BFM2013_4_00_Introduction – Business perspective on e-government

This issue of BFM was focused on “Business Perspective on E-government”: how to ensure that your organization maximizes the benefits deriving from e-government, while understanding its impact on your way of doing business.

Since this issue was first prepared, 2004, and published, 2005, e-government became an everyday reality for any organization.

While some of the late-1990s promises still have to be turned into reality, most of the material published a decade ago is at last now obsolete.

E-government is following the “snowball” principle: the longer it runs, the larger it becomes.

Therefore, instead of refreshing the old material, this updated chapter focuses on few basic principles and their potential impact on corporate and individual citizens.

BFM2013_4_01_A first step

More than any other issue of BFMagazine so far, this is an introductory issue, as e-government is the tip of the iceberg of different initiatives, with the purpose of using information and communication technologies (ICTs) to change the relationship between citizens (corporate and individuals) and institutions.

As e-government and related initiatives are widespread and constantly increasing in number, it is pointless to try to provide a list.

Instead, if your business activities are in Europe, it is easier to register on epractice.eu, the social network created by the European Commission to ensure that knowledge generated by EU-financed projects is accessible, notably to potential business users.

Once inside the community, register your interest for e-government, search the existing library of case studies, and maybe connect with other users who actually worked on e-government initiatives.

In business, we need to get used to alternative ways to ensure “knowledge continuity”, i.e. keeping your “knowledge base” to look more like a “knowledge thesaurus” than a “knowledge container” , i.e. knowledge connected to current practice.

As in other business areas, using Google etc. should become a second nature, a litmus test of the ability of your own staff to keep in touch with evolution of knowledge in their own domain.

BFM2013_4_02_E-government in perspective

As defined by the OECD in its March 2003 issue of “Observer”, e-government is more about “government” than about the “e-”: technology has to be seen as a just an enabler toward a common trend on streamlining the interaction between government and citizens (corporate and individuals).

Historically, states consolidated government control through harmonization: defining regulations and enforcing them was a mean to an end, i.e. defining acceptable behaviours and sanctioning by law the penalties associated with violation of said rules.

Since WWII, the increasing development of market economy accelerated the pace of these harmonization activities, moving the scope beyond the mere national level.

An obvious example is WTO: also if a specific “round” of negotiations fails, it is the mere recognition of the WTO as the forum where negotiations should take place and complaints presented that should be considered a success.

But it should not be forgotten that computers pervasiveness started quite recently, when the 1950s building-sized computers were converted into penny-sized chips, allowing the development of products that would simply not be feasible using the old mechanic technology.

Before computers were introduced, the typical accounting or administrative office looked like shown by films such as K. Vidor’s “The Crowd” or “The Hudsacker Proxy”: tens or hundreds of people used mechanical computing machines to produce partial results, collected and then consolidated into coherent documents- and many administrative processes still mirror that approach.

Computer technology is pervasive, and it is increasingly being embedded not only in tools and equipment, but also used to externalize business control processes, e.g. controlling stock through the insertion of tracking chips inside products shipped to retail stores.

While at first computer and communication technology (henceforth ICT) were used mainly for administrative support, eventually business processes started to be built around computers.

A first issue that became immediately visible was: how could information be shared across companies?

After physical delivery of shared information (e.g. tapes), attempts were carried out to create electronic exchanges, with different, competing EDI (Electronic Data Interchange) standards.

If you were a company with customers operating in three or four industries, you would be asked to deliver electronically information using different communication channels with different protocols.

After country-by-country attempts (e.g. Minitel in France), it wasn’t until DARPA Internet infrastructure, originally designed to deliver business continuity at the national level, became usable through SGML/HTML/XML for commercial purposes, that widespread electronic communication began to be part of everyday life.

Internet delivers different interesting features, but these are the ones that we consider critical to Internet success:

  • you do not need to set up any custom infrastructure to communicate via the internet, as software and hardware components required are easily available
  • you can connect to third-party knowledge/services immediately, through hyperlinks
  • anything that is available online is theoretically accessible without any middle-man being involved.

Since mid-90s, when Internet was first open for commercial uses, the new medium has constantly changed, lowering the cost of activities such as market research.

Before Internet, finding information was more art than science, and most newspapers had information offices supporting journalists in finding background information, sometimes open to the general public, e.g. 1970s books described how to set up your own in-house information office.

It has been only few years, but already the technology is showing signs of having grown beyond its usefulness.

Since mid-2000s, social networks transferred online the old “knowledge networks”, but on a global scale, and merging both academics and businesses.

Even generalist social networks such as Linkedin and Facebook gradually introduced various ways to create “knowledge tribes”, built around a specific “niche”- be it a business, or just a private interest.

For over a decade, this has altered the way knowledge is shared in business communities- from the obvious (software developers and business users of complex software systems), to the traditionally more secretive (businesses based on knowledge); following the evolution of e-government can benefit from a knowledge of the basic ways to structure “virtual knowledge networks”, a concept that will be discussed in a future book .

A study from RAND, published in 2000, can be a good introduction to the concepts related to self-organizing, knowledge-based communities.

