Back in 2012 Liam Maxwell, then Deputy CIO and Director of IT Reform for the UK government championed the need for the British public sector to use more small and medium sized (SME) technology service providers.
“The idea that SMEs can’t deliver the required savings is “fundamentally not correct,” he told one gathering of business technology leaders in February of that year. Yet today in 2017 an increasing number of the UK’s SME and startup technology service providers tell this title that they find it difficult to engage with, let alone secure procurement from the public sector.
So why does the UK public sector not procure and work with national small technology providers? Or is a change sweeping the land and is austerity increasing local procurement? This week’s Horizon CIO podcast discusses those issues with a leading public sector CIO and a former private and public sector CIO who is now working in the world of startups.
“Traditionally it has been hard for startups and SMEs to contract into the public sector and that is for a number of reasons; one of which is the disjoint between contracting and commissioning in the NHS, they are used to dealing with big organisations, they are not used to dealing with smaller organisations,” says Rachel Dunscombe Director of Digital at the Salford Royal Group NHS Trust and also CEO of the NHS Digital Academy.
“Another thing is the interoperability and the standards just have not been there to work with, so there just hasn’t been a blueprint for SMEs to work towards. Everything has been tactical for each organisation, so that has not been economical for SMEs,” she says of how bespoke processes are in each and every area of the public sector, meaning SMEs cannot create a platform that a number of different public sector organisations could acquire. This imbalance of economies works in favour of large global suppliers who have can offset the cost of bespoke development. Dunscombe’s public sector peer Julie Peirce recently described how different areas of the Department for Environment, Food and Rural Affairs had bespoke monitoring systems for farm animals instead of a single system that recognised the difference between a sheep and a cow.
“There are some barriers to entry and the frameworks you need to be involved in as well as having the resources to manage those frameworks and this can be expensive,” says Mark Dundon, Programme Director with National Grid and former CIO in the NHS. Dundon is also developing a consumer facing App for families through an organisation he leads.
“The understanding of digital and what it means has just not been there, but a real sea change is taking place and this is a vibrant place so it is about finding some middle space where we can all collaborate. There haven’t been any unicorns in the health space, 23andME is the only one, but I am expecting a lot more. I think we are on a cusp of a real revolution in healthcare,” Dunscombe says of the genomics and biotech firm in California and her expectation that health will be a growth area for startup business.
Dunscombe has a unique position amongst health CIOs in that she has for some time worked closely with the startup community: “For my sins a couple of years back I decided to set up a small vehicle that wrote Apps and investigated the space. It works quickly, you are dependent on Apple and to some extend Google and as a CIO you have to understand how they work and their rapid cycles and how to mitigate risk in those cycles and keep the NHS and the SME safe and also understand SMEs and their funding models. VC and angel investors is very foreign language to the NHS and if they cannot get their head around how a small company is run then that is very difficult,” Dunscombe says of the lessons she learnt with a foot in the startup camp.
“We need these companies to go through the procurement cycle once, as we spend so much time talking to them and then not procuring and these people are not sitting on huge cash flows and this is an ethical decision,” she adds.
“The governance cycles of the NHS work far too slowly. In digital we work in a quick agile way and we see this with the governance and cyber security and everything in digital has to be rapid. I think the NHS has an inability to look at this, for example there are certain boards that you have to go to every two months and that doesn’t work quick enough for digital, so how do you embed that agile and more rapid delivery and more delegated authority to deliver more rapidly?” Dunscombe says of the culture clash between the public sector and the startup community.
Age of austerity
Austerity has been the watchword of the public sector since the financial crisis of 2008 and Brexit will, most government CIOs tell this publication, continue austerity. Back in 2012 Liam Maxwell and many others believed austerity should be an opportunity to improve connections between the UK’s impressive SME and scale up technology economy, but that hasn’t been the case.
“Austerity can be the mother of invention, but it can also mean that certain people shut up shop and don’t innovate and concentrate on cost reduction. The wise people do innovate.
“I think it is causing us to question how we deliver care and how we do care delivery, but it is difficult to know, money is not the solution, throwing money at digital is not the answer, but in some cases austerity has helped,” Dunscombe says.
“My experience as a public sector CIO was post financial crash and it was a difficult time, every penny was prioritised and the approval was done in a black box way that was very subjective,” Dundon adds.
“The procurement frameworks and the methodology and the leash that we are given is not long enough it prevents us from doing the things we really should do to innovate and it makes it easier to not do them. So for me procurement frameworks are something that I am really passionate about,” Dunscombe says in reply to Dundon’s observation that public sector CIOs lack autonomy to act, yet their organisations demand new methods.
Both business technology leaders expressed experience of and concern for the lack of autonomy with ceilings placed above investments of £50,000 and beyond. This highlights a clear challenge to making the public sector a truly responsive and digital business. As the money the CIOs spend is public money there is a need and expectation that investment decisions will be monitored. However, the current systems of governance, as Dunscombe highlights, are preventing innovation and inhibiting the ability of the UK’s SMEs to win public sector work.
