Transforming government

Bjarne Corydon,
Vidhya Ganesan,
and Martin Lundqvist

through digitization
Public Sector November 2016

By digitizing processes and making organizational

changes, governments can enhance services, save
money, and improve citizens’ quality of life.

As companies have transformed themselves with digital technologies, people are calling
on governments to follow suit. By digitizing, governments can provide services that meet
the evolving expectations of citizens and businesses, even in a period of tight budgets and
increasingly complex challenges. Our estimates suggest that government digitization, using
current technology, could generate over $1 trillion annually worldwide.1

Digitizing a government requires attention to two major considerations: the core capabilities
for engaging citizens and businesses, and the organizational enablers that support those
capabilities (exhibit). These make up a framework for setting digital priorities. In this article, we
look at the capabilities and enablers in this framework, along with guidelines and real-world
examples to help governments seize the opportunities that digitization offers.

The core capabilities of a digital government

Governments typically center their digitization efforts on four capabilities: services, processes,
decisions, and data sharing. For each, we believe there is a natural progression from quick wins
1 For more, see “Disruptive to transformative efforts.
technologies: Advances that
will transform life, business, Services
and the global economy,” Governments are using digital tools to improve their interactions with citizens and businesses.2
McKinsey Global Institute, Most begin by digitizing a few high-volume activities. The United Kingdom kicked off its digital-
May 2013.
transformation program by digitizing 25 basic services, such as voter registration.
2“Making government for

the people,” June 2016, The key to good digital services is understanding the user’s perspective.3 Governments must
McKinsey.com. be willing to remake products, processes, and policies around what citizens want. Norway’s
3 Emma Dudley, Diaan-Yi tax administration gives citizens tax returns that it has filled out for them, and more than
Lin, Matteo Mancini, and 70 percent of citizens submit those returns.
Jonathan Ng, “Implementing
a citizen-centric approach
Providing services on mobile platforms is another way that governments are aligning with
to delivering government
services,” July 2015, citizens’ digital preferences and behaviors. In China, some provincial governments accept
McKinsey.com. passport and visa applications through WeChat, a widely used mobile app.
 Web 2016
Transforming government through digitization
Exhibit 1 of 1
Exhibit
A digital government has core capabilities supported by
organizational enablers.

Capabilities: citizen- and Enablers: innovations across

business-facing innovations government systems

Services Strategy
• Digitization of touch- • Close connection to broader
points government priorities
• Consolidated online- • Bold aspirations translated
access platforms into concrete targets
• Citizen and business • Focus on citizen and business
portals experience
• Messaging platforms • Attention to needs of marginal
• Payment platforms populations (eg, elderly)

Processes Governance and organization

• Automation of • Organizational design
transactional mapped directly to goals
processes (eg, grant • Governance and
applications) accountability for pace,
• Digital enablement scale, and collaboration
(eg, e-health) • Funding mechanisms for
collaboration, innovation,
and efficiency
• Regulations that allow open,
joined-up citizen experiences

Decisions Leadership, talent, and culture

• Deployment of sensors • Leadership commitment and
(eg, mass transit) awareness of trends and
• Advanced predictive opportunities
analytics • Technical and implementation
• Large-scale, cloud- talent
based data storage • Programs to attract and retain
digital workers

Data sharing Technology

• Unified, open public • Two-speed model for rapidly
registers deploying new services
• Peer-to-peer sharing • Agile development at scale
of data • Analytics platforms to support
• Cocreation of efforts in big data and open data
solutions with • Robust cybersecurity measures
private sector and and controls
citizens

Processes
Digitizing behind-the-scenes processes offers the most potential productivity gains, as well as
tough challenges. Just as governments should digitize high-volume services first, they should
digitize labor-intensive, costly processes before others. Sweden’s social-insurance agency
began its digitization program with five products that accounted for 60 percent of manual-
processing work and more than 80 percent of call-center volume.

Digitizing processes should involve streamlining them at the outset. After amending its tax laws,
Denmark was able to create an algorithm for classifying newly registered businesses. Now, more
than 98 percent of the tasks involved in registering companies take place with no human effort.

2
Decisions
The public sector can benefit from big data and analytics in defense, public safety, healthcare,
and other areas. Australia’s tax office analyzed returns from more than one million small and
midsize enterprises to develop industry-specific financial benchmarks. It now uses those
benchmarks to identify firms that may have underreported their income and notify them of
possible discrepancies.

