Accenture outlook-journal-february-2013

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Accenture outlook-journal-february-2013

  1. 1. The journal of high-performance business accenture.com/outlook | 2013, Number 1Cross-industry ecosystemsGrowth outsidethe boxPLUSRadically rethinking public servicesWhy gamification is serious businessHow end-to-end sustainablesystems drive value
  2. 2. OutlookOutlookVol. XXV2013, No. 1Outlook is published by Accenture.© 2013 Accenture.All rights reserved.Editor-in-Chief Chairman & CEODavid Cudaback Pierre NantermeManaging Editor Chief Marketing &Letitia B. Burton Communications Officer Roxanne TaylorSenior EditorJacqueline H. Kessler For more information about Accenture, please visitSenior Contributing Editor www.accenture.com.Paul F. NunesContributing EditorsDavid Light The views and opinions expressed in theseCraig Mindrum articles are meant to stimulate thought and discussion. As each business hasIndustry Editor unique requirements and objectives, theseWendy Cooper ideas should not be viewed as professional advice with respect to your business.Contributing Writers Accenture, its logo and High Per­ ormance fLance Ealey Delivered are trademarks of Accenture.John Kerr This document makes reference to trade-Assistant Editor marks that may be owned by others. TheCarolyn Shea use of such trademarks herein is not an assertion of ownership of such trademarksDesign & Production by Accenture and is not intended to repre-IridiumGroup Inc. sent or imply the existence of an association between Accenture and the lawful ownerswww.accenture.com/Outlook of such trademarks.This publication is printed on10 percent post-consumer fiber.
  3. 3. The Long View Bold ideas for a digital economy likely to be created through collabo- not limited to the private sector. ration, within “ecosystems” made up Caught between rising citizens’ of mutually supportive companies expectations and a looming fiscal from multiple industries. (The article crisis, many innovative local, begins on page 22.) state and national governments are experimenting with new, Another disruptive idea discussed more efficient and more effective in this issue is intended to enhance service-delivery models that can current business models rather also help close major funding gaps. than replace them—“gamification,” (This article on the public sector the application of the mechanics of begins on page 12.) digital gaming to a wide spectrum of business challenges. In fact, “Ecosystems,” “gamification,” companies across several industries “inclusive business initiatives,” Pierre Nanterme are already using the concept to “public entrepreneurship”—going Chairman & CEO encourage innovation, build more forward, we will be hearing more Accenture effective marketing campaigns about these additions to the new and retain talent (page 30). business lexicon. And I hope you As the locus of global growth find our discussion of the ideas shifts and competition intensifies, The high-growth markets of Asia, behind them useful. identifying new markets and Latin America and Africa will opportunities is not the biggest continue to be at the center of challenge facing business. The strategic thinking for most com- harder part may well turn out to panies, with particular attention be coming up with bold, new, often paid to an emerging middle class disruptive approaches and models of consumers. Here, too, innovative that are required to achieve high new models and approaches are performance in a digital economy. essential for success. In this issue of Outlook, we look One of our articles looks at “inclusive at a number of these models, some business initiatives,” enterprises of which are already proving to that partner with governments, be highly successful. NGOs and local entrepreneurs to scale innovation and boost profit- The idea explored in one article calls ability in low-income communities into question a bedrock assumption (page 38). Another looks at the about the world’s economy—that it other end of the income scale, at is structured as a relatively small China’s affluent, sophisticated number of discrete industries, urban consumers. Their behavior compartmentalized collections has changed so dramatically in of businesses that pursue value recent years that companies must be essentially on their own, in their willing to embrace unconventional own markets. The article challenges and often counterintuitive marketing this Industrial Age concept. It argues strategies to reach them (page 48). that in today’s connectivity-enabled global marketplace, value and When it comes to delivering value, differentiated offerings are more however, bold new thinking is 1
  4. 4. Contents Perspective Features The Long View Public Service Strategy1 Bold ideas for 12 Coup d’état: 22 Cross-industry a digital economy Radically rethinking ecosystems: Growth By Pierre Nanterme public services outside the box By Bernard Le Masson, Brian J. By Cedric Vatier Moran and Steve Rohleder To reap future growth As they attempt to square benefits, companies public service demand must smash through the Industry Report against supply, governments traditional confines of worldwide must do more, industry walls to seek Media Entertainment better, with less. To be collaborative opportunities4 eyes have it: The successful, they need to that stretch across multiple Guess who controls overthrow old ideas and business sectors. embrace the next generation of the future of TV tools and ways of working. By Robin Murdoch, Youssef D. Tuma Strategy II and Marco Vernocchi 30 Why gamification is Television is about to serious business undergo the same kind of By Marco Ryan, Andy Sleigh, disruption that occurred Kai Wee Soh and Zed Li with the introduction of the smartphone. What will By using the mechanics of change when the largest digital gaming, companies screen in the home has a in a wide range of industries big say in how we consume are boosting innovation, content, information and building more effective services over the Internet? marketing campaigns and driving value. A few leading companies are making the changes demanded by sustainability science and creating competitive advantage for their businesses. “ ow end-to-end sustainable systems drive H business value” (page 58)2 Outlook 2013, Number 1
  5. 5. F or additional thought leadership from Accenture, including the Accenture Institute for High Performance and Accenture Technology Labs, please visit www.accenture.com/ideas. For a personalized electronic newsletter tailored to highlight specific industries and issues, subscribe to My Outlook at www.accenture.com/myoutlook. High-Growth Markets Sustainability Information Technology38 Scaling innovation 58 How end-to-end 78 IT governance: for an emerging sustainable systems Spinning into control middle class drive business value By Saideep Raj, Jack Sepple and Leslie Willcocks By Raghav Narsalay and By Peter Lacy Ryan T. Coffey Plenty of companies have For today’s IT executive, Efforts to create innovations taken significant steps the job has never been more that can meet both social and toward becoming more difficult. The solution? business goals in low-income sustainable, but none has Mastering a new set of markets are fraught with turned incremental progress capabilities focused on areas unanticipated dangers. into truly transformational that are generally not part A study of 18 initiatives change. That requires of traditional IT governance. from around the world reveals innovation and collaborative how ventures can succeed initiatives right across the Business Process Outsourcing | where others have failed. enterprise—from strategy to Talent Organization operations to the supply chain. 88 asters of the mix M China By Michael J. Salvino, Walter G.48 Meet the new Supply Chain Management Gossage and Mary Lacity Chinese consumer 68 When product The benefits of effective By Jeffrey I. Beg, Tzeh Chyi Chan complexity hurts true change management in BPO and Xuyu Chen profitability are measured at both an individual and organizational Successful consumer By Johan Sjöström Bayer, Mikael Hilding, Antal Kamps, level. Companies that are marketing in China is, in Gustaf Sahlén and Robin Sparrefors attentive to transition many ways, as much art issues and to supporting as science. It combines a To meet the challenges the retained workforce can sophisticated understanding inherent in today’s volatile drive topline benefits from of local perceptions and global marketplace, companies a more effective functional preferences with a willingness need the right analytical lens organization. to embrace unconventional to clarify the incremental strategies and the best profit generated by offering new technology. more innovative and differentiated products. 3
