McKinsey: Government digitalisation can save $1 trillion

19 January 2015 3 min. read

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

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.”

Win government-wide and agency-deep commitment to 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.

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.

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.

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.

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.

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.