BFM2013_4_03_Why e-government

If technology is just an enabling factor, then something else should be a motivation, and that something else is quite simple: cost.

Since Industrial Revolution, the cost of government has increased, also because, in our complex society, services that centuries ago were carried out by each one independently, are now part of what we expect to be part of the environment.

Yes, governments talk about the benefits, added value, etc., but in the end the truth is: the level of government services that we have become used to in Western Europe since WWII is economically unsustainable if delivered by XIX century processes.

If you were to try to deliver business services in former-COMECON countries in mid-90s, when they were defined “Transitional Economies”, you would have had a feeling of what would happen in industrialized countries if the fabric and structure of society were to disappear: just moving your product from your warehouse to the distributing centre would have required bartering and bribing.

Your writer remembers in mid-90s being told in a former Soviet Union country by a local business man that he had to keep two sets of accounting books, as the taxes had reached an unaffordable… 18% on revenue (including payroll, etc.); the bribes required to have somebody turn a “blind eye” were cheaper than that, and anyway “payments” were due for each step of the supply chain, to the a weak “rule of law”.

Wealth distribution meant that almost any job in Western Europe was paid at a level enabling salaried employees to obtain living standards that just two centuries ago would have been unaffordable to more than 90% of the population.

This meant that also the maintenance cost of our industrialized countries started to increase.

Added up to the cost of providing health and retiring benefits to an increasingly ageing population, governments had to explore new ways to reduce costs.

At the same time, the increased level of schooling implies that citizens are unwilling to see a reduction in services, however it is masked, and after different experiments with privatization, some successful, some not, technology is now perceived as an enabling factor, with at least these benefits:

  • reducing costs
  • streamlining government processes
  • increasing transparency, to improve the capabilities of the authorities to monitor and help economic development (and reduce the risk of corruption)
  • getting the authorities closer to citizens
  • potentially improving the communication between States and citizens (a two-ways communication channel).

BFM2013_4_04_Defining e-government

Probably the most famous structured initiative to benefit from the use of technology in government is “re-inventing the government” in USA, launched by the first Clinton administration in 1993, managed by then Vice-President Gore.

E-government is generally defined as the use of ICT to transform the relationship between the government and citizens, businesses, and other parts of the government.

As a way to simplify the relationship between EU citizens and their governments, EU has sponsored different research projects, to exploit technologies as diverse as Internet, GSM, GPS, to both reduce the cost of governing and increase the services delivered to citizens.

One of the most recent examples is the PEPPOL (Pan-European Public Procurement Online) framework , which is one step further in EU integration, potentially enabling significant savings.

A common purpose of EU projects is to increase the visibility and the “valued added” perceived from EU citizens, that until now considered EU as a business related association.

Side-effects of EU initiatives as the Schengen agreement include easing mobility across EU territory- up to a point.

Most EU and EU-candidate countries are issuing regulations to ensure that any part of the state machinery, be it the local town council or the national health system, fully exploits new technologies to streamline the communication with citizens, while reducing costs and adding new services: and online social networks are increasingly part of the picture.

Also, most UE countries adopted the “subsidiarity” approach also in their internal distribution of powers, e.g. delegating decision-making as close as possible to where the results are produced.

At the same time, there has been a constant convergence on the regulatory system governing the behaviour of multinational companies, as discussed in the previous issue .

While the harmonization of these rules at the supra-national level is still in its embryonic phase, regulatory frameworks as Basel II/III and the OECD Guidelines for Governance are trying to shift the focus from a sanctioning system (whose acceptance requires a political mandate) to a common framework of accepted behaviours.

These rules try to ensure the smooth working of market economy by enhancing transparency, with rules focusing on governance, product and environmental quality standards, etc.
As forecast when this material was first prepared in 2004, it was only a matter of time before also corporations would be required to manage most communications with regulatory agencies and governments via the new technologies.

Using the same technologies also to manage the internal processes resulting in communication with regulatory agencies and governments would only make sound economic sense.

New staff and junior managers are now, in the early 2010s, well-versed in new technologies, and with a modicum of training and coaching could smoothly integrate your business processes with Government-sponsored systems and other online technologies to maximize the benefits while keeping risk and intrusive practices at a minimum.

Unfortunately, the key resistance to change is coming from decision-makers above them, who often state objections that sound more as a sign of fear of change, than of the changes by and for themselves.

BFM2013_4_05_The economics of e-government

EU-level initiatives and similar national initiatives resulted in a widening gap between the complexity and thoroughness delivered by these focused project teams composed by experts, and the actual capability of the recipients to process and implement the results within the budgetary constraints.

While larger towns have probably staff (and financial resources to hire external resources when needed), smaller local authorities, whose communities would benefit more from implementing e-government, will probably have more difficulties in just grasping the implication of the thousands of pages delivered by all the national and supra-national projects, czars, study groups.

Theoretically, e-government should simplify and harmonize the administrations’ behaviour across countries; practically, it adds significant pressure on communities already fighting with both tight budgets and the reduced funds provided by central governments- a direct result of the distribution of powers to local authorities (yes, “subsidiarity” could have negative side-effects).

In effect, local authorities will be required to ensure that eventually any citizen or any business in their constituency will receive the same services, irrespective of the size of their tax-base.