  6. 6. Industry Report | Media EntertainmentThe eyes have itGuess who controlsthe future of TVBy Robin Murdoch, Youssef D. Tuma and Marco VernocchiTelevision is about to undergo the same kind of disruption that occurred with theintroduction of the smartphone. What will change when the largest screen in the homehas a big say in how we consume content, information and services over the Internet?Picture a typical nine-year-old her classmates and loaded into screen-viewing time. The fact is,watching TV today. She probably has her home’s cloud-based content the TV is here to stay. Its role ina tablet in her lap, ready to check out librar y. After her friends leave, delivering compelling viewingvideos related to the Animal Planet she might pick up the easy-to-use experiences—collective andspecial she’s watching. Or perhaps TV remote to take a high-resolution individual—will continue. However,she’s borrowed her big sister’s phone tour around the Beijing neighborhood the big screen in the living room isso she can vote on this week’s episode where her big sister lives. Or maybe indeed undergoing a metamorphosis,of Dancing with the Stars. she’ll search for a favorite scene in because what goes on behind the one of the Twilight movies. screen is changing dramatically.By the time she’s old enough tohead off to university, however, Good-bye to the familiar old TV set? For most of us, the TV will developher TV viewing experience will Au contraire. For years now, the as an even more valuable vehiclebe markedly richer. By then, she demise of the popular appliance for entertainment and, increasingly,may be inviting her friends over has been predicted as the Web has for education and information. Butto watch the “sitcom” filmed by claimed more and more of our for business leaders up and down the 5
  7. 7. Industry Report | Media Entertainment media value chain—from filmmakers continue to be so. There is still no and broadcast channels to Internet substitute for the collective viewing service providers to “last mile” experience of watching the big game communications operators—the or the season finale of a popular reinvented TV is a huge disruption. drama. Plus, the new Accenture study reveals that young people are There will be winners—businesses much more engaged with TV than that quickly grasp the nuances of might be supposed. the resulting changes in the creation, financing, production and delivery of Even 25-to-34-year-olds view, on content. But others may find them- average, almost 140 hours a month of selves facing fierce new competition. “traditional” TV programming—more Take, for instance, the pressure than 20 times as many hours as they the cable companies are facing spend watching video on the Internet from so-called over-the-top (OTT) or on their phones (see chart, page 9). providers, such as Netf lix and And nearly half of all users still sit Hulu, which send their content down in front of the TV—not their through the Internet. In short, smartphones or tablets—to watch we’re now seeing the collapse of some type of OTT video content. the walls that previously excluded Another relevant measure: YouTube new entrants to the TV business. users average five or so hours of video viewing per month—a figure So how can the TV still be relevant that is dwarfed by the time they in a tablet and smartphone age? spend in front of the TV. To be sure, TV viewing time has Bottom line: Television still has become fragmented—the result of great power to pull audiences. And busy lives that see consumers record- big changes are coming that will ing, for example, the Boardwalk continue to engage viewers. Empire episode that the school board meeting forced them to miss. And of Not too many years from now, course, “screen time” today is shared we will be able to use the TV unit with laptops, phones and tablets. to access an entire ecosystem of content—richly immersive, far more Accenture’s latest research on of it fully interactive and all of consumer viewing habits finds that it on-demand via the Internet. It fully 62 percent of TV viewers are will be easily sourced from content concurrently using a computer or catalogs and accessed with a a laptop and 41 percent are using handheld device—a next-generation a mobile phone—messaging friends smartphone, perhaps, or a dedicated about a sitcom joke or fact-checking device that is as simple and intuitive politicians’ claims, perhaps. Coupled to use as today’s remote. with the widespread availability of high-speed wireless Internet, Just as significantly, individual today’s viewing experience is more consumers, armed with high- interactive, more consumable and performance hardware and software, far more sharable in real time. will become content creators, able to provide more of what the news Dominant medium channels deliver. (Think of higher- But the truth is that the living quality versions of the public’s room screen remains a dominant mobile-phone news bulletins of communications medium, and will Hurricane Sandy’s devastation.)6 Outlook 2013, Number 1
  8. 8. www.accenture.com/OutlookAt the same time, the major movie The easy answer, of course, is them prefer using genres—that is,studios are meeting the growing “technology”—from the TV hardware content types such as “spaghettidemand for premium video content. to the social media with which to Westerns,” “cartoons” and others—Look at the money pouring into share content to the cloud services as search criteria for finding newblockbusters—$150 million to produce that make it effective to store vast video content. And 43 percent preferSkyfall, the latest James Bond film, amounts of data. The fact is, however, finding new video content by usingfor example, and the estimated that the consumer is the undisputed personalized recommendation$250 million spent on the newest king of content. engines that track what they’veBatman movie, The Dark Knight watched and suggest similar content.Rises. These movies are being Over the past decade, control ofengineered during original production the viewing experience has shifted In a similar vein, 28 percent of usersto maximize the downstream rapidly to the one who holds the have already created video playlistsopportunity in extras, web videos, remote. TiVo and many other digital on their current video services,apps and so on. And, increasingly, recording systems have made it such as Netflix and YouTube. Thesecontent is as likely to be distributed easy for people to choose when they companies make it ever easier to doby an Amazon or a Google as it is watch their favorite programs. But this, particularly by using historicalto show up courtesy of Bravo. consumers also want to be able to behavior to recommend relevant personalize the services they con- viewing experiences. The story isKing of content sume, with search, recommendations much the same with music servicesNetwork executives and cable and social features becoming such as Pandora and Spotify asoperators don’t need to look far increasingly integrated across media. well as Amazon.com with a wholeto see what is rocking their world. Accenture found that 64 percent of range of merchandise. Reinventing TV: Nine key questions for established media players There are dramatic changes in the television industry going on behind the screen (see story). Traditional media players must respond by reinventing them- selves, a process that begins with self-examination. Crucial questions for the C-suite management team include: 1. Should traditional media and entertainment companies reinvent themselves as consumer businesses? If so, how? 2. Can new digital economic models be made to work for all parts of the media value chain? 