James Riley
July 27, 2015

Govt locks out digital innovators

Govt locks out digital innovators

Robert Hillard: We need a new mechanism to deliver rewards to small innovators

Australian Government procurement practices designed to de-risk technology projects are having the opposite effect, creating large, complex programs that carry more risk and discourage the participation of smaller innovators, Deloitte Australia’s National Managing Partner Consulting, Robert Hillard says.

The net effect of the procurement focus on process – rather than on outcomes – is the creation of larger projects that are more costly, and less likely to drive transformative change.

The cost to the Australian industry is that local tech innovators – the community of tech-enabled disruptors that are driving transformative change across industry after industry in the rest of the economy – are locked out of applying new thinking to public sector.

Mr Hillard says the Digital Transformation Office can be an important change agent inside government. But without a rethink and renewal of Australian Government technology procurement, it may struggle.

The DTO was set up within the Communications Department with a mandate earlier this year to improve citizen services through new digital means. The Office’s just-appointed CEO Paul Shetler was recruited from the UK’s Government Digital Service and this month arrived in Australia to start work.

The DTO’s structure within Communications has been criticised as not having enough muscle to drive change across government. Specifically, the Office does not carry responsibility for procurement, which still resides in the Department of Finance.

Mr Hillard says this might not be a big problem, but that “philosophical issues” related to technology procurement need urgently attention, regardless of whether it is in Communications or Finance.

“We still have too much tendency to focus on the procurement process rather than the procurement outcome. And in trying to avoid risk, you actually end up taking on far more risk,” Mr Hillard said.

If you are a bureaucrat and you have an outcome to deliver, you set about achieving this through a very specific and proscribed procurement process. To get a project approved and funded, you jump through a series of stages to get through, from tenders and panels and expert advisories.

All of these things have an overhead attached to it, he says, adding to the cost of doing business for both the buyer and the seller. This means the natural order tends to aggregate needs into bigger projects on the basis that it doesn’t cost half as much to tender for something that’s half the price.

“The problem with technology projects is that with scale, the risk increases exponentially. So the very thing (the processes) that you are using to decrease your risk is – ironically – forcing you to increase risk,” Mr Hillard said.

Until government can find a way to break apart its large, integrated technology projects – some worth north of a billion dollars – it is presenting impossible barriers to entry for the disrupters. These projects lock the public service into arrangements that have little chance of delivering the kind of change that is the promise of current suite of disruptive, commodity technology.

‘Large project’ process mentality “is effectively shutting out most of the Australian technology sector,” he says. “Not all of it, but most of it. And certainly it shuts out the most innovative Australian technology companies.”

While there is an improving “mood” in government to look more fundamentally at disruptive change – and the creation of the Digital Transformation Office is evidence of this – without an overhaul of the way government engages with the industry, this change will be hard to achieve.

“There are not currently the kinds of opportunities to have the sort of break-out wins where you do something really innovative that’s going to make a small business [which did the project] phenomenally successful, Mr Hillard said.

“And we actually need to create those prizes. The really big, big wins are what encourages the break-out inventors, the dreamers, the innovators who really stake everything on a big idea,” he said.

“We need a mechanism to allow these guys to get big rewards in government – that’s what will move things [in terms of digital change.] And we’re just not seeing enough of a move in that direction.”

None of this is straight-forward, of course. eGovernment, as it used to be called, is hard. Digital transformation in any large organisation is hard.

The Australian Government has a pretty good track record in digital service delivery, even if its momentum ground slowed dramatically after 2010. It’s moot to say government has been a poor performer in this area if measured against the private sector. Government transactions – especially in the health and social services areas – are hugely more complicated.

But where digital services are delivered successfully, the results can be phenomenal. Telstra has increased its number of digital transactions from about 25 per cent to about 50 per cent in three years. That’s a stunning, incredible achievement.

“One of the things that interesting about a company like Telstra is that when you move people from call centre-based interactions to digital transactions, when you do it well, customer satisfaction goes up,” Mr Hillard said.

Costs come down, customer satisfaction goes up. And it happens fast. It’s what makes the current round of transformative digital technologies so crazily compelling.

This of course, is precisely what our government hopes to achieve. But until it reforms the way it procures technology, successful outcomes might prove elusive.

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