For small and medium-sized enterprises (SMEs), working with the public sector offers both enormous opportunities and considerable challenges. The sector is vast, resource-intensive, and essential to society’s functioning. Health, education, welfare, and municipal services all depend on continuous improvement and innovation. For companies with strong ideas and proven solutions, public sector collaboration can unlock systemic change.
Yet many SMEs encounter the same frustrating paradox: their innovations succeed locally but fail to scale. A pilot project in a single municipality or care home shows positive results, but when it comes to expanding to other sites, regions, or national levels, the momentum stalls.
From the viewpoint of an SME, this raises critical questions: Why does scaling stall, even when a solution works? What systemic barriers are at play? And how can both SMEs and public sector organizations better prepare for successful adoption?
The answer is not a simple one, but a complex one with many facets. Let’s explore five: organizational anchoring, business criticality, exit planning, competence, and value choices. Understanding these dynamics is vital for SMEs that want to design sustainable partnerships with the public sector.
Organizational anchoring
Innovations need to be firmly embedded in the public organization to succeed. For SMEs, this means that a project cannot depend solely on a single enthusiastic employee or department. Without support from leadership, decision-makers, and operational managers, the innovation risks remaining peripheral—seen as a “nice to” rather than a “need to.”
From the SME side, a lack of organizational anchoring often becomes apparent only after the pilot stage. A municipality may welcome a trial enthusiastically, but when the SME seeks to expand or formalize the partnership, resistance emerges. Leaders may be unaware of the project, budgets may not have been allocated, or political priorities may have shifted.
SMEs should prioritize building relationships not only with end users but also with middle and top management. Demonstrating how the innovation aligns with the organization’s strategic objectives—whether those are efficiency, patient outcomes, or sustainability—is crucial. Anchoring requires early buy-in, clear agreements, and visible commitment at multiple organizational levels.
Business criticality
Public organizations, like private ones, prioritize initiatives that are critical to their mission. If an innovation is not perceived as directly addressing core challenges, it risks being sidelined when budgets tighten or new demands emerge.
For SMEs, this means that proving impact is not enough. Even if a solution demonstrably improves user satisfaction or operational efficiency, it may not scale unless it is clearly linked to the organization’s top priorities. For example, in healthcare, if a project improves quality of life but does not directly reduce hospital readmissions or costs, it may struggle to gain traction.
SMEs must frame their solutions in terms of business criticality. This involves mapping the public sector’s pressing challenges and aligning innovation outcomes with them. Communicating in the language of “mission-critical problems” makes it more likely that innovations will be prioritized for scaling.
Exit plan
Many public sector innovations begin as projects or pilots funded by short-term grants or discretionary budgets. Without a clear plan for continuation—who will pay, who will own, and how the innovation will be sustained—the project risks ending once initial funding runs out.
For SMEs, this is a recurring pitfall. Pilots may generate enthusiasm and evidence, but when the project period ends, the SME finds no structured path to conversion into long-term contracts. Instead, the innovation “dies” at the pilot stage.
SMEs should insist on developing exit plans from the beginning. An exit plan defines what happens after the pilot: Will the municipality integrate the solution into its budget? Who will champion adoption? What evaluation criteria must be met to trigger scaling? By clarifying these issues early, SMEs reduce the risk of wasted resources and “innovation theater.”
Competence
Scaling innovations requires skills and capacity within the public organization. Even the most intuitive solutions need training, technical support, and operational adjustments. Without competence building, public sector staff may resist adoption or misuse the innovation.
From an SME’s perspective, competence gaps often become apparent during rollout. A municipality may underestimate the resources required to implement the solution, assuming staff can adopt it without additional training. The result: frustration, underuse, and eventually abandonment.
SMEs should integrate competence development into their offering. This includes training programs, user manuals, and ongoing support. By positioning themselves not only as technology providers but also as knowledge partners, SMEs help ensure that their innovations are used effectively and sustainably.
Value choices
Scaling often forces public organizations to make difficult choices about values. For example, should cost efficiency be prioritized over individual user satisfaction? Should equity take precedence over speed of implementation?
For SMEs, these value choices can be frustrating. An innovation may deliver measurable benefits, but if it conflicts with political priorities or ethical standards, it may be rejected. For instance, a digital tool that improves efficiency but raises concerns about data privacy may face insurmountable barriers.
SMEs must understand the value frameworks guiding their public partners. Engaging in dialogue about trade-offs and demonstrating flexibility in adapting solutions to align with organizational values increases the likelihood of scaling. Transparency and sensitivity to ethical concerns build trust and legitimacy.
Why projects stall: The bigger picture
Despite their best efforts, many public sector projects remain trapped at the pilot stage. They deliver localized impact but fail to spread across organizations or regions. For SMEs, this pattern creates significant costs and lost opportunities.
Particularly in healthcare, rigid structures and competing priorities act as barriers. Even when evidence is strong, scaling requires overcoming institutional inertia, fragmented governance, and resource constraints. This is not simply a matter of innovation quality—it is about navigating complex systems.
Implications for SMEs
From the SME perspective, the inability to scale poses strategic risks:
- Resource drain: Repeated pilots without scaling can deplete finances and staff time.
- Reputation risks: Being seen as a “pilot company” can undermine credibility.
- Missed impact: The societal benefits of the innovation remain localized instead of systemic.
To mitigate these risks, SMEs must adopt a systemic perspective when entering public sector partnerships. This means understanding organizational dynamics, aligning with strategic priorities, and planning for sustainability from the start.
Recommendations for SMEs working with the public sector
- Engage multiple stakeholders early
Don’t rely solely on enthusiastic frontline staff. Build relationships with decision-makers, managers, and political leaders. - Demonstrate strategic alignment
Frame the innovation in terms of the public organization’s most pressing challenges and policy goals. - Negotiate exit plans
Make continuation and scaling part of the conversation from day one. Define clear success criteria and next steps. - Invest in competence building
Offer training, support, and ongoing development to ensure adoption and effective use. - Respect value frameworks
Understand the ethical, political, and organizational values guiding your partner. Adapt and communicate with sensitivity.
Scaling: Thriving between promise and peril
For SMEs, collaborating with the public sector offers both promise and peril. While the sector is eager for innovation, systemic barriers often prevent solutions from spreading, even when they prove effective.
By focusing on organizational anchoring, business criticality, exit planning, competence, and value choices, SMEs can better navigate the complexities of public sector scaling. Success depends not only on the quality of the innovation but also on the ability to align with institutional realities and build sustainable pathways for adoption.
Scaling innovation in the public sector is not simply about technology or ideas. It is about systems, structures, and people. SMEs that recognize this—and plan accordingly—stand the best chance of moving from isolated pilots to meaningful, system-wide impact.
DREIESKIVA|Roald Kvam 
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