Rethinking Government capacity

Introduction

Governments worldwide face increasing pressure to modernise their operations, enhance service delivery, and improve efficiency in an era of rapid technological advancement. The report "The How We Need Now: A Capacity Agenda for 2025 and Beyond" by Jen Pahlka and Andrew Greenway provides a critical analysis of state capacity and explores alternative models for governmental operations.

This summary distils the core arguments of the report, emphasising its relevance for nations reconsidering their operating frameworks. The report challenges traditional bureaucratic models and advocates for a shift towards an agile, product-driven approach to governance that enables better decision-making, resource allocation, and public service outcomes.

Reassessing state capacity in a digital age

Traditional government structures were designed for an industrial-age approach to administration, prioritising rigid processes, risk aversion, and linear decision-making. However, these models are increasingly misaligned with contemporary challenges such as digital transformation, fiscal constraints, and evolving citizen expectations. The report underscores that modernising state capacity requires governments to adopt operational models that emphasise continuous improvement, flexibility, and responsiveness.

Governments that fail to adapt their structures and decision-making processes risk inefficiency, poor service delivery, and escalating costs. The report draws comparisons with private-sector firms that use iterative product development methodologies to refine services and respond to changing demands. By embracing a product-driven approach, governments can build resilience, enhance service quality, and reduce costly project failures.

The case for a product model approach

A central argument of the report is the need to shift from a project-based to a product-based model of governance. In contrast to large-scale, multi-year projects with fixed budgets and rigid requirements, the product model allows for incremental funding, continuous iteration, and regular user feedback. The product approach is particularly relevant for digital service delivery, where requirements evolve rapidly and pre-defined specifications often become obsolete.

The report highlights several key benefits of the product model:

• Incremental funding: Avoids the pitfalls of large, upfront investments by allowing for iterative adjustments based on performance and evolving needs.

• Cross-functional teams: Encourages collaboration between policymakers, technologists, and service delivery experts, ensuring more effective implementation.

• User-centric design: Focuses on delivering real value to citizens by incorporating feedback loops and performance measurement into service development.

This approach enables governments to transition away from outdated procurement practices that prioritise compliance over outcomes. Instead, they can adopt flexible funding mechanisms that allow for experimentation and adaptive policy making.

The role of internal capability in government transformation

One of the report’s critical insights is the importance of developing in-house expertise rather than relying excessively on external contractors. Many government agencies struggle with digital transformation due to an over-reliance on vendors who prioritise contractual obligations over innovation and adaptability. By investing in internal talent and capabilities, governments can ensure they have the knowledge and skills needed to oversee and implement modern service delivery models.

Key recommendations include:

• Building digital expertise within government: Hiring and retaining professionals who can manage iterative development processes and integrate digital tools effectively.

• Reevaluating procurement strategies: Shifting from rigid, requirement-heavy contracts towards more flexible partnerships that incentivise innovation.

• Aligning oversight with new operating models: Reforming audit and compliance practices to support adaptive and iterative approaches rather than reinforcing outdated processes.

By fostering internal capabilities, governments can retain control over critical digital infrastructure, reduce dependency on vendors, and create more sustainable and efficient public services.

Aligning funding and oversight with modern governance models

A significant barrier to modernisation is the misalignment between funding mechanisms and the realities of digital-era governance. Traditional budgetary processes emphasise fixed costs, multi-year appropriations, and rigid deliverables, which conflict with the need for continuous innovation and adaptation.

The report advocates for:

• Ongoing funding streams: Enabling agencies to develop and refine services over time rather than being constrained by one-time project funding.

• Performance-based accountability: Shifting oversight from compliance-driven evaluations towards outcome-focused assessments.

• Reducing procedural bloat: Streamlining regulatory requirements that slow down progress and limit operational agility.

These reforms would allow governments to make more strategic investments in technology and operational improvements, ensuring that funding models support long-term capacity building rather than reinforcing inefficiencies.

Conclusion

The report presents a compelling case for rethinking government operations in an era of rapid change. By shifting to a product-oriented approach, investing in internal expertise, and modernising funding mechanisms, governments can enhance their ability to deliver effective public services. The insights provided are particularly valuable for nations reassessing their administrative structures and seeking to build more resilient, efficient, and responsive governance models.

As digital transformation accelerates, governments that fail to embrace these principles risk falling behind, incurring unnecessary costs, and diminishing public trust. The path forward requires bold leadership, institutional adaptability, and a commitment to continuous improvement. This report serves as a crucial guide for policymakers seeking to navigate these challenges and build a government that is fit for the digital age.

Reference Pahlka, J., & Greenway, A. (2024). The How We Need Now: A Capacity Agenda for 2025 and Beyond. Niskanen Center.