Challenges of the Interaction Economy

Challenges
of the Interaction Economy
embracing complexity in the
Public, Finance
and Health care sector
Thei Geurts

Challenges of the Interaction Economy;
embracing complexity in the Public, Finance and
Health care sector
Thei Geurts
May 7th
, 2011
Version 2.3

1
Contents
1. Mastering disruption – embracing complexity ........................................................................... 2
1.1 Introduction............................................................................................................................... 2
1.2 Change and complexity: a paralyzing combination................................................................... 2
1.3 Coping with complexity............................................................................................................. 5
2. Public sector ................................................................................................................................ 8
2.1 Introduction............................................................................................................................... 8
2.2 Facing complexity...................................................................................................................... 9
2.3 Looking at the public sector from the blank canvas viewpoint: examples ............................. 11
2.4 Empowerment by embracing complexity ............................................................................... 13
3. Finance sector ........................................................................................................................... 15
3.1 Introduction............................................................................................................................. 15
3.2 Facing complexity.................................................................................................................... 16
3.3 Looking at the finance sector from the blank canvas viewpoint: examples ........................... 19
4. Health care sector ..................................................................................................................... 25
4.1 Introduction............................................................................................................................. 25
4.2 Facing complexity.................................................................................................................... 27
4.3 Looking at the health care sector from the blank canvas viewpoint: examples..................... 30
Appendix............................................................................................................................................ 34

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1. Mastering disruption – embracing complexity
1.1 Introduction
What is it that keeps a manager awake at night? It is either the myriad of snap decisions he1
has to
made every day on a seemingly increasing variety of issues. Or it is one of these far reaching
decisions that directly affect people (employees, customers or partners) and the future of the
organization? The answer can be ‘both’. Fact is that most of the managers perceive their current
environment as becoming increasingly complex. They have a natural tendency to keep control while
the circumstances beyond their control evolve with a mind-blowing speed and magnitude that is
virtually impossible to keep track with. It is this short term oriented control bias that leads to the
creation of seemingly sophisticated solutions that in the end make life even more complicated and
disturb the manager’s good night’s sleep.
In this white paper we will address the causes of complexity and how to deal with them in a goal and
future oriented way that brings the business back in control and empowers customers, employees
and partners. We will illustrate this approach by examples from the public, financial and health
sector.
1.2 Change and complexity: a paralyzing combination
Organizations are under constant pressure of social, regulative, economic and technological
challenges. They must deliver business effectiveness and efficiency while responding quickly and
correctly to changing business conditions. They must deliver more personalized, customized products
and services to meet the increasing demands of consumers and reduce costs at the same time. The
flood of new regulations on local, national and international level that has to be implemented,
increases all the time, despite the efforts to reduce red tape. Business operations are becoming
global, distributed and complex and are changing also all the time. Simple ‘step to step’ value chains
are transforming into highly dynamic and interactive networks that tap into distributed expertisei
and
unlock the power of specializationii
.
Organizations, both public and private, operate in an environment in which change is the new
Normal and …… change is continuous. They are in a constant transition from the old to the new. The
ones that will dwell to long in the old will become static and ultimately obsolete. The ones that ride
the waves of change in time will seize on new opportunities and survive. The ones that catch a wave
too early will be praised for their insight, but will not get the rewards.
Figure 1 Continuous change is the new Normal
1
Wherever we use ‘he’ for a person, this may be substituted by ‘she’ if this matches the preference of the reader.