Advanced analytics systems feed data from many sources into algorithms that adjust
operations in real time. While no government has such a system yet, Singapore is setting up a
nationwide network of sensors that will stream data into a repository for all agencies.

Data sharing
Transparency can strengthen the public’s trust in government and its civic engagement. A
useful step toward sharing data is unifying registries of public information. By using a digital tool
to link more than one billion data items from 30 sources, the UK tax authority has claimed an
additional £3 billion in tax revenue since 2008.

Information exchanges can also help with data sharing. Estonia’s government has a platform,
called X-Road, for securely exchanging data among agencies. Even some companies can
connect to X-Road.

Enabling success in digital government

Four enablers can accelerate digital transformation in government: strategy; governance and
organization; leadership, talent, and culture; and technology. Here is how a government can
ensure that each enabler contributes to its digital initiatives.

Strategy
We have seen two approaches that can help governments incorporate digital concepts into
their strategies. The first is to align the goals for digital transformation with the government’s
overall priorities. The government of Denmark designed its digitization strategy for 2011 to 2015
to advance a broader cost-cutting agenda. This helped to speed the execution of the strategy
and led to cost reductions that the government had sought.

The second is to evaluate regularly whether digital programs are performing well and to adjust
them as conditions change. Governments should also be aware that digitizing services can
make those services less accessible or usable to certain groups.

Governance and organization

Many government agencies prefer to operate independently. In our experience, this can
hamper digital initiatives. To overcome this problem at the uppermost level of government, one
department can be put in charge of setting strategies and assigning responsibilities. In the

3
 Getting started: Five questions for leaders

To begin a digital transformation, 3. What capabilities must the

government leaders should consider government acquire to make up
the following five questions and map those differences, and what existing
the answers onto the framework of structures and systems should it
capabilities and enablers proposed in abandon?
this article:
4. How do our government’s current
1. If we were redesigning the digital-transformation efforts compare
government, with no legacy structures with the changes we identified in the
or systems, what would it look like, and third question?
what would its top priorities be?
5. What new priorities must we set for
2. What are the biggest differences our digital transformation to bring it into
between that vision and the line with our overall vision for improving
government today? the government?

Australian state of New South Wales, central units help multiple departments work together on
some digital-transformation programs.

Within agencies, too, cross-functional collaboration can be the key to successful digital
projects. The Danish Business Authority keeps its projects on course by assembling teams of
both business and IT professionals, along with vendor staff.4

Leadership, talent, and culture

Government leaders should play meaningful roles in digital initiatives. When the Danish Business
Authority initiated a major digital program, the chief information officer rearranged his priorities to
devote more time to it, and the CEO chaired the governance team’s weekly meetings.5

Leaders can also push governments to mobilize technical workers and implementation
4 Sverre Fjeldstad, Martin
specialists, both by investing in their own human resources and by drawing on external support.
Lundqvist, and Peter Braad
Olesen, “From waterfall to We see governments running short-term fellowship programs and staging hackathons to
agile: How a public agency attract digital talent.
launched new digital
services,” March 2016, Technology
McKinsey.com.
Digital transformation need not involve major IT-architecture changes. Sometimes incremental
5 Ibid. adjustments to a government’s enterprise architecture suffice. We also see promising

4
opportunities for governments to share knowledge and technology. Finland is experimenting
with Estonia’s X-Road system, and Estonia and the United Kingdom have a partnership called
TechLink to exchange knowledge on topics such as cybersecurity and smart cities.

The digital transformation of a government can be challenging, but many public institutions
have discovered it is ultimately rewarding. Committing to a comprehensive vision of a digital
government is the first step (see sidebar, “Getting started: Five questions for leaders”). Leaders
then need to develop and carry out plans for digitizing the government’s capabilities and
establishing the right organizational enablers. Governments that transform in these areas can
ease budgetary strain and improve their citizens’ quality of life.

This article is adapted from the McKinsey Center for Government report Digital by default: A
guide to transforming government.

Bjarne Corydon is the director of the McKinsey Center for Government, based in McKinsey’s
Copenhagen office; Vidhya Ganesan is an associate partner in the Singapore office; and
Martin Lundqvist is a partner in the Stockholm office.

The authors wish to thank Sverre Fjeldstad and Diaan-Yi Lin for their contributions to this article.

Copyright © 2016 McKinsey & Company. All rights reserved.