of public
organizations and towards external partners, systematic evaluation procedures of ideas and
innovations, the involvement of personnel, participation of various social groups. These all seems to
be requirements for innovation management and its practices, which will be further experimented
and elaborated through empirical case studies.
6 Conclusions
To sum up, I have aimed in this paper to set up a conceptual framework to experiment and explore
innovation management, its practices and operational principles in the public sector context. Based
on the re-defined understanding of innovation in the public sector and drawing on deliberative
governance and management studies the paper discusses the specific features of public innovation
management in two directions. Firstly, innovation management in the public sector context can be
discussed in terms of increasing operational performance of public organizations through
innovations. Secondly, since public tasks are dominantly defined by (more or less) democratic
processes, innovation management was defined in this paper also in relation to the question of
democratic legitimacy. By integrating these viewpoints and by emphasizing the large interpretation
of the concept of user the ongoing study wants to highlight and discuss public sector reforms in
relation to citizens’ experiences of their legitimacy. I argue in this paper that recognized societal
and economic ‘wicked’ problems cannot be resolved relying on traditional representative
democratic practices but new ways to discuss and tackle these problems with all type of users are
needed. In this respect developing innovation management, which recognizes the role of demand
and users not only by voting and giving a voice but also in terms of cooperative and collaborative
partners, in the public sector and in public organizations could be one answer to the current societal
and economic needs. Permanent and systematic innovations activities in the public sector require
management practices which support them, too.
As the preliminary empirical findings show, innovation activities have been carried out in public
organizations but systematic structures, practices and operational principles of innovation
management seemed to be missing. Furthermore, current innovation activities seemed to highlight
17

18. the aspects of operational performance of public organizations, not that much of the issues of
democratic legitimacy.
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