Government innovation

Cities efforts for government innovation

Government innovation holds the potential to solve many of the challenges facing cities, from climate change to social justice, and from ensuring smarter mobility options to speeding up the digital transformation. As explained by Philipp Rode of LSE Cities in his guest essay for this publication, given the growing prominence of mayors in politics at all levels, more fundamental questions are being asked of how the public sector can be at the forefront of such challenges. For city governments, as Rode explains, this form of innovation primarily focuses on strengthening local administrative capacity to act, distributing risks, and enhancing their ability to tackle pertinent local issues, all while efficiently meeting residents’ needs.

Cities often manage this via their local innovation ecosystems, by connecting diverse but complementary actors, such as universities and startups; curating the local policy and regulatory environment to enable innovators to do what they do best; providing financing for innovative local ideas, organisations and projects; and creating upskilling opportunities that empower local people to leverage cutting edge research and technology to solve local problems in new ways.

Cities efforts for government innovation

Government innovation holds the potential to solve many of the challenges facing cities, from climate change to social justice, and from ensuring smarter mobility options to speeding up the digital transformation. As explained by Philipp Rode of LSE Cities in his guest essay for this publication, given the growing prominence of mayors in politics at all levels, more fundamental questions are being asked of how the public sector can be at the forefront of such challenges. For city governments, as Rode explains, this form of innovation primarily focuses on strengthening local administrative capacity to act, distributing risks, and enhancing their ability to tackle pertinent local issues, all while efficiently meeting residents’ needs.

Cities often manage this via their local innovation ecosystems, by connecting diverse but complementary actors, such as universities and startups; curating the local policy and regulatory environment to enable innovators to do what they do best; providing financing for innovative local ideas, organisations and projects; and creating upskilling opportunities that empower local people to leverage cutting edge research and technology to solve local problems in new ways.

Mayors responding to this year’s Eurocities Pulse Mayors Survey voiced optimism in their city’s capacity to innovate. As can be seen, 88% of the mayors responding to this question expressed either strong or partial confidence that their city can find the best way to tackle their challenges and deliver on their priorities, with only 4% signalling trepidation.

Meanwhile, a similar percentage of mayors (86%) either strongly or partially agree that their city will have to innovate to overcome a lack of resources to deliver on their priorities. A lack of resources was also highlighted in last year’s Eurocities Pulse Mayors Survey, where only around one in five mayors expected to have enough resources to match the needs of their city.

While mayors’ focus is clearly on the day-to-day delivery of public services, in their reflections many also highlighted that innovation has a strong role in ensuring this. As already indicated in the main survey analysis, when asked about the main strategies they would wish to employ to achieve their priorities, mayors ranked sourcing additional funding from central governments and the EU level in first place.

At the same time, almost half of all respondents to the Eurocities Pulse Mayors Survey 2024 shared that their cities do struggle to develop innovative approaches to address their political priorities, highlighting the importance of capacity building in this domain.

My city will have to innovate because otherwise we will not have enough resources to deliver on our priorities

I am confident in my city’s capacity to innovate to find the best way to tackle our challenges and deliver on our priorities

What can innovation help mayors do better?

When asked ‘what innovation can help your city do better,’ the top response, selected by 45% of mayors overall, was to solve complex challenges and deliver on transformative policy agendas.

Cities face an array of complex challenges that increasingly require coordination and horizontal work across departments and in tandem with other actors. It therefore comes as no surprise that innovative approaches to managing challenges such as the just transition, which require huge efforts not only to decarbonise and shift behaviours, but also to ensure no one is left behind, are foremost on mayors’ minds.

Through innovation, cities can transform their normal service provision while formulating coherent approaches to potentially divergent policy agendas, all while strengthening their collaboration with other players including local residents, academia, startups and other corporate and civic entities.

In Tallinn, the ‘Tallinnovation’ initiative engages companies to enhance local innovation, improve local service provision, grasp environmental goals and enhance urban living, including through an innovation competition, awarding prize money and providing opportunities for companies to test their products in urban settings.

A quintessential example of how this kind of collaborative innovation can be harnessed to solve complex challenges is the Climate City Contracts that Eurocities and its partners help cities deliver through NetZeroCities as part of the EU Mission for 100 Climate-Neutral and Smart Cities by 2030. The city here acts as facilitator to develop a shared vision of climate neutrality, and shared commitments with other local players.

Second overall, with around 44% of mayors selecting it, is anticipating and managing future challenges.

Recent crises, most notably the Covid pandemic, have demonstrated how essential it is to have reliable foresight and resilience towards future challenges. At present, demographic shifts, economic volatility, and climatic uncertainties compel cities to look into the future and prepare for its uncertainties. Conversely, innovative predictive models and adaptive strategies can better position cities to capitalise on upcoming opportunities.