3. How might new OTT offerings threaten the subscription pay-TV giants? 4. What new types of partnerships and collaborations should media businesses consider in order to better match consumers’ new digital experience requirements? 5. Will new industry business models sustain investments in high-quality content—or will profits be channeled elsewhere? 6. How can the ad industry’s traditional players collaborate to move toward a new world of multiplatform advertising? 7. How can data and analytics be used to galvanize new business models? 8. Should traditional vertically integrated media companies resist or embrace open platforms? 9. How do content companies maximize revenue across linear and on-demand as the balance shifts toward the latter? 7
  9. 9. Industry Report | Media Entertainment At the same time, consumers are This is not just about controlling becoming distributors. Social content; it’s about content creation as media users have an average of well. The term “prosumer” is entering 3.2 friends who post videos at least the language to describe talented once a day; almost four out of amateurs who use sophisticated but 10 consumers post video online via affordable consumer technology social media. More than half of the to produce quality news reports or respondents polled by Accenture instructional videos, for instance. would be interested in recommending Today, aspiring adventurers can buy video to others as part of belonging a GoPro camera for less than $300, to a video service. attach it to their mountain bike or UK viewers now get “all channels” digital TV In the summer of 2012, the British public got another broadcast TV). It includes a unique content discovery way to watch “telly.” The new Internet TV service, called platform: a central catalog that allows global search, YouView, has been hailed by some industry insiders browsing by genre/popularity across content providers, as the natural successor to Britain’s current model of and a “backward-looking” electronic program guide free-to-air TV. Some researchers expect that 3 million (EPG). “Unlike a lot of smart TVs, it doesn’t zone off UK homes will have YouView by 2015. on-demand content in a separate section that you access from another menu—the whole lot is integrated,” YouView combines the United Kingdom’s free-to-air notes one reviewer. Its open application platform can digital channels with on-demand content, all delivered be used by any participating content provider, offering without subscription. An easy-to-use set-top box brings consumers a tremendous range of content. It also together IP and broadcast TV technologies, making them upgrades easily, accepting new features over time such accessible to viewers through a single consistent and as behavioral targeting and predictive recommendations intuitive user interface. The service is backed by a generated by analysis of social media data—such as consortium of seven partners, including the country’s iTunes Genius music recommendations. main terrestrial broadcasters (BBC, ITV, Channel 4 and Channel 5), two ISPs (BT and TalkTalk) and a network YouView provides a strong springboard for innovation. services provider, Arqiva. Its unified and open ecosystem is expected to disrupt the existing TV business model, affecting content The service’s big innovation happens behind the screen. providers, broadcasters, ISPs, advertisers, set-top-box Its application platform gives consumers access to a manufacturers and many other technology enablers. vast array of content options. For example, if the box is And it offers abundant opportunities to create new connected to a broadband line from a partner ISP, then products and features, becoming increasingly attractive an application providing that ISP’s IPTV service will to consumers and providers of content, devices and appear automatically. As the number of content sources TV services. in its ecosystem grows, YouView’s attractiveness to both consumers and to potential new content, devices To date, consumer feedback on the user interface and service providers will continue to increase. At has been very positive. UK telecom company TalkTalk— launch, more than 140 content providers had signed up just one of multiple sales channels for YouView—signed to add their content to the YouView platform; today, up 29,000 YouView customers in the first month more than 300 providers are interested. after launch. A thousand new customers are signing up each day for the service, according to a TalkTalk YouView is not simply another version of a web-enabled spokesperson. TV service. It features a single, consistent, intuitive user interface (integrating on-demand, catch-up and8 Outlook 2013, Number 1
  10. 10. www.accenture.com/Outlookscuba mask, and capture aston- If those technology-enabled factors not a stretch to say that companiesishingly high-quality video that is are pushing the media industry from such as Amazon and Google willeasily edited on any laptop and just one side, its key sources of revenue— make big gains, as will othersas easily shared via social media. notably advertisers—are pulling it that grasp the significance of theIndeed, the growth in so-called on the other side. Increasingly, disaggregation of traditional mediauser-generated content has exploded. businesses expect to be able to value chains and the developmentYouTube now has more than 800 measure what they get for their of new forms of media value creationmillion unique users every month, investments. Traditional media has and consumption.and while the vast majority of them always had a hard time deliveringare watching, growing numbers of precise measurement, and while We’ve already seen the arrival andthem are posting content that they the explosion of Internet media is growth of businesses that offer newor others they know have generated. exacerbating the situation by further ways for consumers to access digital fragmenting viewing attention, it content. New entrants like YouTubeThe capabilities are developing is also creating opportunities for and Netflix are also now creatingso quickly, and spreading so widely, better measurement. their own content to differentiatethat it’s safe to say that prosumer their brand and sidestep the battlecontent will soon provide serious Following the money for content rights.competition for some genres of So who wins in a new media world?professionally produced content— The consumer does, of course. Amazon, Google and Apple alreadynews footage, for instance, and some But the other winners are likely to offer consumers access to significantreality TV shows. Consumers are come from outside the boundaries amounts of content, even thougheven changing the funding of content that have defined the industry it is not at the core of any of theircreation (see sidebar, page 10). over the past half-century. It is businesses. For instance, Google’sScreen of choiceTV is still the primary device for watching full-length shows and live content in both the United States and the United Kingdom.Portion of US and UK viewers who watch video content over the Internet, on each device 70% 32%Full-length movies and TV 4% 7% 65 30Live content 6 5 12 74Short videos/clips 24 12 9 TV 49 PC/laptopUser-generated content 15 Mobile/smartphone 9 TabletSource: Accenture analysis 9
