Innovation 101: The Budgeting Boundary

We talk to Dan Hoffman, Chief Innovation Officer (CINO) at Montgomery County


When we started this series, one of our main aims was to explore innovation from a number of different perspectives.

So far, our contributors, Mark BighamSue Jefferson and Yuval Dvir have discussed the importance of people, culture and ROI evaluation.

This week, it’s the turn of Dan Hoffman, Chief Innovation Officer (CINO) at Montgomery County.

Having been with the county since October 2012, Dan’s experiences with innovation have mainly come within the public sector. This differing perspective, one which does not come from a purely commercialized setting, allows us to evaluate the budgeting boundary in a different way.

Montgomery County is part of the Maryland state. Just above Washington DC and just to the left of Baltimore, the county has around one-million inhabitants and is one of the most affluent areas in the United States.

Dan, who’s worked in both the public and commercial setting in his career, has experienced innovation from both perspectives. He sees considerable differences. He states; ‘The difference between government and commercial organization is considerable. We don’t think that we have to spend a certain percentage on R+D, it’s very ad-hoc.’

The environment in which innovation is tested also has an impact on the budgeting process. In the government sector, failure is almost encouraged, and is seen as a way of guaranteeing the development of future iterations. This can be done because the budgets involved rarely amount to more than two-hundred thousand dollars.

In contrast to this, Apple spent ten-billion dollars on innovation in 2013. You may think that having a budget of this magnitude would allow for more freedom. In terms of the projects that Apple could undertake, it did, but what it didn’t do was give them an opportunity to fail. If you spend ten-billion dollars, you need a return. When you spend two-hundred thousand, or even less, that pressure isn’t as intense, although there is still pressure to succeed, meaning that innovation doesn’t have to be forced.

In reference to this Dan states;

‘Instead of creating a safe place for these ideas to be tested out, they [commercial organizations] create these mechanisms where failure isn’t possible. I think that inhibits innovation for governments.’

Proof of concept projects, then, are not done with the same mindset. Yet drawing a straight line between public and commercial environments isn’t possible either. Dan says, ‘It depends on the size of the government too. It’s hard to say that a rural county with 15,000 people is going to be doing the same amount of R+D that a major county like ours is, which has a million people, but there are things they can do.’

This means that the budgeting process, due to the tasks that a jurisdiction of a million people will have to undertake compared to one which has a much smaller population, differs considerably from government to government.

As mentioned before, the budgets that Montgomery County deals with are often in the region of two-hundred thousand dollars. But budgets, in Dan’s opinion, shouldn’t be rolled out on a project by project basis.

He states; ‘They are not huge sums of money, so having a fund available to capture emerging opportunities, to maybe help a startup company, those are the types of opportunities you want to seize, and to do that you can’t just rely on the standard annual budgeting process. You need to have fund set aside to accommodate for those types of projects.’

Smaller budgets don’t necessarily mean shorter timeframes to completion. Dan, however, does measure his projects by the month, although their completion can often take much longer. Concerning one of his current projects, Dan explains that;

‘[It] is just about to reach a six-month milestone - it’s 18 months long. At that point we’ll either end it, or scale it up and keep it going.’

Innovation is truly different in the public sector. The projects aren’t as glamorous, but they are ultimately as important. Budgeting isn’t as stringent as it is in the public sector, with Dan preferring a ‘fund’ to an annual budget as this gives him the freedom to deal with issues as they arise.

In terms of negotiating the boundary, Dan’s been lucky to work with leaders who have granted him access to funds when he’s needed them. He does, however, point to the need for projects to be brought to life, in whatever way possible, before budgets are worked out. He says;

‘You have to show people. Start with low-cost prototypes that you can do - hackathons, maybe, that can make it real so that you can show people. A rough prototype maybe. You’ve got to make it real.’

Next week we will be hearing from Richard Angus, our Head of Innovation, who will be exploring the ‘Structure’ boundary.


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