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Creating A Government Innovation Fund

In January of 2011 shortly after taking office as Governor Andrew Cuomo signed an executive order creating the Spending and Government Efficiency (SAGE) Commission. The purpose of SAGE is to modernize and rightsize government to make it more efficient, effective and accountable through four activities:

On December 15, 2011, the SAGE Commission met and approved some interesting recommendations. As a supporter of increasing new approaches in government, I was pleased to see that the Commission has recommended the following:

Create a dedicated Innovation Fund to finance Business Process Redesign and efficiency-creating technology projects based on the following criteria:
• Can be completed in 1-3 years
• Generate a Return on Investment of at least 30% annually
•Materially improve agency performance and/or government customer service

The Innovation Fund would focus on the following type of initiatives:

1) Business Process Redesign 

•Identifying and redesigning processes that touch consumers, businesses, and/or staff to improve service, cost and quality
•Understanding pain points and opportunities for efficiency and effectiveness gains

2) Leveraging Technology

•Automating standardized and routine processes or functions
•Utilizing sophisticated analytics to detect variances and target activities

3) Integrating Government Customer Facing Activities

•Improving customer service levels to citizens and businesses
•Integration across touch points with the government to make government service delivery more seamless

These projects produce a high ROI, but may need financial support because they require an up-front investment. Government is very much behind the times as far as customer service, technology and efficient processes.

Many private sector organizations invest in innovation to improve their operations. Earlier this year Allstate  Insurance opened its Insight, Design & Innovation Center, which has become a testing center for more than 30 projects at any given time. Allstate is working on an automated claims process that will allow a customer to submit a claim through a smartphone without help from a claims center representative or agent. One method being looked at is a drive through setup at an Allstate location or auto dealership where with lasers and photo equipment take pictures of damaged vehicles.

Government needs to take the same approach to encourage and fund innovation. The City of Baltimore recently established a $1 million Innovation Fund. The purpose of the fund is to provide seed money for one-time investments that will lead to improved results, increased revenue, and/or reduced ongoing operating costs for City services. The Innovation Fund is meant to be self-sustaining; savings from the investments are returned to the Fund so that other projects may be funded. Continuing this Fund is one way to keep City agency heads and staff focused on innovation and spur creative solutions on how to use limited resources.

Innovation funding in Baltimore is awarded through a competitive process among City agencies. City agencies submit proposals for review by a committee of city and private sector leaders that make recommendations for funding to the Mayor. The Innovation Fund Committee this year reviewed 30 proposals from 15 different City agencies, which ranged from requests for $100,000 to $1.8 million and recommended three proposals for funding.

Innovation is about experiments that don't always work. It is not uncommon for seventy to ninety percent of innovation efforts to fail. Even in failure lessons are learned and improvements often result through additional efforts down the road. Most government officials and the public have a low tolerance rate for failure, which is a huge problem in encouraging innovation in government.

Would you support your state or local government establishing an innovation fund in an effort to improve government performance? Is the public accepting of failure in government when it comes to trying new ways of designing and delivering government services?

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Tags: 2, budgeting, jobs, leadership, tech


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Comment by Kevin Schafer on February 22, 2012 at 9:17am

I think this is a STRONG idea!  Watch out for the birds!  :)

Comment by Abed Ali on January 19, 2012 at 10:12pm

Jitinder, thanks for sharing your great CAP work!  I believe Jo mentioned awhile back something about accountability for innovation funds.  It sounds like at least in the Baltimore case you're relying on the committee review of ideas to choose the proposals with the most potential.  But while certainly accountability and transparency is necessary when spending taxpayer dollars, I also think the public can get on board with the idea that failing fast (but cheaply) is a key innovation strategy from the private sector that should yield dividends in the public sector.

Comment by Paul Wolf on January 16, 2012 at 9:09pm

Latesha thanks for the web link. Jitinder I recently discovered the Center for American Progress and love the information they have on their web site. You and Geoff Mulgan have written some very interesting reports, I encourage to utilize a blog here to share your information.

Comment by Jitinder Kohli on January 16, 2012 at 5:47pm

Geoff Mulgan and I have published a couple of reports that might be of interest. They are both aimed at the US audience (even though we are both British!) One focuses on idea generation and the other one is about scaling. They are available at and We would really welcome comments from readers. 

Comment by Andrea Schneider on January 16, 2012 at 5:36pm

Latesha, thanks for the links.  I agree that Geoff Mulligan has written some amazing documents.  He is inspiring in his work.

I am still stuck on why the discussion of innovation is so connected to technology and not a broader agenda. It seems so limited to me.

Comment by Christine Jung on January 16, 2012 at 1:12pm

Is an innovation fund such as this one, any different from an agency's research and development (R&D)? People talk about having a high failure rate, which shouldn't be shunned with R&D. But when someone talks about an "innovation fund," people's expectations are not as forgiving. Things like BPR, leveraging technology, and being more customer-focused, are the way things SHOULD be done now and therefore, doesn't seem "innovative" to me. Therefore, I also would expect a low failure rate out of projects that are funded with an innovation fund. 

Comment by Latesha Love on January 13, 2012 at 12:36pm

GAO recently recommended something similar to OMB in its report entitiled Streamlining Government: Key Practices from Select Efficiency Initiatives Should Be Shared Governmentwide (GAO-11-908). You can check it out at or


Comment by Andrew Krzmarzick on January 13, 2012 at 11:55am
Comment by Christopher Whitaker on January 12, 2012 at 8:31am

Chicago just announced it's own internal innovation fund. The city sped up collection on revenues collected from bus advertisements. The city is setting aside 20 million dollars to give to departments with the best ideas. 

Video of John Tolva 


Comment by Jitinder Kohli on January 11, 2012 at 6:57pm

This is a great idea - in fact, some agencies already have innovation funds in place. Education set up the Investing in Innovation Fund a couple of years ago, and the Labor Department is setting up the Workforce Innovation Fund. Geoff Mulgan from the UK and I highlighted the education fund in the Center for American Progress report Capital Ideas from July 2010 available at We also published a recent series on innovation in government with lots of great examples of government agencies being very innovative. There's even an interactive quiz that helps establish how innovative your agency is -

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