  11. 11. Industry Report | Media EntertainmentFor further reading core business is search, yet it streams House of Cards, the US version of more than 4 billion hours of video the UK political series of the sameAccenture Video-Over-Internet per month via YouTube. name directed by David FincherConsumer Survey 2012: Winning the and starring Kevin Spacey.Battle for Consumer Trust, Accenture Apple generates the vast majority2012: http://www.accenture.com/us- of its income from sales of its The tectonic shifts underneath theen/Pages/insight-video-over-internet- devices, yet it made $2 billion in media industry will permanentlyconsumer-survey-2012.aspx revenue in the third quarter of reshape the landscape, altering 2012 alone from its iTunes Store, everything from the flow of“Taking The Pulse” study, Accenture 2012: App Store, the iBookstore, sales of advertising dollars to the makeupwww.accenuture.com/pulseofmedia iPod services, and Apple-branded of the industry itself. and third-party iPod accessories.“Changing Faces: The TV Company To that last point: Some of theof the Future,” Accenture 2012: The newcomers are following the writing may already be on thehttp://www.accenture.com/us-en/ money. They understand that success wall. In recent months, some purePages/insight-changing-faces-tv- in the media sector has revolved OTT content providers have gonecompany-future-summary.aspx around premium content, and from strength to strength. Netflix that it will continue to do so in the now has more subscribers thanFor more related content, future. Which explains YouTube’s many pay-TV operators in theplease visit www.accenture.com. announcement, in October 2011, of a United States. That is an astonishing $100 million investment in premium statistic, given that Netflix was channels and the announcement by founded only in 1997. Netflix in May 2012 of its plan for a $185 million, five-year investment At the same time, the most in original content. Just two forward-thinking of the traditional examples of Netflix’s investments: operators are making significant The new season of Arrested moves to properly position them- Development, releasing shortly, and selves in the new media world. Not waiting for deep pockets By 2010, a movie director named Steve Taylor secured funding to create a film adaptation of Donald Miller’s book, Blue Like Jazz. The following year, the film lost the support of a major investor, forcing Taylor to stop production. That’s when two fans of the book stepped in. To raise the $125,000 required to resume production, they created a Kickstarter webpage called “SAVE Blue Like Jazz! (the movie).” The campaign reached its funding target of $125,000 in 10 days—and blew past it, becoming the most successful Kickstarter fundraiser of 2010. In total, $345,992 was raised by 4,495 backers—an average of just $76.97 each. In April 2012, Blue Like Jazz opened nationwide across 136 screens. In just eight weeks—before distribution internationally and through rental and cable channels—it had netted half of the movie’s total budget. It is just one of several examples of crowdfunding. The trend is borne out by Accenture’s recent consumer research: 36 percent of digital consumers would be willing to donate small sums to fund their favorite movie or TV program.10 Outlook 2013, Number 1
  12. 12. www.accenture.com/OutlookTo take just two examples: British from traditional advertising The decisions that new entrantsSky Broadcasting is making its models—digital data is more are making today up and downexisting content offerings available accurate and more granular than the media value chain are alreadyon as many devices as possible, its analog predecessor. forcing some serious rethinkingand YouView—a new open-platform within the established mediasystem that makes IP and broadcast But there is still much to do before industry. The traditional broadcastTV technologies easily accessible the typical marketing department is networks—those most at risk ofto viewers through one intuitive able to effectively use sophisticated disruption—must act more promptlyuser interface—is backed by such analytics to deliver premium, and assertively than they areindustry giants as BT and the BBC personalized, interactive advertising, accustomed to if they are to survive(see sidebar, page 8). and create a richer, more detailed in the new world. understanding of specific consumerRemoving the guesswork groups—or fan bases—that will But the decisions being made byTraditional subscription models respond to new offers. the Amazons and Googles haveare not the only ones at risk from ramifications far beyond the mediathe new media model. Advertising So what does the new face of TV business itself. They will color thewill also have to accommodate the mean for today’s established media choices that advertisers—business-steady shift to digital content and businesses? The ascent of the to-business as well as business-to-the inexorable move to OTT content, consumer requires business models consumer—will have to make. Theytogether with the fact that more that are built around consumer will have an impact on the world ofand more content is being viewed needs rather than those of a education. They may well changeholistically, with digital entertainment particular channel, platform or the directions of development ofexperiences encompassing TV, film, advertiser. A single shared view a host of new content-deliveryweb video, gaming and apps. of the customer—often across products. And they could even different channels—is a prerequisite reshape the role of media as itThus far, the managed migration for a successful, consumer-focused reflects and affects public policy.of rights to new platforms has multiplatform strategy.preserved traditional TV advertising To paraphrase the old politicaland pay-TV subscriptions as the The businesses that adapt success- maxim: Where TV goes, so goesgreatest drivers of revenue. But the fully will need to try different the nation.industry may be about to change approaches concurrently. They’lltoo fast for that to remain true. need to create and run with hybridPossible signs of things to come: business models and constantly About the authorsSubscriptions could well shift away reevaluate their place in the mediafrom bloated bundles to à la carte value “ecosystem”—perhaps taking Robin Murdoch leads the strategy groupoptions that allow consumers to on new roles—so they can spot and within Accenture Communications,pick and pay for exactly the content capture new revenue opportunities. Media Technology. He is basedthey want and no more, from a In short, players all across the media in Seattle.range of different providers—new value chain now have to plan for a robin.murdoch@accenture.comInternet-based players among them. new and fundamentally different media delivery architecture. Youssef D. Tuma leads Accenture DigitalAlready, chief marketing officers Services for the United Kingdom. He iseverywhere are scrambling to based in London.reallocate and optimize marketing Ten years from now, the TV will youssef.d.tuma@accenture.combudgets across platforms. They are still be one of the largest pieces ofgetting some help from increasingly furniture in the living room, and Marco Vernocchi leads the Media sophisticated customer data it will still have a central place in Entertainment group within Accenturecollection and analytics tools, family life. But the TV business Communications, Media Technology.which are beginning to enable new overall may be unrecognizable— He is based in Milan.forms of cross-screen targeting certainly when compared to the marco.vernocchi@accenture.comand measurement. To a large extent, operating models and industrydigital removes the guesswork makeup that prevail today. 11
  13. 13. Public ServiceCoup d’étatRadically rethinkingpublic servicesBy Bernard Le Masson, Brian J. Moran and Steve RohlederAs they attempt to square public service demand against supply, governments worldwidemust do more, better, with less. To be successful, they need to overthrow old ideas andembrace the next generation of tools and ways of working.12 Outlook 2013, Number 1