Such thinking is in evidence in Aix-Marseille Provence where the metropolitan government uses innovation policy to foster links between local and African startups. With PwC’s The World in 2050 Report indicating that emerging economies will be the driving force of global growth in the coming decades, with a relative slowdown in the EU, this approach serves at once to diversify the local economy and to create lasting bridges with African innovation ecosystems.

With more than 20% of mayors overall saying that generating new sources of revenue or resources is a key role that innovation can play, we again see the crucial need for effectively financing cities to meet all residents’ needs.

At a similar threshold (20% overall), but with more selecting it in first place, engaging residents and stakeholders is clearly important to cities when it comes to developing their innovation strategies.

Cities are intent on unlocking the potential of innovation to engage residents and other local actors. Inclusive forms of innovation that bring diverse voices to the table are also more robust and sustainable.

With its participatory budget, Warsaw uses an innovative mode of governance to enable innovative ideas coming from the ground up. The initiative allows residents to decide on how a portion of the city’s budget is allocated to selected projects, such as the creation of an ecological ice rink in Bielany and the installation of book vending machines.

Other areas that were highlighted were simplifying procedures for firms and residents; and directly improving the quality of life of residents, for example by improving health or job outcomes.

Government Innovation for European Cities

Since LSE Cities’ first convening of mayors from leading European cities in 2003, urban policy concerns have been both sticky – housing, transport or urban regeneration – and fundamentally shifting – climate, health or technology. Alongside the more profound shifts in priorities and sentiments has come a global recognition that a passive, or even an ‘enabling’ state can’t rise to the scale of the challenges that we face.

By Philipp Rode

Executive Director, LSE Cities

Instead, we need rapid and radical action, with a particular focus on inducing positive social tipping points. From this standpoint, it’s right that Europe’s cities, with their large economic and environmental footprints, forward-looking populations, and relatively agile, networked governments, should take a lead.

With a more proactive, shaping role for governments back on the agenda, fundamental questions of how the public sector works and solves problems have naturally re-emerged. Government innovation – the processes through which public administrations create new strategies, policies and services – represents a central field of inquiry. Whether requiring new cultures of innovation, leveraging digitalisation or co-creation approaches with citizens and the private sector, government innovation is about balancing risk taking, continuity, and responsible budgeting with the flexibility needed for experimentation and creative solutions.

For city governments, this type of innovation is mostly about empowering administrations, sharing risks and building the capacity to address critical local challenges while effectively responding to residents’ needs. Three bundles of fundamental city challenges usually serve as a point of departure, once again confirmed in the Eurocities Pulse Mayors Survey. First, complex, society-wide challenges dominated by climate change but also involving social inequalities and economic performance. Second, domain specific challenges related to housing, mobility, energy and planning. Third, more internal governance challenges that might include budgets, financing and administrative capacities.
Government innovation by city halls can play a major role across any of these challenges and priorities. It is encouraging that close to 90% of cities in the Eurocities Pulse Mayors Survey believe that they have the capacity to innovate, tackle challenges and deliver on policy priorities. Above all, European cities consider innovation to be particularly important for addressing complex challenges through transformative agendas and the anticipation of future challenges. The Future Mentors programme follows this sentiment in an unusual way. Initiated by the City of Espoo for Eurocities and facilitated by the OECD, it reverses traditional mentorship and establishes a small group of young people mentoring a city decision-maker and has so far engaged 26 cities.

Additional opportunities cut across citizen engagement, accessing new revenues, developing new procedures, and improving outcomes for residents. The most easily identifiable innovation activities relate to data and evidence-based policy as well as data analytics. New digitally enabled services and solutions alongside human-centred design for public services are a second group, followed by more technical activities such as finance, procurement and foresight support. Examples include Tirana’s Open Data Portal and One-Stop-Shop of online services or London’s online community, Talk London, which engages citizens in discussions of some of the most pressing challenges and priorities facing the city.

Our forthcoming joint survey of 61 cities across Europe reveals further details on actual innovation practice, and by extension, where opportunities for targeted capacity building and training may be particularly helpful. This includes practices focusing on e-government, climate action, economic development and transport. For example, the City of Turku established a deliberative citizens’ panel with over 170 randomly selected participants to inform transport developments for its city centre. This approach is built on experiences with citizens’ assemblies which have become common for climate action (e.g. Bologna’s climate assembly), as well as for innovating strategic planning (e.g. Leuven 2020). Such approaches may also require novel city institutions. The Cluj Centre for Innovation and Civic Imagination is establishing new forms of collaboration with its residents including a youth advisory council.

Beyond these substantive issues, building capacities linked to crosscutting, whole-of-government approaches; anticipating and managing future challenges; engaging and collaborating with diverse stakeholders; and improving service delivery emerge as priorities. However, any support programmes would have to centrally acknowledge the diversity of European cities and their variable levels of experience in public sector innovation.

