James Riley
July 27, 2015

Turnbull: Digital power of example

Turnbull: Digital power of example

Turnbull: Government can lead economy-wide digital transformation by the power of example

The Deloitte Access Economics report on Digital government transformation launched yesterday by Communications Minister Malcolm Turnbull paints a very big picture, populated by very big numbers. The headline take-outs involve a lot of zeroes.

Deloitte says about 40 per cent of the 811 million transactions at the combined state and federal government levels are completed using “traditional” service delivery methods. It says an achievable goal would be to reduce this to 20 per cent of transactions over a ten year period.

Meeting this reduction of mail, telephone and face-to-face transactions would produce productivity, efficiency and other benefits to government of $17.9 billion over that period.

Citizens would enjoy savings in time, convenience and out-of-pocket expenses – say, catching a train to the Medicare office – of a further $8.7 billion.

And government would enjoy additional windfall benefits from receiving earlier payments, using its digital channels for advertising and sharing information, and from cost savings from digital data storage worth $1.7 billion.

This delivers a total estimated present value of this drive into the realm of government digital transformation of $26.6 billion over 10 years. Big number.

Of course, transformation is neither easy nor cheap. The Deloitte report, which was commissioned by digital giant Adobe, places to total cost, including the significant investment in ICT, as well as transitional costs, staff re-training, redundancies and a digital literacy program for the citizenry, at $6.1 billion.

So the gross benefits are four times the cost.

“It is clear that digital transformation is likely to deliver significant net economic benefits for government and citizens,” Deloitte says. The recommendations in the report also hold to promise of new opportunities for the local private sector compete for new lines of government business.

“At $20.5 billion in present value terms ($26.6 billion less $6.1 billion), the estimated net benefit represents 1.3 per cent of annual Gross Domestic Product, or approximately $880 in net benefits per Australian citizen or $2,000 per household.”

These are substantial benefits indeed. Very attractive, very seductive. But these are the end-game numbers of a successful program – or at least the 10 year anniversary numbers – and perhaps do not illuminate the pain of delivery. Clearly though, the scale of the benefits must energise the will to get things done.

Deloitte has taken a deep dive in building its case. Its six-month study involved the study of publicly available data covering digitisation efforts across mega-agencies like the Australian Taxation Office and those within the Department of Human Services, as well as the South Australian Department of Premier and Cabinet, the Digital Transformation Office and Service NSW. It also looked at the local government experience of The Hills Shire and Brimbank City.

Its assessments measured current transaction volumes against transaction forecasts for each service channel, and applied a measured cost to each. (The most stark of these is the $16.90 cost of a face-to-face transaction compared against the .40 cent cost of an online transaction. That’s a 40 times multiple.)

There are Deloitte assumptions that might be considered heroic. But the report’s author Deloitte Access Economics partner John O’Mahoney could equally be accused of leaving potential upside on the table.

In fact, the notion that only 40 per cent of government transactions use ‘traditional’ channels seems a low ball number – and certainly does not take into account transactions that could nominally be called digital, but through poor design or lack of integration are far from what a benchmark digital service might look like.

So how to get to the Promised Land? Like the UK, the goal for this kind of service delivery seems the creation of a continually iterative government-as-a-platform where it is possible. Consumer choice is king, and where private sector digital service providers compete where it makes sense to deliver the transaction.

Deloitte recommends improved digital regulation, “which may involve a major root-and-branch review. ”This is the monumental change that is being shaped here. This is the dramatic cultural shift that is required for these giant numbers to be achieved.

Happily for Mr Turnbull, Deloitte recommends that greater attention “be given to more customer-focused and whole-of-government agencies such as Service NSW and the Digital Transformation Office.” It is a point worth making that Service NSW and the DTO are vastly different organisations, and that as they are currently set up, Service NSW has a far better chance of delivering on these digital ambitions.

A large part of the report looks at improving “contestability in government customer transaction services” as the means to improving overall delivery (noting that “the urgency to constantly improve user experience does not usually translate to government services since citizens are typically constrained with only one choice.”)

On the road to transformation, Deloitte says user choice is paramount. Among other things, it says

  • Legislative frameworks and government policies and regulations should not restrict competition in the public sector
  • Government provision or procurement of goods and services should separate the interest of policy, regulation and service provision and should encourage a diverse set of providers
  • Third party access to significant bottleneck infrastructure or data should be granted if it will lead to material increases in competition (for example, open government initiatives to drive competition in the private sector to create digital apps)

The delivery of this report, very clearly welcomed by the Minister, and the arrival in Australia of the DTO’s new chief executive officer Paul Shetler perhaps marks the end of the beginning in what will be a very long (and ambitious) road.

There are a great many opportunities in all of this for Australian innovators, and the engine room of tech innovation among small and mid-tier Australian companies.

For the quantative analysis in the Deloitte report, Mr Turnbull says it is not able to measure, or demonstrate, the power of example. If the Australian Government gets it right, it has the power to help drive better digital practices across the wider economy.

In this he says the DTO, and the digital efforts of across the state and federal governments, represent a new wave of reform. Because the only way to get where this report is pointing will require huge reform.

“This is absolutely critical,” Mr Turnbull said in launching the report on Monday. “Because if Australia is to remain a prosperous, first world, high-wage, generous social welfare economy, then the only way we can do that is to be more productive.”

“Our growth in the first decade of the 21st century was driven by terms of trade, and much less by improvements to productivity – which of course had been the big contributor during what we wistfully now call the ‘reform era’,” he said.

“Well, we need a new reform era. The only place that continued growth in national income can come from is from enhanced productivity. And that is absolutely dependent on a more innovative culture, and more innovative use of – and wider use of – digital platforms.”

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