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  15. 15. Public Service Consider this: If 10 key countries business-as-usual level of public- increased their aggregate public- service delivery. sector efficiency a mere 1 percent a year, they would collectively save Our findings are sobering. Through nearly $2 trillion annually by 2025. 2025, the gap between expected demand for public services and But to do this, these same countries government’s ability to meet it must identify and achieve substantial in these countries ranges from cost savings. According to Accenture $10 billion in Singapore to nearly research, by 2025, the gap between a trillion dollars in the United States expected demand for services in (see chart, page 16). Expressed in these 10 countries and the ability terms of GDP, the shortfalls range to pay for them is projected to total from 1.3 percent in Italy to 5.4 $1.6 trillion. percent in the United Kingdom. Today’s political and economic reali- It is clear, in the words of the OECD, ties are putting enormous demands that the “fiscal positions in many on public services throughout the countries [are] unsustainable.” world. Aging populations, growing fiscal uncertainties and rising citizen Given current budget situations in expectations have put governments many countries, these expenditure worldwide in unsustainable positions. gaps are simply not viable. Worse, For example, already high govern- most citizens already consider ment debt in countries in the OECD public-service levels inadequate. ballooned by some 30 percent of GDP A 2012 Ipsos MORI/Accenture between 2007 and 2011. survey shows that only 36 percent of citizens across all 10 countries are Citizens’ expectations—in many cases, either very or even fairly satisfied conditioned by their experiences as with public services. In other words, customers of best-in-class private- the delivery gap is actually larger sector players—have shifted than these funding shortfalls suggest significantly in recent years, and because most governments already the public sector has often been slow fail to meet citizen expectations. to accommodate these changing attitudes. At the same time, Shifting gears governments must contend with But governments can do better. dwindling resources as tax revenues In the course of extensive work in remain stagnant in countries still the public sector, Accenture has hampered by underperforming identified four paradigm-breaking economies, rising expenses and, for shifts governments can make to many, an inability to provide the close major funding gaps while comprehensive service solutions delivering higher levels of service. their citizens want. • hift from offering standardized S To better understand the fundamental to personalized services. disconnect between what govern- ments are being asked to achieve • eplace reactive approaches with R through public services and what’s insight-driven ones. actually possible, Accenture launched a research program across 10 major • ove from standard public M countries focused on the economic management techniques to impact of maintaining the current a public entrepreneurship style.14 Outlook 2013, Number 1
  16. 16. www.accenture.com/Outlook• eplace piecemeal efficiency R countries we surveyed could reduce improvements with a holistic public spending by approximately “mission productivity” mindset. 7 percent by 2025. A full 1 percent annual efficiency gain would cutThe rewards for making these shifts public spending requirements byare potentially huge. Using 2010 data 13.5 percent over the same period.as a baseline, Oxford Economics The United States alone could saveprojected that an overall public- as much as $995 billion by 2025 byservice efficiency gain of half increasing public-sector efficiencya percent per year across the 10 by just 1 percent a year.One size does not fit all: Personalizing servicesTraditional public services often Governments can providefollow a one-size-fits-all model: personalized services using fewerGovernments pour resources into resources by taking advantagea standard mold to produce the of new technology and organiza-same public services for everyone. tional design to make it easier forUnfortunately, simply funneling service providers to collaborate. Themore resources into the mold Istituto Nazionale della Previdenzato improve service levels does Sociale, the main Italian welfarenot typically produce the desired agency, has organized its servicesresults. Data from OECD member around the citizen. Users submitstates shows that even massive a single request and regardlessspending increases for standardized of how many subsidiary agencieseducation services, for example, are involved, the INPS and localdo not necessarily lead to better authorities collaborate to addressoutcomes in areas such as the user’s needs. Personalizationreading scores. can also reduce the cost to deliver services via better-targeted, moreThis standardized services model preventative approaches.stands in sharp contrast to the “mar-ket-of-one” evolution in the private Effective public-service personal-sector, which has allowed commercial ization depends on three actions.organizations to serve customersbetter at reduced costs. The personalcomputer industry has embraced Develop deep citizen insightsthe market-of-one concept of masscustomization for years, enabling These should form the core ofcustomers to “spec” their machine personalization initiatives. Whilewith a wide variety of performance the public sector has cautiouslyoptions and accessories. To drive embraced advanced analytics toproductivity, governments must improve service, several examplesshift to this same model of personal- already illustrate how “rich data”ized services. This implies design- can provide insights and guideing services in partnership with actions in public services.citizens—and delivering them inintegrated ways to provide exactly New York City’s Health and Humanwhat’s needed, when and in the most Services developed a program thatappropriate manner. employs advanced data management 15
  17. 17. Public Service methods to create a comprehensive, Services. This measure decreased cost-effective view of a citizen’s administrative overhead and will interactions with city services. deliver efficiencies of $140 million Caseworkers across agencies can over four years. use the information collaboratively to create tailored services for The government of Maharashtra, families or individuals. India’s second most populous state, is at the forefront of implementing the Aadhaar (UID) project that Design citizen-centered services will ensure the delivery of benefits more efficiently. To date, 40 million Greater personalization requires residents have been enrolled. By governments to put citizens at reducing database duplication, the center of service design. As the state is projected to achieve outlined in the Driving Efficiency savings of up to 25 percent. report in the Australian govern- ment’s 2011–2012 budget, Canberra Designing citizen-centered services supported the development of implies a much greater level of ICT systems that make it easier integration, but so far, many initia- for customers to access Centrelink, tives have simply been “bolted on” Medicare and Child Support as a way of bypassing entrenchedDeeper in the redThe expenditure gaps—the difference between the demand for public services and the ability to pay for them—by 2025across 10 countries are expected to range from $10 billion in Singapore to as much as $940 billion in the United States. Total public- Annual percentage service expenditure, Expenditure gap by Expenditure gap as a increase in efficiency to Country in US $ billion 2025, in US $ billion percent of GDP in 2025 close the expenditure gap Australia $419 $50 3.0 0.91 Brazil $915 $70 1.9 0.57 Canada $724 $90 4.1 0.92 France $1,281 $100 3.3 0.58 Germany $1,402 $80 2.0 0.42 India $501 $70 1.5 1.11 Italy $873 $30 1.3 0.25 Singapore $53 $10 2.3 1.40 United Kingdom $1,016 $170 5.4 1.25 United States $7,328 $940 4.4 1.00Note: Economic modeling used 2010 data.Source: Oxford Economics, 201216 Outlook 2013, Number 1
