Digital business models – what’s in it for public services?

There seems to be something in the air: ‘digital’ seems to be everywhere in public services, and yet at the same time many people aren’t really aware of what it means.  ‘Digital’ doesn’t just mean shiny new tech; it’s not ‘IT’ dressed up in a modish word.  No – ‘digital’ really refers to your business model; yes – even in the public sector.  So how ‘digital’ is your business model – and if you’re not engaging with digital, is it a problem?

Let’s start by understanding what we mean by ‘digital’.  Think of many of the most discussed businesses around: Peer-to-peer lending sites; Spotify; Skyscanner; eBay; Tripadvisor; Rightmove; Jobsite; Uber; Apple’s iphone; Amazon; Google; AirB&B.  All of these have a digital business model.  They are all mediators between those that supply goods and services, and those that consume them.  Importantly, they are able to do this because they use a commonly available, web-based infrastructure that is easily accessible to everybody.  And because it is easily accessible to consumers, it attracts lots of interest from providers.  In short, they are all digital platforms whose critical mass is capable of attracting ecosystems of innovators and investors, like flies around a honeypot.

So why is this digital business model important?  Well, maybe ask the record industry, traditional travel agents, estate agents, recruitment consultants, taxi drivers, bookshops, and hoteliers.  In short, digital platforms disintermediate traditionally-organised bureaucracies that extract value from brokering any sort of transaction because they are able to offer consumers far greater choice, for far lower overheads and therefore at far lower margins than traditionally-organised businesses.  As these business models take hold, any industry dealing in goods and services for which there is widespread demand, almost regardless of what that is, they’re in the firing line for a disruptive digital play that could drive them out of business.  And the danger doesn’t extend just to the front office: back office jobs are similarly at risk.  Emerging digital platforms that are able to standardise HR, payroll, finance, legal, etc. are all starting to emerge – one or two of them are even free.  Any organisation that is able to standardise the way it does things in the back office can start to take advantage of these applications and save a fortune.

If anything, public services offer an even bigger opportunity to realise the benefits of digital business models than the private sector.  This is for the reason that there is widespread demand across the UK. The problem is that we’ve spent the last 100 years perfecting the art of delivering all these fairly standard services differently.  Consider the example of NHS Jobs, the UK NHS’ e-recruitment portal.  Prior to 2003, there was no central platform for recruitment in the NHS; health workers enjoyed very limited choice of jobs that were restricted primarily to their own region, and the 600+ NHS employers each operated their own HR recruitment processes and offices.  Between 2003 and 2012, these organisations standardised on a single recruitment platform that gave workers the choice of the entire UK market, and saved the UK in excess of £1bn in previously duplicated, redundant bureaucracy.  Suppliers now compete to run the e-recruitment service ever more cheaply – because of the opportunity it affords to offer innovative new services on the platform.  And just think of the possibilities of this sort of model for local government: in the UK, we have 400+ of these organisations, all of whom do almost exactly the same things in different ways!

The Public Sector Network (PSN) is another promising example of a piece of shared national infrastructure that can encourage people to come together and take a pan-services, ‘whole region’ view of their business activities.  By providing a set of open standards, PSN starts to set service providers on the path towards horizontal, rather than vertically siloed, business models where ‘re-use and consume’, not ‘build and maintain’, is the order of the day.  However, public sector Chief Executives need to go much, much further.  Like the record executives, travel agents, etc., they will soon find themselves increasingly hard pressed to justify what value traditionally-siloed public bureaucracies actually add to many transactions between service providers and citizens.  If they are unable to keep up, citizens will simply bypass them, making public bodies redundant.  What value does DVLA, for example, add to the collection of road tax?  Do we really need a government bureaucracy for this?  Why are revenues and benefits collected and distributed by thousands of public servants up and down the UK, using multiple different processes and systems?  At a time when councils are busy closing libraries, day care centres, and other front line amenities, should we not be ashamed at such communal incompetence?

Public servants are required to deliver constantly improving levels of services against a background of declining UK share of world GDP from just under 5% around the turn of the century to 2.6% by 2028.  If we’re not to halve our public services, then it’s obvious that we’re not thinking radically enough about how we intend to pull off this conjuring trick.  If you’re a chief executive of a public body therefore, it is surely your public duty to consider all of the ways in which gradual adoption of digital business models might be able to deliver greatly improved, joined-up services, at massively less cost (think NHS Jobs).

Here are some handy tips to get started:

1. Can you map, or profile, all of those elements/processes/transactions within your business model that could be standardised and shared with other public organisations?  Who might those target organisations be, and have you opened dialogue with them?

2. Is your business structured using traditional ‘stovepipe’ silos, with lots of potentially duplicated back office processes?  If so, you are potentially squandering a fat quantity of public funds on redundant process.

3. Are you looking seriously about how you will converge on common, shared infrastructure across health, social care, housing, blue light, education, etc.?  If not, why not?

4. Is your business model cryogenically frozen within a large, multi-year outsourcing deal that effectively kicks the can down the road for someone else to deal with?  What’s the cost of breaking the contract?

5. Are you building anything bespoke (organisational fiefdoms, technology, capabilities) that you might potentially be able to share or consume, if only your organisation had the self-discipline not to be ‘special’?

You will need to think about the skills that you will require, and the sort of roadmap you will need to guide your route.  You are likely to end up as a very different organisation by the time you have finished your journey.  Better, perhaps though, to do this than end up as a footnote to someone else’s.