Despite the recent advancements in the literature on Collaborative Public Sector Innovation (CPSI), several weaknesses persist, particularly regarding our understanding of CPSI as a policy design issue. This article addresses the complex nature of CPSI in a post-NPM world, looking at a Canadian childcare innovation project and highlighting the complex interaction of collaboration, external pressures, and public service design. Our analysis recognizes diversity as a vital component of CPSI, highlighting that different methods exist for implementing and conceptualizing this collaboration. A key factor for the success of CPSI is the ability of organizations to strategically connect innovation with design processes. We emphasize that the likelihood of successful innovation increases when organizations reconsider project design and adopt an outcome-oriented strategy, rather than an output-focused process that fails to engage with broader system thinking and design principles. However, this does not automatically mean that the broadest collaboration and co-design approach is followed.