“We need a new frame of governance and decision making, because if we are going to do the things we are talking about in the country at the moment, about failing forwards and failing fast that is going to need a very rapid decision making and very rapid changes of direction,” Dunscombe says. “So what we need to do now is make investment cases to provide that strategic value and then have the dedicated authority to formulate the elements that make that happen.”
Dundon and Dunscombe have senior technology experience in financial services and both remark how different the levels of delegation to technology leaders is in the private sector. The lessons from both her career in the private and public sectors is informing Dunscombe’s work at the NHS Digital Academy, which she says will develop CIOs with board level influence who can help the public sector manage risk in a way that reflects the needs of a new breed of technology service provider.
Dundon believes access to and influence over the senior leadership is critical and during his time as a CIO in the Yorkshire public sector he had to carry out shadow influence work to ensure a data analytics programme that would deliver major patient benefits took place. He says he spent four to five months “working around groups” to influence and get the investment required. “It was a prohibitive barrier to deliver value,” he says.
Dunscombe as Digital Director at Salford Royal Group is using the viable systems model for the digital change agenda. “This is a model that if it is knocked off course it can re-correct itself and we need those models in the governance and the frameworks so that if we fail we fail forwards and we fail fast. We learn and then we go back on course for that programme,” she says.
Dunscombe believes the variable systems model will help prevent the development of tactical solutions that suit single institutions, as she alluded to above. “The danger is that with this tactical work you are creating something that is valuable to a small service but not as valuable to the whole. Standardisation of care and pathways drives out cost so you get increases in quality at a lower costs. So we have to be careful of not designing for a system, some of the tactical work suits a school nurse or a health worker, but it doesn’t interoperate with the health record because of the way it works. But you have to design everything systemically because it needs to work with the records so everything we record today will persist with that patient for the rest of their life and I am quite passionate about that systemic design and making sure that as a marketplace we are doing that together,” Dunscombe says. Her peer in Ireland and now returning to the UK Richard Corbridge also recently told this title and its podcast that digital systems are not about cost reduction, but coping with the increasing demands of an aging society.
Dundon agrees, in his experience small providers and support form chief nurses delivered a technology led opportunity to make sensible interventions in the care of diabetes patients. Dunscombe and Dundon though believe that the dominance of large global technology providers is hindering the public sector.
“Unfortunately there are some very big players that do not want to open up the date or create the APIs,” she says. “I think the health sector is entering a disruptive phase where some of the commodity value of the bigger players will fall and some of the SMEs will become more important and I think of the market it will be an interesting five years.”
Dundon adds that he sees public sector CIOs looking to be “using a diverse supply chain rather than the big suppliers”. “It is difficult, there are big players that often swamp out smaller players.”
Being swamped, either by a larger global technology provider or even organisations of the scale of the NHS is a daunting challenge for startups and one that Dundon as a startup is aware of.
“From a startup perspective you have to protect your IP and there is a reluctance to release that as you have invested time and money in that IP. Any startup is there is to create a product and create value. The product that we are creating can be leveraged in the public sector and I haven’t gone near a public sector organisation intentionally,” he says.
Dunscombe believes CIOs have to provide support to the startup community. “We have nurtured and supported them where possible. Hackathons mean everyone blends in, the value is not just the product it is the shared learnings. We choose spaces that are quite neutral like The Landing (a Manchester startup hub) and we get clinicians, patients and SMEs to work on specific problems and it is wonderful to see those teams working together. The clinicians are learning about commissioning them and the SMEs are learning about how the healthcare system works, so it is a really powerful knowledge exchange,” Dunscombe says of breaking down barriers between large and small organisations.
“Now my clinicians know how to talk to SMEs, it has widened their vocabulary and their visibility of what we can do. I had a SME in the other week for a 100 people event on user centered design and people loved it as it was very visual and there is no better way to inspire the NHS,” she says.
The public sector is not only service provider, it is one of the UK’s largest employers and therefore has an opportunity to shape society and the economy in its actions. This is precisely why back in 2012 the coalition government that Liam Maxwell worked for began the process of improving opportunities for SMEs. This is a passion Dunscombe shares and has spoken to this author about on a number of times.
“In the last few weeks we have found that Salford is one of the best places in the UK to be a startup and that is really important to me as we have social problems in Salford. It is quite a deprived area, we have the BBC on one side and on the other side we have a lot of kids that come out of school without qualifications. So we are working with the whole education chain to gear people up to work in digital and digital health as one of the best public health measures you can make is to create jobs,” Dunscombe says.
Overall both CIOs believe the public sector environment is improving for SME and startup technology providers. The duo believe startups and SMEs should have confidence in their ideas, get engaged with the public sector and as Dunscombe says “do not fear giving someone a shout”.
Brought to you in association with our next two Horizon live CIO events.
14th November | Increasing business performance
22nd November | Developing a winning customer strategy