Innovation has become one of the most frequently used words in modern government. It appears in national strategies, institutional plans, executive speeches and performance frameworks. Yet behind this enthusiasm lies an uncomfortable economic question: How much of what we call innovation actually improves productivity, reduces costs or creates value?
An institution may organise innovation competitions, establish dedicated departments and reward creative employees without fundamentally changing how it operates. Another may introduce a modest improvement to a licensing procedure, eliminate unnecessary approvals and save thousands of working hours annually.
Which institution is more innovative?
From an economic perspective, the answer should be obvious. Innovation is not measured by the visibility of its activities, but by the value of its outcomes.
This distinction matters particularly for governments seeking economic diversification. While investment in infrastructure, technology and human capital remains essential, the productivity of public institutions also influences the wider economy. Every administrative delay carries a cost. Every duplicated procedure consumes resources. Every unpredictable decision introduces uncertainty for businesses and investors.
Government efficiency, therefore, is not merely an administrative concern. It is part of a country’s economic competitiveness.
THE HIDDEN ECONOMICS OF BUREAUCRACY
Consider a hypothetical government service requiring five separate approvals. Each approval may appear justified when examined independently. Collectively, however, they can create delays, additional transactions and unnecessary administrative expenditure.
Now imagine redesigning the service around a single decision process, supported by shared data and clearly assigned accountability.
The innovation is not necessarily the technology used to deliver the service. It is the institutional redesign that makes several steps unnecessary.
This reveals an often-overlooked source of economic growth: improving how existing resources are organised.
Countries do not increase productivity exclusively by acquiring more advanced technologies. They also do so by reducing friction between institutions, accelerating decisions and allowing businesses to redirect time and capital towards productive activity.
A government that simplifies procedures can create economic value without necessarily increasing public expenditure.
CULTURE CREATES POSSIBILITIES; SYSTEMS DELIVER RESULTS
Organisational culture undoubtedly matters. Employees need confidence to question established practices, propose alternatives and learn from unsuccessful experiments.
But culture alone cannot sustain innovation.
An employee may identify an inefficient procedure and suggest an excellent solution. Without a decision-making mechanism, an accountable owner, a testing process and the authority to implement change, that idea may remain trapped in a presentation.
The real challenge is connecting creativity to execution.
This thinking is reflected in the OECD’s 2019 Declaration on Public Sector Innovation, which recognises innovation as a strategic function of government rather than an occasional activity. It is also consistent with ISO 56001:2024, which establishes requirements for managing innovation systematically.
Both point towards a fundamental institutional lesson: innovation requires more than encouragement. It requires management capability.
However, building that capability does not automatically mean establishing another department.
A government organisation with an elaborate innovation office may achieve less than one that embeds experimentation, collaboration and continuous improvement into its existing operations.
The objective is not to institutionalise the department of innovation. It is to institutionalise the ability to innovate.
FROM INNOVATION BUDGETS TO INNOVATION PORTFOLIOS
An economically disciplined approach begins by asking a different question.
Instead of asking how much money should be allocated to innovation, leaders should ask which problems are expensive enough, persistent enough or strategically important enough to justify experimentation.
This shifts attention from funding activities to investing in outcomes.
A practical innovation portfolio might include improvements to existing services, solutions to cross-government coordination problems and carefully selected experiments addressing future challenges.
Not every initiative should succeed. Experimentation necessarily involves uncertainty. But failure should be inexpensive, informative and identified early.
Small pilots, defined evaluation criteria and clear decisions about whether to expand, redesign or discontinue an initiative can protect public resources while encouraging learning.
The greater financial risk may not be a failed experiment. It may be allowing an inefficient process to continue unquestioned for another decade.
MEASURING WHAT THE ECONOMY ACTUALLY GAINS
Innovation performance should ultimately be evaluated through outcomes that matter beyond the institution itself.
These include the time required to complete a service, the cost per transaction, the administrative burden imposed on businesses, the reliability of decisions and the quality of the experience delivered to citizens and investors.
Such measures must distinguish genuine improvements from activities that merely look impressive.
A digital service, for example, is not necessarily innovative if it transfers an inefficient paper process onto a screen. Its economic value emerges when it eliminates unnecessary steps, improves accessibility or reduces the cost of compliance.
Equally important is recognising that public value extends beyond immediate financial savings. Greater transparency, regulatory predictability and public trust can create benefits that are economically significant, even when difficult to express in a single monetary figure.
A STRATEGIC OPPORTUNITY FOR OMAN
For Oman, this discussion is closely connected to the ambitions of Oman Vision 2040.
Economic diversification requires competitive enterprises, attractive investment conditions and productive institutions. These objectives depend partly on how effectively government organisations translate policies into services, decisions and measurable results.
The next frontier of public-sector innovation may therefore be less about creating new structures and more about redesigning the relationships between existing ones.
Imagine evaluating every major institutional innovation against three questions: What economic or public problem does it solve? What measurable value will it create? And can that value be sustained without permanent dependence on exceptional individuals?
These questions would move innovation from institutional publicity towards economic accountability.
Ultimately, the most innovative government may not be the one that announces the greatest number of initiatives. It may be the one that quietly removes the greatest number of obstacles.
Because the true economic return on innovation is not the number of ideas an institution produces, but the amount of value it enables society to create.
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