Miah Hammond-Errey | Is Australia's defence force, and the public service, too conservative?

Yet, there are clearly tensions between the need to steward public resources, ensure good governance and embrace new technologies.

On the one hand, public-sector entities must implement the decisions of government, or perform the functions assigned to them in legislation, and are bound by policy, compliance and accountability requirements that limit their options for managing risk. On the other hand, innovation is considered by governments - including Australia - as a "core strategic function" of public-sector organisations.

In a recent discussion with former NSW government minister Victor Dominello, he offered insight into the tensions for leaders between public service responsibilities and embracing acceptable innovation risk: "Governments are traditionally conservative, ultra conservative by nature. And that's not a political statement. It's a statement of their risk profile. And that's fair enough ... You don't want a government that is so edgy that it's playing around with public hospital systems. You want safe, reliable transport, hospital and education systems."

Yet, we see repeated calls to harness the economic benefits of digital innovation, called the "$315 billion opportunity" for Australia in 2018. Our defence innovation agency, Advanced Strategic Capabilities Accelerator, is directed to embrace an "innovation mindset" - one "not afraid to fail fast, learn, and adapt" as described by Defence Minister Richard Marles. Last month, Lieutenant-General Simon Stuart called for "harnessing the vast intellectual capital in our Army to leverage our capacity for innovation" to tackle "the challenges that the application of new and emerging technology present".

However, I hear from colleagues that Defence struggles to accept failure in the pursuit of innovation. They say there is still a need to consider how to manage the risks of innovation without stymying their efforts. The annual State of the Service report, which assesses the Australian Public Service, last considered the role of risk and innovation at length in 2017-18 and briefly in 2018-19, but not in depth since. Jennifer Jackett notes that what matters for defence innovation in new technologies, like AI, is strong networks connecting researchers and entrepreneurs; and, most importantly, institutional and cultural environments that embrace risk, experimentation and collaboration between defence and industry.

When recently lecturing on the impact of big data in national security at an Australian War College course for Defence's emerging leaders, we had a discussion about how Defence can embrace emerging technologies and find innovative ways to implement them while remaining steadfast in its defence of Australia. I recommend that leaders embrace innovation and its risk more directly. I suggest that leaders who want to create an environment that authorises innovation and the taking of risk clearly set out their acceptable failure rates and the specific areas of acceptable failure.

This approach draws directly on the way that boards set out a company's appropriate risk appetite. A risk appetite statement articulates the level and type of risk an organisation is willing to take in pursuit of its strategic objectives, given its financial capacity. The board's role is to set the risk appetite of the organisation and then ensure it has a risk management framework to identify and manage risk on an ongoing basis.

It's far from a perfect equation. Nevertheless, there are ways to approach innovation and acceptable risk appetites in relation non-financial risks. When encountering the same inertia often referred to in Defence and other government departments, Dominello advised that public-sector leaders should provide support and space for sandboxes where their people are allowed to experiment, collaborate and fail.

"You need to have some areas inside a government that are prepared to sandbox and do some edgy things. [Service NSW] was essentially the largest start-up in the country ... we were building our own product ... and turning things around really fast. What we need to do is to make sure that we have those units inside of government, just not just Service NSW, but in every agency."

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There is - and will continue to be - an ongoing tension between the need for stable government leadership which acts as the steward of public resources and protector of Australians and Australian interests, and the need to innovate and explore new technologies. To provide an environment that enables experimentation, collaboration, innovation and the inevitable failure that comes with these, public-sector and specifically defence leaders should clearly set out and then embrace their risk appetite.

The first step is to clarify the risk appetite for innovation-related failure, and clearly articulate risk tolerance and unacceptable risk - setting parameters around specific, acceptable areas of failure. The second is to take ownership and accept responsibility for this risk appetite and inevitable failures, to enable their people to continue to innovate.