As we prepare for the Istanbul Innovation Days 2025, we are publishing a series of videos featuring thought leaders who have shaped our understanding of institutions.
In this first conversation, Geoff Mulgan, co-founder of the Institutional Architecture Lab (TIAL), speaks with John Kay, one of the UK’s most influential economists, about the evolution of institutions and what can be learned from business and public organizations alike.
John Kay has spent a lifetime examining how economic organizations function, moving beyond traditional economic models that assume individuals and institutions act as rational optimizers.
Instead, he highlights that most organizations operate in environments of radical uncertainty, where they must continuously adapt and learn.
The question is, how can institutions navigate such uncertainty while maintaining their core purpose.
Kay underscores the importance of institutions – whether businesses or public bodies – staying rooted in their fundamental mission.
He reflects on historical examples of some corporations, to illustrate how organizations that prioritize financial metrics over their intrinsic purpose often lose direction, leading to decline.
Businesses and institutions succeed, not by maximizing short-term returns, but by building collective intelligence – bringing together people with complementary skills to achieve what none could do alone.
The discussion also turns to what the public sector can learn from business.
Over the past two decades, corporate structures have evolved, embracing platform models, franchising, and new organizational forms.
Kay argues that economic organizations exist to add value by assembling capabilities in ways that enable people to achieve more together than they could individually.
He challenges the traditional distinction between public and private sectors, suggesting that hybrid models, such as public-private partnerships and mutuals, should be seen as essential tools for designing effective institutions.
A key challenge in public organizations, Kay points out, is an overriding concern with avoiding blame, which often leads to a focus on process over outcomes. This risk aversion stifles innovation and problem-solving.
He calls for institutions that cultivate responsibility and focus on delivering tangible benefits rather than merely following procedural compliance.
Looking ahead, Kay and Mulgan explore where institutional innovation is taking place globally.
True entrepreneurship, Kay argues, is not about taking risks but about assembling the right capabilities to solve practical problems in new ways.
The role of institutional innovators, much like business leaders, is to create environments where collective intelligence can thrive.
