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

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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.

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systemic innovation activities in the public sector. It can be also seen a way to increase resilience2

(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.

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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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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.

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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”.

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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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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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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

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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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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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ORGANIZING AND PRODUCING

DEFINING

Public organizationSuppliers, producers Customers, users, citizens

Demanding demand

Degree of supply integration

Degree of demand integration

Collaborative, interactiveinnovation

arenas

Demanding end-user demand

Collaborative, interactiveinnovation

arenas

OperationalPerformance

DemocraticLegitimacy

Innovations

Innovations

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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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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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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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

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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.

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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

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the aspects of operational performance of public organizations, not that much of the issues of

democratic legitimacy.

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