I am searching for my own answer to this question in my work, and also by going back to school for a short course on Social Policy and Welfare States in the 21st Century. In the meantime, here are four slightly different perspectives:
Policy making in the real world by Jill Rutter, Michael Hallsworth and Simon Parker
A short guide to policy for government digital professionals by Paul Maltby
WTF is Policy? by Laurence Grinyer
If you have any thoughts on this, or have seen a similarly thought-provoking article on this topic, please leave a comment and add to my list.