  18. 18. www.accenture.com/Outlookdepartmental and jurisdictional Delivery of Services Bill instructures. In the future, govern- 2011, which, if enacted, wouldments need to integrate these direct every government agencyfragmented structures so that to deliver all public servicespublic services are centered on the electronically.holistic needs of citizens. In the future, citizens will become more involved in theEngage citizens as service design of their own public services,design partners and governments will begin to treat them as genuine partners. FredericiaPersonalization gives citizens Kommune, a local authority inmore power to determine how Denmark, has developed preventativethey are served. Enabling citizen solutions that enable older citizensparticipation in cost-effective to live independently at home, thusways requires a strong set of reducing the need for institutionalonline digital services, and for- care. By emphasizing healthtunately, many governments are education, enablement and smartalready on this path. One survey home-based technologies, theindicates that more than 60 initiative is generating significantcountries currently have online savings. Approximately 43 percent“e-participation” policies, which of participating patients now becomefocus on the use of information self-sufficient compared with onlyand communications technologies 5 percent three years ago, generatingin national government and annual savings of approximatelygovernance processes. India, for $2.7 million, or 14 percent of theexample, introduced the Electronic authority’s total budget.Tomorrow’s services today:Adopting insight-driven approachesGovernments will soon shift out Collaborate and cooperateof their reactive postures andembrace insights that enable them Effective cross-agency collaborationto anticipate the public-service often requires strategic information-needs of citizens. Why? The global sharing programs. In one examplepace of change has accelerated from the public safety field, Europol,and become more volatile and dis- the European Union law enforcementruptive, making reactive approaches agency, has established centralizedobsolete. Adopting an insight-driven capabilities for data matching thatpublic-service strategy will allow can identify the nature of criminalgovernments to predict tomorrow’s activity affecting multiple countries.service needs and cost-effectively What’s more, Europol’s Secureprovide the resources required to Information Exchange Networkmeet them. Application (SIENA) is one of a small number of secure internationalTo make the shift to insight-driven police systems, connecting all majormanagement, governments should police forces in Europe on the samefocus on the following priorities. platform. What’s unique about 17
  19. 19. Public Service SIENA is that it complies with all legal ities from the bottom up without data protection and confidentiality major input from above. requirements and as a result ensures that member countries can exchange sensitive information securely. Adopt “emergent identity” services Share insights effectively With identity theft and fraud rampant worldwide, governments Getting the right information to need more reliable ways to ensure decision makers—whether police, that citizens are who they say they caseworkers, border agents or are. In 2012, Amsterdam Airport citizens—when and where they Schiphol piloted an automated need it while safeguarding privacy border control system featuring rights is an essential element facial recognition technology that of any insight-driven strategy. compares passenger identities For police and defense forces in against the digital photographs in particular, mobile devices coupled their passports. The system can with efficient information-sharing also identify forged passports and solutions enable those on the recognize people who may be on ground to organize complex activ- an authority’s “wanted” list. Public entrepreneurship: Focusing on value creation Governments today are underutilizing Beyond needed policy and legislation existing public-sector talent that changes that should, for example, could help them make the transition emphasize such areas as education to “public entrepreneurs.” Making and workforce development, the shift this shift can help governments to public entrepreneurship requires drive much-needed sustainable governments to do three things. job creation and long-term growth in the current tough economic environment. Public entrepreneurs Collaborate to boost impact focus on creating value, forging new relationships, collaborating Public entrepreneurs have a across traditional boundaries and number of options for building breaking through organizational collaborative partnerships that can silos to get things done. They multiply the impact of initiatives. partner to deliver value and take Using new delivery and organiza- calculated risks, understanding tional models can drive innovation that while some efforts may fail, and stimulate better economic others will not. outcomes; these efforts often involve spinning entities out of The shift to public entrepreneurship the public sector. repurposes the machinery of govern- ment to stimulate economic outcomes, For example, in the United Kingdom, collaborate and multiply the impact one healthcare center that converted of government investments. to an employee-owned mutual18 Outlook 2013, Number 1
  20. 20. www.accenture.com/Outlookorganization in 2008 reported involvement, Mexican central, state to compete globally, the effortsproductivity gains of 20 percent and local governments are recasting are unlikely to succeed. Given thein 2009; the quality of clinical the city center as a hub for the complexity inherent in the skillsoutcomes improved or was digital media industry with a goal development challenge, coordinationsustained as well. The greater of providing employment for 30,000 among the public, private and socialautonomy enjoyed by employees people while building an environ- sectors1 is critical.under the mutual model drove mentally sustainable creative culturethese productivity improvements. that can provide a better quality of However, a recent Accenture survey life for the local population. of European decision makers foundSome countries are creating public/ that although organizations fromprivate collaborations that harness all three sectors believe that suchtechnologies to drive both economic Develop labor pool skills collaboration is essential, less thanand social outcome improvements. 20 percent are working together onOne example is a major redevelop- Public entrepreneurs can attempt skills issues with players in the otherment effort in Guadalajara, Mexico. to help businesses flourish, but if sectors. Public entrepreneurs canWith significant private-sector a nation’s workforce lacks the skills address this shortcoming by building1 S ituated between the public and private sectors, the social sector includes cooperative organizations, nonprofits and charities.Big savingsIf the 10 countries listed below were able to improve efficiency in the deliveryof public services by just 1 percent per year, they would save a combined total ofalmost $2 trillion by 2025 annually.Savings in US$ billions Estimated 0.5% Estimated 1% Country efficiency improvement efficiency improvement Australia $30 $58 Brazil $63 $122 Canada $51 $99 France $91 $177 Germany $99 $192 India $34 $66 Italy $62 $121 Singapore $4 $7 United Kingdom $72 $139 United States $514 $995 Total $1.02 trillion $1.98 trillionSource: Oxford Economics, 2012 19
