Public Sector Catch 22: Business Transformation (Part 2 of 4)

This is my fourth blog which looks at the critical choices being faced in the Public Sector both at the National and Local level.

The first two articles were: UK Local Authorities and Shared Services: Cost-Cutting – Myth or Reality?, and Public Sector Performance: Catch 22 type Dilemmas.

This is now the second of four related blogs:

1. Cost Cutting Vs. Cost Reduction (Blog 1)
2. Business Transformation (Blog 2) – focus of this blog
3. The Role of IT in Business Transformation (Blog 3)
4. Strategy and Politics (Blog 4)


Before sharing some of my first-hand views on Business Transformation in the Public Sector, picked up over the last ten years, let me try to try to clarify the boundaries of Business Transformation – this is based upon research, rather than the marketing viewpoints from major consulting houses.

Whilst I agree that reform in the Public Sector is probably overdue, the knee-jerk re-action to cash-cuts has beeen dysfunctional. Cost-Cutting/Product pruning are short-term measures. Inadequate consultation and political expediency has highlighted absence of leadership, with the related vision, strategy and risk profile to sponsor effective Business Transformation.

Business Transformation focuses upon powerful interventions in three core overlapping areas: 1. Technology; 2. Processes; and 3. People. Research at MIT in the 1990s highlighted that two decades of investment in Information Technology  generated patchy evidence on IT improving productivity and business performance. This spawned a decade of focus on IT-enabled Business Transformation and Re-engineering activity. Davidson looked beyond Re-engineering focussing on Three Phases of Business Transformation (based on fifty IBM case studies of firms with histories of advanced business transformation):

  • Phase 1 Automation – concerned exclusively with Efficiency and Automation and targeted only on Internal Operations.
  • Phased 2 Enhancement – with a performance focus on Excellence and Value-Added Processes and Services and an organization focus on customers and supplier.
  • Phase 3 Redefinition – targeting new core competencies in performance and new business units in terms of organization focus.

Another approach was offered by Venkatraman, in a pioneering action research project of leading exemplars where he identified Five Levels of IT-Enabled Business Transformation:

  1. Localized Exploitation – Evolutionary focused on Efficiency
  2. Internal Integration – Evolutionary focused on Efficiency
  3. Business Process Redesign – Revolutionary focused on Enhanced Capabilities
  4. Business Network Redesign – Revolutionary focused on Enhanced Capabilities
  5. Business Scope Redefinition – Revolutionary focused on Enhanced Capabilities

Over the last ten years there has been an enormous amount of Business Transformation activity in both the Central and Local Government. I have witnessed first hand successes at HMRC, DEFRA and ONS. Whilst there have been significant advances in internet based customer-facing systems, many of both the evolutionary and revolutionary change programmes have failed to deliver required benefits in terms of cost-reduction, customer-satisfaction and quality assurance standards. Many organizations have struggled with the early phases of transformation, namely Automation/Business Excellence. Key challenges are vision, leadership and inertia/resistance.

Permanent Secretaries and Local Authority Chief Executives are not like their peers in the Private Sector – they typically come from a different background. Private Sector peers in successful businesses have the leadership, vision, strategy and risk-profile to engage in aggressive Business Transformation. Typically in the Public Sector a Transformation Director is appointed who is a familiar face in the organization, rather than an accomplished Transformation specialist. This context of risk aversion normally leads to employment of consultants for both design and delivery of proposed transformation. Some Public Sector organizations have wisely deployed highly-skilled independent transformation specialists “client-side” to help them manage the suppliers and the transformation. With Cabinet Office freezes on consultants and interims, some Public Sector organizations are now attempting transformation activities with internal or re-cycled staff – in my view, the risks are enormous and are likely to outweigh the benefits of the programme. The good news is that opportunities to bury failures or sweep them under the carpet will be fewer: the Coalition Government are to be commended on proposals for greater transparency in Government.


Next week we look at the Role of IT in Business Transformation

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