McKinsey: Government digitalisation can save 1 trillion

19 January 2015

When done successfully, worldwide government digitalisation can save $1 trillion annually in economic value, says consulting firm McKinsey & Company. As digital transformation tends to be more challenging for the public than for the private sector, the consulting firm lists 6 lessons that should be learned from the business world and translated into governmental digital strategies.

Global management consulting firm McKinsey & Company recently released new research which indicates that digitisation of the public sector could free up to $1 trillion annually in economic value worldwide, through improved cost and operational performance. Savings governments at national, regional, and local levels cannot afford to miss out on amidst increasing budgetary pressures.

According to the firm, many governments are already doing their best to meet citizen demand and capture the benefits of digitalisation. However, most governments are far from capturing the full benefits of the digital era. Governments are advised take their digital transformation a step further and look for opportunities to improve productivity, collaboration, scale, process efficiency, and innovation.

Government McKinsey

For the public sector, transforming digitally proves to be more challenging than for the private sector as it has to deal with several management issues, including different agencies and organisational mandates and longer appropriations timelines. In addition, the needed specialized skills and expertise are needed for complexity of large-scale digital projects is often short in supply, especially for the governments that tend to pay less than private parties.

Although digital transformation is likely to be more difficult for governments, if done successfully, citizens and businesses will benefit from better access and governments will be able operate more quickly and achieve substantial savings. In its analysis, McKinsey lists six levers that translate private-sector best practices into the public context that will make it possible to achieve a broader and deeper public-sector digitisation. According to the firm, these levers can be applied anywhere in the process as they “will help a government as it starts, scales, or evaluates its program.”

Government commitment digital targets

1. Win government-wide and agency-deep commitment to specific digital targets.
Governments should set up digital services that are transparent, have strong central leadership and a clear mandate, and are implemented by the government themselves through the use of seasoned digital leaders from different public departments.

2. Establish government-wide coordination of IT investments.
The establishment of a digitisation agency that is charged with the coordination of large-scale IT projects and planning of IT investments across the government is also seen as an important lever.

3. Redesign processes with the end user in mind.
A third lever is the government-wide implementation of e-government services that accommodate the wishes of the user. For instance, by setting up customer-contact centres supported by websites, physical visits to municipalities and government offices will decrease significantly.

Digital talent - Big Data - Data security

4. Hire and nurture the right talent.
As attracting and nurturing IT talent for public sector projects tends to be more difficult, governments should find innovative ways to attract the talent. For instance, by offering fast-track career opportunities for high performers.

5. Use big data and analytics to improve decision making.
The fifth lever is the use of Big Data to support government decision making, through the creation of open data portals. These portals would function as a repository of government tools, resources, and information and be open to businesses and private citizens to use.

6. Protect critical infrastructure and confidential data.
The protection of data is also an important issue for governments to address when transforming digitally. Governments could protect critical infrastructure and confidential data, for instance, through a national cyber security strategy and the development of information-sharing mechanisms that detect and respond to cyber threats more quickly.


Four ways digitalisation is transforming car brands and dealers

16 April 2019

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”