Rethinking the Public Sector Could Save $3.5 Trillion Worldwide

Rethinking the Public Sector Could Save $3.5 Trillion Worldwide

In a previous post, we identified Five Key Pillars of Successful Digital Transformation.

These included:

a) building a Digital Operating Advantage by leveraging the full potential of digital technology for maximising efficiency and reducing costs and

b) deriving Actionable Insight from data analytics.

The scale of the public sector opportunity in these two areas has been highlighted in a recent report from McKinsey – The Opportunity in Government Productivity.

Governments around the world stand, according to the report, could save $3.5 trillion annually within the next five years – an amount equivalent to the entire global fiscal deficit – if they improved the efficiency and effectiveness of their spending by adopting best practices from the private sector.

$1 trillion of these cost savings could be achieved from the better use of digital technology and data analytics. However, the right enablers need to be in place to allow proper change to take place.

“End-to-end process digitization can significantly reduce costs and boost efficiency, while smart use of data, in areas ranging from student attainment to health diagnostics to infrastructure maintenance, can lead to much-improved outcomes and citizen satisfaction”.

Digital Enablers

For these benefits to be realised, four main digital enablers need to be in place:

  • A clear focus on how to use technology to drive improvements e.g. digitizing interfaces with citizens, automating manual processes, integrating advanced analytics and sharing useful data; fully aligned with and supportive of agreed business goals, outcomes and targets.
  • Governance and organisation designed for cooperation, especially the ability of governments to overcome independent agency/department inertia and to get the public sector to act in a collaborative way.
  • Committed leadership, the right talent, a culture that rewards risk taking, building digital awareness and capabilities. The role of the digital leader is critical in this respect – planning digital initiatives, reinforcing priorities through frequent communications, closely monitoring implementation progress.
  • Thoughtful technology roll-out and excellence in project management to overcome the problems created by legacy IT systems and tied outsourcing agreements that make innovation difficult.
Our Take

Give the slow rate of digital progress being made by many countries, a powerful, insightful and timely report from McKinsey highlighting the growing gap in public sector digital transformation between ‘leading digital nations’ and others. A refreshing approach which supports our argument that technology alone is not a panacea. Technology AND organisation are critical to successful digital transformation. Unfortunately, there are still too many projects where the failure to address organisational, leadership, culture, people and project management issues have derailed progress and set-back agendas.

As governments continue to struggle in meeting the growing expectations of digitally savvy citizens, in an era characterised by continuing austerity and budget cuts, the report highlights the lessons to be learned from leading digital nations.