  21. 21. Public ServiceFor further reading coalitions and partnerships between of streetlight that reduced running businesses, public agencies and costs and associated carbon footprint“Singapore Ministry of Finance: not-for-profit players to provide the levels by 33 percent.Shared Services,” Accenture 2012 labor skills needed for the future.http://www.accenture.com/sg-en/ Governments can also make betterPages/success-singapore-ministry- Accenture’s own Skills to Succeed use of the data they collect. Forfinance-shared-services.aspx initiative provides an example of this example, “data mashing” enables approach. By the end of fiscal 2011, agencies to merge public informa-For more related content, the initiative had equipped more than tion with different types of dataplease visit www.accenture.com. 160,000 people worldwide—two-thirds to produce new products and of the way to the goal of training a services that they then can sell. quarter of a million people—with the In Denmark, Geomatic, a private workplace and entrepreneurial skills company, uses government data to they need to get a job or build a busi- develop market insights that they ness. Partners in the Skills to Succeed sell to clients for marketing and initiative include the International strategy development purposes. Federation of Red Cross and Red Crescent Societies, Junior Achieve- Another opportunity: using tech- ment, Plan, Save the Children and nology to simplify interactions Youth Business International. between business and government. One leading example is Norway’s Altinn portal, which provides a Introduce intelligent stewardship single connecting platform to cover a whole range of government agencies. Governments have many ways Through Altinn, small and medium- to capitalize more fully on the size enterprises can obtain informa- resources they manage. They can, tion and submit applications without for example, use their sizable having to contend with multiple procurement budgets to catalyze authorities at different administrative innovation. Near Dublin, the Dún levels. Between 2008 and 2026, the Laoghaire-Rathdown County government expects Altinn to save Council invited teams of academics Norwegian businesses approximately and businesses to bid for a low- $1.6 billion through data handling energy street-lighting contract. The cost savings and the more efficient winning bid involved a new kind use of time. Optimal efficiency: Encouraging a ”mission productivity” mindset Instead of pursuing piecemeal public sector’s considerable scale attempts to improve efficiency, and assets. governments need to shift to a holistic “mission productivity” Savings from these actions could mindset that embraces broad, be substantial. Oxford Economics integrated thinking to prioritize estimates that if the United States and manage initiatives better. achieved annual 0.5 percent They must also take steps efficiency gains, it would realize to eliminate service delivery more than $500 billion annually in duplications and make use of the savings by 2025 (see chart, page 19).20 Outlook 2013, Number 1
  22. 22. www.accenture.com/OutlookTo capture such gains, governments By restructuring core functions massive opportunities to makeshould pursue three courses of action. through consolidation and public services more effective and collaboration, governments can efficient. Leaders must realize, drive considerably higher levels of however, that the four shiftsFocus on outcomes public-service productivity through described here will require a economies of scale and scope, reformist’s zeal and a true commit-This will require governments to which can dramatically reduce ment to significant change.introduce performance management overhead costs and duplication.approaches that prioritize services In a notable example, Service While undoubtedly difficult,based on desired outcomes. While Canada merged more than 70 these shifts can help governmentsfull-scale prioritization efforts services from multiple agencies— worldwide resolve today’s seeminglycan be difficult, their impact can from the Canada Pension Plan and intractable public-service problemsbe profound: In Sweden, a priority Old Age Security to Employment while effectively positioning themreview during the 1990s reduced Insurance—into a single customer to meet the needs of tomorrow’saverage departmental spending service organization. The program citizens.by 11 percent, helping to move saved more than $265 million infrom a budget deficit of 10 percent its first year alone.into a 1.9 percent surplus within About the authorsfour years. Introduce operationally Bernard Le Masson is the managementSome public-service organizations excellent administration consulting managing director forhave increasingly adopted practices Accenture Health Public Service.performance management to drive He is based in Paris.improved outcomes. While this is a These will support and enable more bernard.le.masson@accenture.comgood start, we believe they should productive core functions in twoalso use performance systems to ways. First, public entrepreneurs Brian J. Moran is the managingdrive continuous improvements should fully exploit government scale director of Accenture’s Public Servicein the value of investments. This to drive efficiencies. New Zealand’s Operations Management group.approach requires a budgeting government agencies, by jointly He is based in Cleveland.process that rewards outcome purchasing supplies and services brian.j.moran@accenture.comdelivery and shifts away from such as vehicles, office supplies,inflation-based budget adjustments. air travel and legal services, are Steve Rohleder is the group chiefSouth Korea has developed a unique expected to save almost $300 mil- executive of Accenture Health Publicperformance management mechanism lion over the next few years. Service. He is based in Austin, TX.whereby all public agencies must stephen.j.rohleder@accenture.comregularly review their programs Second, they should make betterthrough self-assessments focused use of existing assets. For instance,on total cost. Programs that are government agencies in Singaporerated ineffective face 10 percent developed a shared human resources,budget cuts. finance and procurement system to provide support to 15 agencies and 17,000 users. Over its lifespan,Restructure core functions the system is expected to help cut the cost of IT infrastructureThe second main thrust for by 30 percent.optimizing efficiency involvesthe core functions of governmentagencies. Worldwide, public services Governments worldwide faceare delivered in highly fragmented daunting public-service challenges.ways. For example, New York But with the right approach, weState alone has nearly 5,000 local believe they can overcome thesegovernment entities. obstacles by tapping into the 21
  23. 23. StrategyCross-industry ecosystemsGrowth outsidethe boxBy Cedric VatierTo reap future growth benefits, companies must smash through the traditionalconfines of industry walls to seek collaborative opportunities that stretch acrossmultiple business sectors. 23