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Moving from one wave to another is in the pubic and business sector even more difficult than on the
surfboard in front of the Californian shores. These sectors have to cope with co-existence of the old
and the new. They are faced with multi-reality in which old products exist along new ones, old
business models along new models, old practices along new practices and old technology along new
technology. Dealing with this type of multi-reality and preventing that ‘the old’ paralyzes ‘the new’ is
in essence the real challenge in the ‘change game’ for our restless manager.
There are many theories and visions that provide their own interpretation of what causes this change
and the complexity we perceive. It all boils down to the fact that we have moved from a
manufacturing era in which transformations prevailed into an era in which interactions prevail. A
society that is based upon interactions is service oriented and deals predominantly with transactions
and interpretations. The processes are knowledge intensive which leads to a strong growth in the
number of knowledge workers in the economy of interactions.
Figure 2 Interaction economyiii
Of course have interactions been important in every economic age, but were considered a secondary
element rather than a primary source of value creation. Interactions in earlier economic eras were
largely hierarchical, stable, and predictable, and learning one’s role was more important than
learning how to interact between roles. In general, the source of coordination was compliance with
the dictates of authority. The vocabulary of the Interaction Economy shows how much all that has
changed. Terms such as “cross-boundary initiatives”, “horizontal processes”, “supply chains”, “value
networks”, “collaboration”, “connectivity”, “silos versus systems” and the “matrix organization” all
denote the prominence of interactions in developing and executing value creation strategies. The
source of coordination now is “mutual interest” because we need far more cooperation than we can
garner through compliance. Interaction Economy leaders must learn to evoke, connect with, and
orchestrate commitment rather than demand complianceiv
.
Information technology did not keep up with the pace of the interactions. Traditional ICT focused on
supporting structured activities, like registration of objects or simple straightforward transactions.
This type of ICT solutions is not designed for change and is not human centric. The system is leading.
This approach is not sufficient to support more complex and decision centric activities in which
human interpretation is required or has to be supported. These activities tend to be unstructured
and they are in the majority in knowledge intensive processes. It is only recently that new
technologies provide the opportunity to support unstructured and less structured processes.
15 %
41 % 44 %
Transformation
TransactionInterpretation
13 %
39 %48 %
TransactionInterpretation
2005 2010

4
In this hyper dynamic world of interactions and change are private and public organizations
challenged by three types of complexity: social, dynamic and emerging complexityv
.
Figure 3 Operating in an era of hyper complexity
 Social complexity is about values and their underlying basic assumptions (beliefs,
perceptions, thoughts and feelings) that determine a person’s behaviorvi
. The alternative of
not correctly addressing social complexity is irreparable reputation damage and customer,
employee and partner drain.
 Dynamic complexity is the product of interdependences between the subcomponents of a
system. It is caused by a systematic delay or distance between cause and effect. This delay
makes it hard to assess the impact of decisions and to manage processes. This leads to
diminishing responsiveness, unnecessary high costs, decreased productivity and increased
competition.
 Emerging complexity is characterized by disruptive change and the uncertainty that these
disruptions create. Organizations that are not able to deal with uncertainty risk to be
outperformed by new entrants and existing competitors. They also risk claims for not being
compliant to changing regulations and face high transformation costs of legacy operations
and systems.
What keeps a manager awake at night is how to act in a hyper-complex environment in which change
is the new normal and in which complete control of the dynamics and interactions in the networks in
which he operates has become a fixed idea. He feels powerless and as a result he focuses his actions
on short term improvements that fit within the traditional ICT and management paradigm.

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The result of this approach is devastating. Driven by the conviction of reducing complexity he in fact
accumulates complicatedness. Not being able to handle exceptions because of rigid IT-systems and
creating therefore additional isolated processes and systems is an example of this behavior. Instead
of becoming more empowered, the organization and its actors become more dependent on short
term solutions and accompanied silo behavior. The level of complexity seems to be risen, while in
fact sight is only blurred by self-generated complicatedness.
1.3 Coping with complexity
What the manager actually wants is a vision and methodology how to empower people, be customer
centric, create operational excellence, and be and remain innovative and adaptive at the same time.
This will only be possible if he embraces complexity, because complexity is going to stay. There is no
way to avoid or circumvent complexity. Complexity is a natural given and has always existed. The
present scale and speed of change makes it today more urgent to find a way of coping with
complexity. To be able to deal with complexity requires acceptance of changeability, the
simplification of processes and the facilitation, rather than control, of new options and trends. In this
context, efficiency should no longer be sought in the 'one best way', but in 'any way, all the way'.
The manager needs, as a matter of speaking, to set up his painter’s easel and
put a blank canvas on it. On this frame he can draw a design that is built for
change and for people. A design for the essence of the organization and its
operations. A design that fits within a dynamic environment and that enables
optimization and innovation at the same time. A design that can balance
between flexibility and control, between structured and unstructured activities,
between situational awareness and uncertainty. He has also to draw the lines
between the old and the new and to visualize how they will interoperate.
The blank canvas does not mean that the manager has to re-invent the corporation from scratch on.
It basically means that he has to take a step back and look at the organization from another, more
holistic, viewpoint. This approach will clarify in which areas unintentional complicatedness has been
created and how it can be removed. Reducing the complicatedness of procedures, systems and
services helps organizations to gain in terms of customer friendliness, operational efficiency, and
productivity. It also creates room for professionals to focus on challenging, complex issues. It
increases their motivation and organizations consequently gain in terms of creativity and
responsivenessvii
.
An important design concept in the blank canvas approach is the use of what analyst firm Forrester
calls dynamic case management. If reality changes, the old “best practices” don’t hold anymore. The
reality of business processes has significantly shifted. To deal with business megatrends such as mass
customization and customer self-service, administrative processes have become more knowledge
intensive. Next to traditional business process management techniques and technologies, new
practices and technologies are needed. It is necessary to move from a process-based approach in
operations to a more case-based focus.
The great leap forward comes from abandoning the central concept of the old S-curve: the process-
centric approach. This approach dictates that transactions need to follow the process and the
moment transactions do not fit with the process, the process needs more hardcoded exceptions. In
more formal terms, this is called a prescriptive approach. The case-based approach proves that If you