And citizens do expect to have access to the same level of services in towns with 2,000,000 inhabitants as in villages with just 200: they are required to pay the same taxes, aren’t they?

BFM2013_4_06_Past forecasts, current realities

The side-effect forecast in 2004?

  • most technology-only services or the resulting information will progressively be “hosted” remotely on a central, government-sponsored infrastructure, that will increasingly be able to automatically “classify” companies according to their operational behaviour
  • more and more “one-stop” services will be requested to local authorities, which will try to use them as a way to compete for business investment, as more of their revenue and services will need to be financed locally.

In 2013, those are almost everywhere a reality (or becoming so, as shown e.g. in Italy in 2012).

The increased de-coupling of national and supra-national authorities from the ones that will have actual contacts with the providers of funding (companies and citizens) is already resulting in some unheard-of alliances between local authorities.

As an example, in the early 2000s in UK some local authorities whose ruling council is Labour partnered on e-government initiatives with other that are Conservative, and together negotiated with the Labour government as their counterpart.

The same applied in Italy for over a decade, where the Governor of Piedmont (centre-right) partnered with the Turin mayor (centre-Left) to negotiate with the government (centre-right) as counterpart.

In mid-2010s… the only difference is that now the government is a centre-left/centre-right coalition.

Machiavelli stated that the prince was supposed to maintain control of his constituency.

Subsidiarity within the country, instead of just between the EU and Member States, implies that governments and political parties represented at the national level are losing some of the power that was related to their capability to award or deny funds, replacing this power with more “national standards”.

These “standards” are embedded in rules, and also by linking local authorities’ internal processes to the central government through e-government, to enforce the rules.

This approach is also used to avoid the development of de-facto transnational economic enclaves, that would feel limited or no attachment to central governments.

BFM2013_4_07_The hidden costs of e-government

Previous initiatives resulted in mandatory audit, ISO9000, EN14000, mandatory electronic filing, etc.; therefore, the typical attitude is to expect some additional costs.

Introducing e-government obviously adds the typical costs associated with new methods, tools, and business processes.

As happens with any structural and process change imposed from outside on your own business culture, e-government comes with an assumption on how your internal processes should work , and adapting without proper planning could at best result in the same work being done twice, at worst disrupt your internal processes and affect your business viability.

Before outsourcing everything to an external company, replacing internal processes with e-government processes, we suggest that you consider the guidelines delivered on knowledge retention , and the summary information on strategic outsourcing .

Additional costs for your organization could include making some privileged internal information available to competitors, by improperly linking external e-government processes to your internal production and marketing processes.

BFM2013_4_08_Converging transparency initiatives

Increased transparency is a side-effect of e-government that is already with us.

As an example, consider your pricing approach: what would happen to your customer satisfaction if you were requested to publish all the pricing parameters online on a single, government-sponsored website, where any prospective customers could compare in few minutes your prices and services with the ones applied by your competitors, watching their own Digital TV and using their remote control to switch suppliers?

E-government, like the governance initiatives spurred by Enron (SOX) and others (e.g. Basel III and maybe a future Basel IV), is just part of a common trend toward transforming Adam Smith’s “invisible hand” into a worldwide, shared reality, by using technology to remove asymmetries in information.

By “asymmetries in information” we imply that some economic actors, despite all the non-disclosures and rules on insider trading, always had information that was used to make informed decisions before the rest of the market received the same information.

Sometimes, they had this information because they were suppliers or customers of the investment target, and were just good observers; sometimes, it was just sheer lack; quite often, these factors were compounded by “back door” information.

Increasing transparency will probably remove some intermediaries, as already done by companies like e-bay and industry-wide initiatives to lower the cost of supplies by pooling procurement resources.

A properly working market economy requires a level playing field, and e-government will progressively move further deep inside your organization the threshold for the delivery of “public” information.

BFM2013_4_09_Business side-effects

Different industries received additional impacts by disclosure regulations, like ISO9000, EN14000, Basel II, etc.

Sometimes these regulation are self-inflicted by industry, as a way to remove the threat of new, more consumer-oriented legislation, but the overall effect is the same: if your company is certified or not, this is visible; and if your company accounts are subject to compulsory auditing, some information that smaller companies would not disclose is available online.

The transparency trend embedded in e-government has an interesting side-effect: as more and more of your strategy-related information has to be disclosed, and becomes easy to access and compare automatically, the capabilities and approaches used to implement the strategy are what make your company unique.

New business approaches will be needed, and cost will increasingly become only a short-term competitive advantage, offset by the increased productivity that companies using your business approach later will have by using your company as a case study, and maybe setting up their facilities where they can have a short-term cost-advantage, useful until they get enough market share from you, and can afford to enter your own market with local facilities.

As an example, if you are a shipyard with a new production management approach, obviously the initial infrastructures and cost of production would make a difference and you will have some time before your competitors will catch up.

Eventually, your cost advantage would disappear, as competitors would benefit by a shorter start-up time, avoiding part of the “tuning” costs that you sustained.

If you created a new market, then your competitors will not need all the initial marketing investment required to “evangelize” the market.