  24. 24. Strategy Are industries obsolete? Consider, for instance, how Apple leads an ecosystem that spans Until recently, the concept of at least four industries—personal standalone industries made sense. computers, consumer electronics, From the Industrial Revolution on, information and communications— the world’s economy has consisted and now encompasses even of dozens of compartmentalized more, such as music and TV collections of companies, each (see chart, page 27). serving its own markets, teaming up with its own suppliers and Breaking out pursuing its own ways of capturing Because of today’s advanced value. In more settled times, this connectivity solutions and value- paradigm worked well; staying laden emerging markets, many within an industry’s established companies have never been better lines of business and ways of doing positioned to engage in multi-industry things made competition compara- collaborations. But few have broken tively straightforward and was out of the static industry box. the normal path to profitability. In fact, lacking today’s digital They had better figure out a way means to change the game or global to do so soon. Several Accenture opportunities to form new business studies suggest that future growth models, breaking out of the industry opportunities will increasingly box was all but impossible. emerge outside a company’s traditional business. And each of Today, however, disruptions in these opportunities will require everything from the flow of raw disruptive new approaches and materials to the nature of end collaborative models. markets have conspired to knock even well-rooted industries off- Meanwhile, the new competitive kilter. Fortunately, companies have dynamics will be shaped by a variety of technology-enabled two important factors. The first ways to smash through the confines is collectively known as Big of industry walls and unlock Data—increasingly vast pools new value-laden synergies in of information that empower pursuit of collaborative opportu- companies to link previously nities that stretch across multiple distinct industries. business sectors. But even though Big Data is blazing Welcome to the bold new world of countless fresh paths to growth, in business ecosystems, a term first many cases, companies need new coined two decades ago by James F. ecosystem partners to pursue them. Moore, an expert on leadership and These cohorts can help make up for change in large-scale systems, in a lack of internal competence or a Harvard Business Review article. provide access to information. What’s Instead of being rigidly grouped more, the intimate knowledge housed around a specific business or branch in an organization’s customer of manufacturing, ecosystems databases can open potential new draw together mutually supportive revenue streams beyond a company’s companies from multiple industries core business. that collectively seek to create differentiated offerings and capture The pursuit of new business oppor- value they could not reach alone. tunities depends on the availability24 Outlook 2013, Number 1
  25. 25. www.accenture.com/Outlookof increasingly scarce financing, Emerging markets are expectedwhich is the second factor shaping to drive up to 70 percent ofthe new competitive dynamics. This future growth for multinationalscarcity, along with the instability corporations. But penetratingin financial markets, is spurring these markets can present seriousthe emergence of innovative ways obstacles for most companies.for companies to obtain the capital In many cases, organizationsthey need. will need to develop innovative business models to meet specificAt the same time, burgeoning local market needs.public debt is forcing governmentsto reposition themselves as project Leading companies no longer viewinitiators that depend on outside environmental concerns as a barriersources of funding when it comes to growth, seeing them insteadto public-sector procurement (see as opportunities to be pursuedsidebar, below). Sharing costs with partner enterprises. The newand risks has therefore become sources of growth being created bya necessity for both private- and environmental issues often requirepublic-sector companies. a collaborative strategy that crosses industries. For example, offeringsFor these new multi-industry focused on energy efficiency arecollaborations, opportunities will be already being created by ecosystemsfound in three broad areas: emerging of energy providers, technologymarkets, the environment and providers, construction companiesmaturing Western markets. and more. Collaborating for cash Although originally, multiparty, cross-industry collaboration mainly consisted of public-private partnerships, it actually encompassed a wide variety of different models. More than half of these partnerships in emerging countries between 1990 and 2001 involved cooperation between the government and the private sector that was limited to the founding contract. These agreements also included technical and quality objectives, although they were secondary to the initial issue of financing. Today, traditional public-private partnership contracts are considered too complex; they are also considered inflexible because they lock partici- pants in for extended periods (often 20 to 60 years), making it extremely difficult to adapt to unexpected shifts in technology or environmental concerns. In the area of municipal services, however, an entirely different approach is emerging. A number of “smart city” initiatives reflect renewed interest in both public- private and private-private partnerships based on simple and innovative collaborative business models. These partnerships provide innovative ways for cities and their stakeholders to work together to access the resources needed to effect change (see story). 25
  26. 26. Strategy Maturing Western markets still Better Place wants to introduce contain significant numbers of a totally new transportation sophisticated, affluent consumers. business model by positioning Instead of writing off these markets, itself as the provider of an end-to- companies need to capture value by end network and service solution pursuing new sources of competitive for electric vehicles. The company differentiation. Positioning an has established an ecosystem organization as an innovative market that links public authorities, disruptor can be both risky and which support development difficult, but it remains one of the through tax credits; automakers, best ways to generate significant which develop EV technology; profitable growth. battery suppliers; energy suppliers; and investors.Positioning an Disruptive business models These growth opportunities have At the same time, disruptiveorganization as an been spotted by a number of initiatives involving multipleinnovative market organizations that have already industries are transforming the seen the benefits of collaboration way we travel. Some ecosystemsdisruptor is one and have created cross-industry have already successfully deployedof the best ways to ecosystems. tools like location-based smartphone apps in airports. The “My Waygenerate significant Consider so-called smart cities. Aéroports de Paris” smartphone In the Netherlands, the city of app enables Paris-Charles deprofitable growth. Amsterdam teamed with energy Gaulle Airport terminals and network company Alliander, Android smartphone providers telecom operator KPN and city- to collaborate to help travelers affiliated agency Amsterdam navigate their way to airport shops, Innovation Motor (AIM) to create restaurants, parking terminals an experimental cross-industry and, ultimately, their flights. public-private ecosystem to reduce the city’s carbon footprint. Looking Other companies could develop beyond a basic commitment to ecosystems using location-based funding clean infrastructure, the technology as well. Clothing retailer project partners built a platform where Gap, for instance, in partnership a diverse array of different-size with a credit-card company, has companies can share expertise and introduced the Gap Mobile4U jointly lead projects to improve urban location-based service for text- living, working and mobility, and, at enabled mobile phones, which the same time, reduce the impact these sends Gap customers text messages projects have on the environment. with personal offers for deals at the nearest store. Electric vehicles also offer a compelling illustration of how More generally, highly diverse cross-industry ecosystems can segments of the population have usher in major paradigm shifts. come to expect uninterrupted Better Place, a venture capital-backed connectivity and virtual interaction. company, is structuring a new As a result, consumers no longer collaboration that ranges from the perceive travel as a solitary development of EVs with removable experience; regardless of age or batteries by automakers to the whether their trip is for business installation of networks of battery or pleasure, today’s travelers want charging and swapping stations. to be connected throughout their26 Outlook 2013, Number 1

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