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turn it around, the complexity problem disappears: put the case at the heart, not the process. A case
can be defined as all the work that needs to be done to achieve a certain result regarding for instance
a customer, or an object such as a building. The context of the case describes which activities are
needed in order to complete the case, and nothing else. There is no predetermined sequence or set
of activities that needs to be completed, there are no unnecessary steps. Using a more formal term,
this is called a declarative approach.
A second important design concept is the use of a model driven approach. In this approach stands
the model in the middle of the new design. It connects business objectives and structures (products
and services and organizational groups) to customers (or partners) and their requirements in a
specific context. The rules that apply in this situation, based upon procedural and legal regulations,
are infused into this connection. And last but not least enables the model driven approach to deal
with market trends, for instance the instant configuration of new products based upon existing
components or adapting risk profiles for specific groups or activities due to unforeseen incidents.
Figure 4 The model as connector
Changes in the model have to be applied only once and can become instantly active in all
combinations in which the model is used to generate services to empower customers, partners and
employees. The model driven approach enables the use of dynamic case management, because it
does not model the process. It just models the activities and dependencies, so that each transaction
can have its unique flow. In this approach is everything a business rule. Even exceptions are business
rules. This allows many knowledge-intensive, complex transactions to be handled by a single process.
The business rules, the 'know' are not hard coded or stored within a business system, but stored and
managed separately, so they can be reused. And if a business rule changes, the system changes
automatically with it. The complexity that users perceived in the past was created by embedding,
often in a hardcoded way, business rules in information systems. By separating 'know' from the
'flow', only a very simple process remains with just a few phases and states.
Last but not least allows the model driven approach in combination with dynamic case management
organizations to create a continuous loop of improvement. By using the policy of a ‘Model – Run –
Improve ‘-sequence, they can embed continuous change and innovation in their running operations.
Stakeholder
requirements
Business
objectives
Market trends
Regulatory requirements

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In the next section we will illustrate how complexity can be embraced and users can be empowered
in the Public, Finance and Health care sector.

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2. Public sector
2.1 Introduction
The main discriminator between the private and the public sector is the fact that the public sector
cannot go out of business. It can shrink and be reshaped, but will not disappear entirely. The same
applies to taxes or legislation. The latter will even be rather more than less.
The public sector is characterized by the huge variety of services it provides. They range from
deciding on permits and benefits to levying taxes, law enforcement and crisis management. One of
the specific features of the public sector is the prerogative it has on policy making and
implementation. The policy making process is carried out in a highly political arena. A balance must
be found between the interests of the various stakeholders and interest groups.
Another characteristic of the sector is the fact that individuals have varying personal interests and
roles in society i.e. they are citizens, voters and entrepreneurs, but also consumers and tax payers.viii
This causes dilemmas in providing public services that are adhere to the principles of good
governance, as well being effective and efficient at the same time. The challenge, and the dilemma, is
the natural limitation on public administration, in contrast with private business, in that it cannot
“choose” its ‘customers’. Public administration must serve all citizens equally, no matter the cost and
difficulty in doing so. And they must be efficient, doing more for less.
Figure 5 Dilemmas of burden reduction (Millard adapted by Archmann & Meyerhoff Nielsen, 2009)
The public sector is not only very heterogeneous, public sector organizations are also very
autonomous. This causes challenges in an era in which participation and collaboration in process
networks or value chains is a must. Autonomy tends to create silo solutions and silo behavior, which
is being reinforced by the hierarchical nature of public sector organizations. Attempts to improve the
interoperability between organizations and systems are often brought to a standstill by risk
adversity, inertia and even by fear for loss of position and status.
The foregoing explains also to some extend why there is a gap between policy making and policy
execution. Political interests can lead to policy intentions that are difficult to execute in the
envisioned manner. Execution agencies are not or only limited involved in the policy making process
and have to cope with the effects of the decisions taken. The same applies to citizens’ groups.