What the forthcoming Eurocities Pulse/LSE Cities survey on government innovation once again confirms is a considerable potential for closing the opportunity-practice gap of government innovation. The opportunity cuts across better data and data analytics for decision making, more effective public engagement and service improvements. Related practice will range from AI trials considering privacy, transparency and other risks to people-focused innovation of governance, management and local democracy. Any of this will require informed, confident, and willing leadership which should not be taken for granted. Instead, proactive leadership training, coaching and technical assistance is urgently needed.

To get there, universities will need to better combine their role as ‘anchor institutions’, with large workforces, land holdings and purchasing power, and knowledge bases by fully engaging with the urban government innovation cycle.

By Philipp Rode

Executive Director, LSE Cities

Boosting city capacity through innovation

Among the approaches to innovation that mayors indicated could enhance local operations the most, the top overall (72%) is data-driven analytics and evidence-based policy making.

With ever-more vast quantities of data becoming available to cities, it may come as no surprise that innovative approaches to engage with this resource are a top priority for mayors. This data allows local leaders to make more informed decisions about their strategic direction and distil insights and inform decisions that are both responsive and anticipatory.

In Bologna, the city’s data is fed into a digital twin, a 3D digital copy of the city that includes an array of urban processes. This innovative approach allows the city to observe and comprehend local data from above. By opening up the model, the city can enhance transparency and create opportunities for further innovation among companies and other local organisations.

Gathering this data, ensuring that it is of a high quality, and even using the collection to engage residents through citizen science presents its own challenges. Via pathways including Eurocities’ EU-funded projects CitiMeasure and CitiObs, local governments are honing their data-gathering techniques.

Given the centrality of digitalisation and e-governance to cities’ thinking on innovation, it is also important to note that this was an area that a significant percentage of mayors (26%) highlighted as one of the top areas where more EU funding is needed. Such approaches range from apps and online platforms for civic engagement in Rotterdam and London, to offering benefits like reduced school fees to residents proactively on the basis of data available to the city, as in Ghent – all finalists for the 2023 awards of Eurocities’ EU-funded UserCentriCities project.

Second, developing new services and solutions based on digital technologies, was selected by 60% of mayors overall.

Mayors also see innovation as key to rethinking the municipal approach to financing and procurement. Innovative financing can help cities generate revenue, earmark portions of their budget, and capitalise on private finance. Eurocities works through the EU-funded Prospect+ project to create resources and mentoring opportunities for cities on innovative financing.

Ljubljana uses energy performance contracts to enable massive solar projects without drawing on the municipal budget. A local energy services company makes the initial investment, paying for and installing solar panels on the roofs of school buildings in cooperation with the city council. The company then recoups its investment over the coming years, by receiving the monetary amount from the savings produced by the use of solar energy.

Which of the following innovation activities do you think your city would benefit from the most?

Innovative public procurement is a way that cities can save money as well as gaining outsized benefits from planned spending. Typically, public procurement has awarded tenders to the provider charging the least. However, innovative procurement shifts the focus to getting the best value for money, meaning a more expensive option could be chosen if the eventual payback, whether in economic, social or environmental terms, is greater than other options. Eurocities works through the EU’s Big Buyers initiative to enhance local capacity for innovative public procurement.

As big spenders, responsible for €6 out of every €10 of public spending, local and regional authorities also have the power to incentivise shifts in the market. For example, by signalling interest in the procurement of electric waste collection trucks, Gothenburg was able to entice Volvo into manufacturing an initial batch of such vehicles. In this way, the city was able to use the money it had earmarked to update its fleet while also meeting its sustainability and noise reduction goals, and contributing to the development of a solution that other cities can now use.

Third, human-centred design of public services and policy interventions, was selected by 57% of mayors overall.

Mayors also see potential for innovative human-centred design of public services and policy interventions, ensuring that they remain grounded in the lived experiences of residents.

In Donostia – San Sebastian, the SmartKalea project involves local shops, technology companies and residents in building a smart and sustainable urban environment. The provision of real-time data to local shopkeepers and the integration of this data on the SmartKalea website allows for better business and greater transparency, empowering locals through innovation and information.

Ghent’s climate crowdfunding platform, developed in 2015, enables residents to propose and finance ideas for the city. This ensures that projects that are financed always have local buy in, literally. Funded projects include ‘Lekker dichtbij!’ which encourages urban farming on balconies of social housing, and ‘the Edible Street,’ which transforms stone facades into vertical gardens for local food production.

Besides these areas, mayors also considered innovation to carry potential for developing Mission-oriented innovation, such as through the 100 Climate-Neutral and Smart Cities Mission; engaging residents in new ways, such as through citizen dialogues; and rethinking local approaches to financing and procurement.