Innovations in public services seminar, Third Sector Research Centre and UK Innovation Research Centre, 17 June 2013

1. Processes of Innovation in Public Services:
The Case of Social Enterprise Spin-outs
TSRC & UK~IRC Seminar on Innovation in Public Services
17th June 2013
Fergus Lyon & Ian Vickers
with Leandro Sepulveda, Caitlin McMullin, Dan Gregory
Centre for Enterprise and Economic Development Research
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2. Introduction
Policy context
• Reforms initiated by New Labour (1997-2010) and
continued by Coalition Government
• New Public Management and political-ideological forces
in favour of markets, increased choice and competition
• State-run public services increasingly transferred to new
‘independent’ spin-out social enterprises and mutuals or
bought in from existing organisations that trade for social
purposes – process of social enterprisation
• Theory of change that links spin-out social enterprise (SE)
and mutual forms with innovation and efficiencies
• Focus on health & social care sector as recent testing
ground, but longer history of employee-owned council
leisure centre spin-outs since 1990s
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3. Aims and research questions
• What is the nature of innovation in public service
delivery as enabled by spin-out SE/mutuals?
• What sort of processes, facilitating factors and
influences?
• What is the involvement of employees (co-owners),
user communities, government, funders and other
stakeholders in such processes?
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4. Methodology
• 25 case studies of social enterprise (SE) mutuals
in health and social care
• 5 cases in leisure services
• Interviews/focus groups with:
– chief executives
– senior managers
– key staff
– service users
– key external stakeholders (commissioners, partner
orgs, TUs etc)
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5. Preliminary findings
The new organisational form
• Combination of push and pull factors
• Transition processes often accompanied by:
– contestation + opposition from some stakeholders
– high levels of consultation and staff engagement
– adoption of specific mechanisms (e.g.
staff/shareholder councils, user/community
forums, asset locks) giving greater power and
voice to staff and user communities (‘co-creation’
or ‘co-production’)
– Cultural/presentational changes

6. Advantages of new SE form – staff views
“…being able to use your initiative, to actually
develop things that people want and need without
the red tape.”
“…as shareholders, we’ve actually got a say in what
happens.”
“…as an NHS trust it was very, very set in stone that
these are our boundaries and this is how we’ll behave
and this is where we’re going. But, as a social
enterprise, staff are […] really empowered to have a
massive part in the decision making”
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7. New services
• Often focused on meeting under-addressed
health and well-being needs and related
preventive activity:
– novel forms of outreach and engagement within
local communities
– rehabilitation (e.g. helping people with disabilities
with independent living, employment/training
schemes)

8. Incremental changes
• Often resulting from the more flexible and
responsive organisational forms and
cultures, leading to greater efficiency/cost-
effectiveness:
– numerous small improvements to systems and
processes
– services re-modelled and more integrated
– managing sickness absence

9. Advantages – a chief executive view
“You’ve not got the comfort, the safety
blanket, of being part of a massive
organisation, but it means that you can
obviously go for best value [....] you can be a
little bit edgy, a little bit more risky […] it’s a
flat faster structure.”
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10. Advantages – a commissioner view
“…they are very willing to go the extra little bit
[…] really go ahead, forward thinking,
proactive, innovative […] And leadership is
really key. [***] is a fantastic leader [...] The
staff who worked in the old organisation are
[now] much more motivated and much more
productive.”
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11. Support for innovation
• Financial support from Social Enterprise Investment Fund
(SEIF) (about 2/3rds) + some report need of financial
backing/investment to respond to tenders for larger services
• Other support - coaching, mentoring, advice etc (cited as v.
helpful: Cabinet Office Mutuals Taskforce, Employee
Ownership Association, Social Enterprise UK, Baxi Partnership
+ others)
• Stakeholder/political support – e.g. Local Vol Services, some
LA ‘co-operative councils’ particularly supportive
• Current/future needs identified by many – concern that in
austerity context such support may not be there in future…
• Strongest spin-outs have themselves become role models/
channels for learning (some v. critical of restrictive notions of
‘best practice’ advanced by some consultants).
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12. Growth – bigger is better
…or is small beautiful?
• Some aspiring to grow beyond their region, diversify, achieve
economies of scale including through franchising..
• Others cautious about growth (or only growth within limits) –
‘big not beautiful’ and may be antithetical to ideal of
closeness to users/customers and potentially damaging for
integrated local infrastructures... ?
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13. Could changes have occurred within
the public sector?
• For many interviewees, NO or would have happened
more slowly….
• But - in some cases significant innovative activity was
a continuation of what had been initiated within the
public sector some years previously
• SEIF selection process – evidence of previous
innovation important for qualifying for such funding

14. Views of SE chief execs
“A lot of the integrated team that I’ve described to you
could be done. […] I think it would be misleading to
say that you couldn’t have done it as part of the NHS.”
“We would have made some of these changes but I
don’t think we’d have had the freedom to test and be
as risky as we are.”
“*Our pre-spin-out innovative service] existed because
we didn't ask permission. All the best things I've ever
done in the health service, we've done under the radar
*…+. We haven't explicitly looked for permission.” 14

15. Future prospects for SE spin-outs and
public services?
1. Capabilities and support - in order to compete in
increasingly competitive markets, SEs require varied
resources and a high level of entrepreneurial/ leadership
skills. Questions remain over how these can be nurtured and
developed over the longer term.
2. Co-operation and competition - tensions around need for
co-operation and sharing of innovative ideas in a
competitive context, posing a challenge for the development
of integrated local infrastructures and support for
innovation.

16. Future prospects cont’d
3. Commissioning for social value and innovation – in future
competition rules may restrict commissioners’ ability to
support SE innovations. Under austerity, danger that short-
term financial savings are prioritised over experimentation/
innovation and potential long term benefits?
“..... our ability to fund things outside of a competitive
process in the future are going to be severely restricted by
the government’s proposals. […] sometimes when you go
out to tender, it’s the bigger organisations who’ve got the
capacity to actually do those huge tender processes….”
(Commissioner)

17. Thank you –
any thoughts, questions?
Centre for Enterprise and Economic Development Research