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Internationalization and the media do also have an increasingly strong impact on maneuverability
and priorities in the public arena. Internationalization limits the national decision room. The public
limelight of the media influences the behavior of actors in the public domain.
Last but not least, the public sector is a very knowledge intensive sector with a myriad of interactions
between organizations and individuals and between various organizations. The knowledge
insensitivity leads to need to take decisions all the time. Therefore, is decision making at the heart of
many public sector services.
2.2 Facing complexity
The public sector faces the same types of complexity as the private sector does. The first is social
complexity, that deals with values. Society’s expectations of public service delivery have by no means
diminished as citizens from the 1980s onwards have become more concerned with choice and
service quality. They suffer from high administrative burdens, long lead times and delays which lead
to growing cynicism and frustration. Citizens and enterprises expect a service oriented attitude that
is expressed in supporting in what Gartner coined the ‘process of me’ and in a coherent and
transparent set of multichannel services. Instead of that, citizens and business loose track,
confronted with an overwhelming amount of institutions, laws and regulations. They do not know
which rules apply in their specific situation. Trust in government and policy making practices is
quickly evaporating. Therefore, public administrations are under constant pressure to modernize
their practices to meet new societal demands in a highly individualized society with reduced budgets.
This led to the introduction of concepts like Citizen Centric Government and ignited vision of e
Government. Strategically, governments use e-Government today to pursue more than ever the
goals which are not specific to the crisis but that were embedded in public sector transformation
strategies and modernization efforts over the last 10 to 15 years. These include: increased efficiency
and effectiveness; structural and organizational change; regulatory reform/administrative
simplification; citizen-focus; quality of services; openness and transparency; and responsiveness in
policy-making and service deliveryix
. Fostering transparency also leads to the need of increasing
accountability and broadening the sphere in which citizens can make or influence decisions and
building civic capacity. In this respect offers the concept of e-Participation instrumental value by
strengthening the evidence base for policy making, reducing the implementation costs and tapping
greater reservoirs of experience and creativity in the design and delivery of public servicesx
.
Another manifestation of social complexity is the need to cooperate in networks between
organizations of different cultures, terminologies and attitudes. This poses not only social challenges,
but also managerial, operational and technical challenges that are related to dynamic complexity.
Keeping the focus on efficiency and effectiveness-oriented activities, together with activities that
make public service delivery more coherent, is difficult if the interdependency between the parts of
the system is unclear. Insight and oversight of cause and effect relations within the own organization
and within the network in which one operates is hard to obtain, let alone to maintain. The same
applies to productivity, since increasingly complex legislation leads to more and more complex
applications and business processes to execute these laws. Productivity gains can be flushed away by
new political and legislative demands. Standardized processes are forced to accept exceptions which
lead to the creation of new processes and laborious exception handling.

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A basic problem in managing public sector operations is the lack of a “real” bottom line. Most
performance goals are put together to please those who must be pleased. Moreover, the goal posts
can be moved when it’s politically expedient to do so. This also applies to e-Government programs
which are at the heart of the effort to make the public sector more agile, simple and responsive to
internal and external demands. Governments are focusing on achieving second-order effects from
their economic crisis-related e-Government priorities but can reformulate the goals and outcomes
based upon the political situation at hand. Putting purpose into practice is not only difficult because
of the gap between policy making and policy execution, but also because of the moving targets.
Increased ICT use and user-centric service development presents an interesting dilemma in relation
to e-Government. Higher demands from the system in which public organizations operate require a
level of support that existing facilities fail to deliver. The present supporting infrastructure can be
characterized by isolation, fragmentation, non-responsiveness to change and an eminent lack of
crucial synthesizing support services. The knowledge intensive and decision making character of
public services and public policy calls for an enabling ICT that empowers users and can connect
structured and unstructured activities.
No wonder that the public sector has
huge difficulties in coping with the
third type of complexity, emerging
complexity. Emerging complexity is
characterized by disruptive change.
Governments face challenges to which
the solution is unknown. It can even
be that the problem itself is still
unfolding and not yet totally clear. The
greater the emerging complexity, the less government can rely on past experience. It has to deal with
situations as they evolve. This requires an adaptive approach and also calls for competences,
methods and instruments that are oriented towards continuous change. Traditional organizational
boundaries will not be sufficient to deal with the scale of the problem. More than thirty years ago
Thompson already wrote: “Uncertainty appears as the fundamental problem for complex
organizations, and coping with uncertainty, as the essence of the administrative process”xi
.
Dealing with multi-reality is one of the greatest challenges public organizations face. They have to
cope with new regulative requirements and the time versions that arise from new legislation. Old
cases have to dealt with according to the old procedure and new according to the new procedure.
Citizens have to be treated as an individual citizen or as owner of an enterprise, depending on the
case. Services have to be provided across multiple channels while users can switch between channels
in between their process. New channels evolve due to for instance the mobility of citizens, while old
‘paper based’ services remain intact. New product can be offered, while old are still in place. New
participants with specific knowledge and competences must be instantly integrated in an incident
management operation along existing participants to unlock the power of specialization.
Emerging complexity calls for leadership that can deal with uncertainty, that is forward and outward
looking. It must be able to respond to unforeseen situations. This type of leadership must be able to
adapt, to influence and to generate. It has to transform public sector organizations into agile entities

