Fostering innovation in the Public Sector: insights from Mike Potter

Photo Credit: Martin Beale Photography, HM Treasury

Mike Potter, the former UK Government Chief Digital Officer, offered his perspective on navigating challenges like shrinking budgets and limited resources in conversation with Huw Stephens, Chief Information Officer at HM Treasury yesterday, as part of the latter's Innovation Day 2024.

“When resources are tight, you have to focus on goals and cut unproductive activity,” he asserted. Constraints, he argued, should be seen as catalysts for innovation rather than barriers. Potter urged organisations to ask, “Can we squeeze out unproductive activity and focus on our objectives?”

Citing Pat MacFadden's speech at the beginning of the week, where the Cabinet Office Minister argued for the Civil Service to embrace a “test and learn” mindset, Potter described this approach as essential for fostering innovation in the public sector.

“Don’t call it ‘fail fast’ - call it ‘learn fast,’” he remarked. “The only failure is the failure to learn.” This philosophy, he noted, encourages experimentation and iterative improvement, allowing teams to adapt and thrive.

Potter also highlighted the role of Objectives and Key Results (OKRs) in driving meaningful progress.

“OKRs aren’t just a way to measure performance - they unleash people’s innovation,” he said. By setting ambitious yet achievable goals, OKRs can help teams align their efforts and unlock creative potential. “It’s not about doing the impossible; it’s about creating an environment where people feel empowered to contribute and innovate.”

Potter underscored that innovation isn’t limited to technological advancements: “Innovation comes from changes in process and approach,” he said.

Examples of this include the National Blood Service’s efforts to “cut and paste” high-performing practices to other teams, leading to a 20% productivity improvement. Another case was training nurses in sales techniques in order to improve organ donation consent - an unexpected but effective solution.

He also pointed to "blue sky innovation," exemplified by Making Tax Digital, a fundamental reform of the tax system that began as a small project addressing a specific issue. “This is about dreaming big, starting small, and scaling up as you learn what works,” he explained.

Innovation culture

Potter emphasised that fostering a culture of innovation is as critical as any technological or procedural change. “Relentless celebration, reward, and recognition are key,” he noted. “The most successful digital businesses have mastered this, and government can too.”

Drawing on his experience scaling teams from six people to over 1200, Potter discussed the importance of balancing team size and focus.

“When we split teams to allow them to scale independently, we saw breakthrough results,” he explained. “You have to nurture small, agile groups while giving them the space and support to grow.”

Building communities of practice within and across departments is another critical strategy: “Communities build confidence, and confidence amplifies results,” Potter observed.

He argued that these networks not only enhance individual contributions but also create collective momentum, enabling organisations to achieve more than they might expect.

However, he acknowledged the challenges of driving innovation within traditional structures: “You can drive innovation from within, but it often reaches a ceiling,” he said. “To scale transformative change, you sometimes need to seed an entirely new organisation - one that can replace or disrupt existing structures.”

Examples of this approach include the creation of a small, independent team to roll out Universal Credit, which started with a “test and learn” culture and ultimately succeeded where earlier efforts had failed.

Attracting and retaining talent

Retaining top talent in the public sector requires creating an environment where people can thrive. Potter outlined three pillars for achieving this: a strong mission, autonomy, and opportunities for growth.

“First, you need a powerful mission,” he said. “People in the public sector are deeply motivated by the desire to make a difference. If they feel connected to that mission, they’ll go the extra mile.”

Autonomy, he argued, is equally crucial. “You have to give people the ability to make decisions and see the results of their work. Autonomy fuels creativity and engagement.”

Development opportunities form the third pillar. “Motivated people want to learn and grow,” Potter said. “A lot of learning happens on the job - throwing yourself in at the deep end and engaging with others across teams. There’s evidence to show this is one of the most effective ways to develop skills.”

Potter also stressed the importance of diversity within teams. “If you’re looking for innovative disruptors, you need to attract people with high growth mindsets,” he said. “But you also need those who are reliable and committed to doing a good job day in and day out. Success comes from blending these different types of people.”

He pointed to the unique appeal of departments like HM Treasury. “Few places can make as big a difference as the Treasury,” he said. “If you can communicate that effectively, you’ll attract the best talent.”

Reciprocal collaboration

Collaboration with the private sector is essential, Potter argued, not because the private sector does everything better, but because of the mutual benefits it brings. “In many cases, the scale, impact, and need to mitigate risks make the public sector much more successful than many private organisations. But collaboration broadens the church and fosters knowledge exchange,” he said.

Potter recounted his experience at HMRC, where partnering with SME Equal Experts yielded transformative results. “We didn’t just buy their capability - we bought their culture,” he said. “Cultural alignment is key. When you pick partners who share your values and ways of working, you find areas of mutual advantage.”

He also emphasised the untapped potential of private sector resources. “There’s a lot of capability and money out there that we can harness,” he said. “But it’s about more than just accessing these resources. It’s about building partnerships that enhance what we’re already doing.”

Potter advocated for creating stronger bridges between public and private organisations, particularly in the context of digital transformation. “When we scaled HMRC Digital, we moved away from big vendors and focused on building relationships with smaller, more agile partners,” he said. “This approach allowed us to innovate more effectively and achieve better outcomes.”

In closing, Potter highlighted the reciprocal nature of collaboration. “The private sector can learn as much from the public sector as we can learn from them,” he said. “The key is to create spaces where these exchanges can happen. That’s how we drive progress together.”

As Potter reflected on what success might look like, he emphasised the importance of fostering an “insane buzz” of active, effective teams. “Government will want to see real progress on public services,” he said. “But ultimately, it’s about the culture - attracting and retaining the best people and unleashing them to achieve extraordinary results.”

Acknowledgements: We would like to thank the HM Treasury team for inviting Government Transformation Magazine along to be a part of their Innovation Day 24.