A New Operating System for Government

For states and regions to be competitive and innovative, they need transformational change. The business community could be a formidable ally.
by , | October 5, 2011

Do you see the difference between incremental and transformational change, feel an increasingly urgent need for the latter, but have trouble convincing your bosses to commit to and invest in the heavy, transformational lift? If so, you have what I'd call "deep systems vision."

Here's a potential strategy for applying that vision to the public sector. Enlist the business community to make the case with you. Remind them that government is a critical component of competitiveness and that they have a direct stake. Now more than ever, we need our governments to be catalysts for prosperity and innovation, not barriers.

Unfortunately, U.S. competitiveness is heading in the wrong direction. In the last three years, we slipped from first to fifth on the World Economic Forum's Global Competitiveness Index. Several of the component measures within the just-announced 2011–2012 overall ranking are even more jarring. Among 142 world economies, the U.S. ranks 50th in the public's trust in politicians, 58th in the burden of government regulation and 68th in the public's belief that government spends its resources well. The two most problematic factors identified by U.S. businesses were tax rates and inefficient government bureaucracy.

Harvard competitiveness guru Michael Porter reminds us that instead of one national economy, we are "a collection of specialized regional economies." Within and beyond U.S. borders, he continues, "states and regions compete to offer the most productive environment for business." So "each state and region takes responsibility for competitiveness and addresses its own problems rather than waiting for the central government. This decentralization is arguably America's greatest hidden competitive strength." This is especially true now, as dysfunction paralyzes federal leadership.

States and regions whose governments transform to help them become more competitive will do better than others. We know what that looks like:

Faster, easier and cheaper regulatory compliance and other business transactions, without sacrificing health, safety or the environment.

• Quality physical, financial, social and technological infrastructure.

• Policies, incentives and supports that encourage start-ups and grow existing businesses.

• A workforce aligned with the needs of business.

• Vigorous and networked R&D and higher-education institutions.

• And successful public education, essential to long-term productivity.

What's less clear to most elected public CEOs and legislative leaders is why the Nike solution won't work. "Just do it" too quickly bounces off "the way we've always done it." You can make incremental progress on competitiveness using command-and-control, but even that limited progress falters in these fiscally challenged times. This brings us back to your recognition that we need transformational change to substantially boost government's contribution to competitiveness.

We are getting better at realizing that government is a complex portfolio of systems. What we're not so good at is recognizing the underlying meta-system. Computing provides a good analogy. Think of government's programs and organizational units as software. The meta-system is the computer's operating system. Our meta-system is bureaucracy, successfully installed a century ago to cure the ills of the spoils system and meet the growing needs of an industrialized society.

But now we've outgrown it. Our governments are trying to run 2011 software, including economic development strategies, on an antiquated operating system, a DOS machine. States and regions that can upgrade to Windows, OS X or Linux will gain a competitive edge.

Upgrading our operating system means transforming budget, accountability, personnel, procurement and other core systems so they first and foremost deliver results and value. The current operating system was designed not for results, but to control inputs and processes. We have certainly improved the bureaucratic operating system, but now it's time to upgrade.

A 21st-century operating system should identify the results it most wants to achieve and the strategies most likely to get there, and then rigorously prioritize and allocate resources to achieve them. It should co-produce with citizens, business, nonprofits and other governments. It needs to recruit, nurture, empower and reward entrepreneurial leaders and staff, many of whom move readily among all three sectors. And it must relentlessly improve and innovate, continuously creating higher-value methods and activities while shedding those that deliver less value.

The Oregon Business Council is playing a leading role in upgrading that state's operating system. Partnering with Gov. John Kitzhaber, it has put its best people and dollars forward, leading and supporting transformational change in education, health, administrative services and the budget process. Similarly, a coalition of New Orleans businesses, foundations, higher-education institutions and other civil-society organizations has joined with Mayor Mitch Landrieu to transform that city's government.

Are there business allies in your state and region who will join you in leading the charge for transformation and competitiveness?

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