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that are able to respond swiftly and dynamically on new political and economic challenges. Public
sector managers want to be enabled to scale their response accordingly and ensure that investments
made, have a broad longer-term economic impact. This focus will become more significant in the
years ahead according to the OECD xii
.
2.3 Looking at the public sector from the blank canvas viewpoint: examples
From a purely objective point of view do many public sector processes only consist of a few steps. If
we take for instance the process of deciding upon permits, we can see that the process basically
consists out of four steps: Informing or orientation about the requirements and filing the request by
a citizen or business, followed by deciding upon the request and enforcing the decision by the
government organization. If preferred
the process can be drawn in more
detail by adding aspects like ‘advice’ at
the citizen side and ‘publication’ of the
decision at the government side. But
even then only a short list of steps
remains. Every step consists of a
limited set of activities, that can be
executed multiple times.
In the center of the process resides the
case file that connects the results of
the activities. After each step the
permit dossier will be in a specific
state, like ‘requested’, ‘approved’, ‘rejected’, ‘checked’ or ‘fined’. The rules that determine which
activities are allowed by whom, which deadlines apply and which regulations apply to the specific
permit request are managed separately and infused into the process at runtime. Exceptions do not
exist anymore; they are caught in the business rules. Data that are needed in the request and that
reside in government databases are also fused into the process, in order to prevent asking
information that government already knows.
A proven way of defining the context of the requester is the use of life events. These are common
events like birth, study, marriage, work, moving, being unemployed or death. In line with these life
events, also other events and appropriate scenarios can be defined that are specific for a certain type
of service. By identifying the actor and event we can reason about the rules that apply to the specific
combination. For instance, an au pair may be allowed to work in certain countries only if she is not
older than X-years or an enhanced risk profile will be applied for entrants from a specific country. The
following picture shows some examples of combinations that may illustrate how far reaching this
simple concept of ‘life events’ can be applied. They are all based upon the “I am, I want/need”
approach.
Interaction Transaction
Interpretation
Intervention
Case

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Figure 6 Using customer centric scenarios
One of the great benefits of this approach is that public services can be offered as self-service to
citizens and businesses. The users are addressed in a language that they understand. Their replies
and context is mapped upon the ‘government’ speak in a very transparent and manageable way. This
type of semantic interoperability is also vital for specialists of diverse practices that have to work
together in for instance an incident situation.
The dynamic case management approach can not only be applied to public services, but also to
political decision making. In the next image is as an example the process depicted of deciding upon a
proposal of the European Commission. It consists of four main steps and two types of support. One
for the political consultation
process and one for the
production process. The various
actors in the consultation process
have their own virtual case file
that they control themselves.
Only the approved products, like a
report to the parliament, are
transferred to the central case
file. This central case file is the
linking pin between all political
and production activities. The
same infuse and fuse approach is used to support the various actors and to interface with existing
data stores and production processes. Separate viewpoints can be generated to support for instance
e-Participation. Depending on the case it is possible to instantly involve other actors into the process.
In the background supports the dynamic case management service the logging of all data that are
required to prove compliance to the executed regulations.
I am a police officer
and want to book this
traffic offender
I am a citizen and want
a building permit for
this house
I am a judge and need
to assess the cost of
damage of this offence
I am a civil servant and
need to decide upon
this permit request
I am a enforcer and
want to check the
permit compliancy of
this company
I am a police offercer
and want to book this
traffic offender
I am a tax office and
need to levy tax for
this conglomerate
I am a policy maker
and want to consult
these bodies
I am a crisis manager
and need an
assessment of
cellulosetrinitrate
I am an au pair from
Thailand and want to
work in Belgium
I am a student from
Iceland and want to
study in France
I am a knowledge
worker from India and
want to work in
Germany
I am an unemployed
mother and need a
social benefit
I am an administrator
and want to calculate
this contribution
I am a notary and want
to know the specifics
of this cadastral object
I am a bar owner and
want to extend my
opening hours limit
I am an intermediary
and want to assist this
disabled person in his
claim
I am an inhabitant and
want to report damage
to the City playground
I am,
I want / need
Initiation EvaluationFormulation Implementation
Political GroupsCommission Council Committees Plenary
Political
Support
Activities
Other Participants and Stakeholders
Actors with
mulitiple roles
Hub
Production
Support
Activities
Translation Registration Modelling Codification Publishing

13
2.4 Empowerment by embracing complexity
By embracing complexity public sector organizations become capable of empowering their
stakeholders, leverage first class public services and closing the gap between policy and execution.
Existing value chains become even more valuable and new value chains can be created.
Interoperability problems between autonomous organizations are solved by introducing semantic
interoperability and dynamic case management support. Civil servants are released from doing
monotonous work by introducing straight forward processing in order to enable them to use their
expertise in solving more complicated cases and issues. Citizens and businesses can use self-service
and a single point of contact for public services. They have the possibility to monitor progress and
give feedback via their own personal dossier. Decisions are made faster and more consistent by using
the same rules for request, decision making and enforcement. Managers can monitor progress and
auditors and lawyers can trust upon the embedded compliance.
Figure 7 Value drivers for stakeholder empowerment
Many reforms in government in the last decades were based on increasing efficiency, effectiveness
and value for money without giving much attention to the policy process and the way it affects the
ability of policy makers to meet the needs of constituents in an increasingly complex, uncertain and
unpredictable world. Modernizing this core process by embracing complexity will yield considerable
economic and social benefits, including enhanced productivity, openness, transparency and
participation as well as actionable integrated and interoperable policy intelligence. Policy makers can
be empowered by semantic based support in legal drafting and by evidence based policy to meet
requirements for smart regulation. The concepts of Public Sector Information and Open data can be
extended to the use of open rules and concepts. Regulators can even start to offer public services
based upon their legislation. These services can then be re-used and embedded in the existing
services of other public sector organizations and private sector parties. Catalogues disclose the
contents and rules of basic registrations in order to increase the potential for use and re-use. Product
portfolios can be managed and adapted by the business owners themselves.
Citizen Centric Government
Single Point of Contact
Life events
Self service
Multi-channel, -law, -actor, -product
Semantic Interoperability
Decision making
Risk profiles
Request to cash (levy/benefit)
Request to appeal and enforcement
Public Sector Information
Embedded compliance
Personal dossier
Dynamic Case Management
Rule Governance
Impact Assessment
Scenarios
Predictive Analytics (simulation)
Inclusive policy making
Consultation
Transparency
Legislative design
Open rules and data
Vocabularies and definitions
Catalogues
Portfolio management
PublicEmbrace
Complexity
Policy to Execution
Public Services
DomainFocusValue drivers
Design &
Continuity
Mantra
Quality assurance
Organizational design
Transformation support
Architectural design
Lifecycle management
Network & process management

14
Managers are able to implement an expertise network that is tasked with design and continuity
responsibility. This network will keep distilling the essence of the operations and focusing on
supporting the essence in order to prevent the creation of new complicatedness. It will support the
transformation process of the organization and the overall management. It will support business and
ICT in working together to continuous improve the public service quality and manage the lifecycle of
services.
Managers can sleep comfortable at night because they have embedded and embodied complexity in
their organization.

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3. Finance sector
3.1 Introduction
Financial services can be defined as the products and services offered by institutions like banks of
various kinds for the facilitation of various financial transactions and other related activities in the
world of finance like loans, insurance, pensions, credit cards, investment opportunities and money
management.
For most of the products in financial services, transactions are essentially a set of promises being
exchanged between the buyer and the seller. From the buyer’s point of view much depends on what
exactly is being promised and the likelihood of such promises being delivered. The financial services
sector therefore essentially deals only with one product: TRUST. Trust is literally of vital importance
since customers have trusted their money to financial companies to be assured of sufficient means in
situations that determine the quality of life, like retiring on a pension, coping with a handicap,
relocating or basically being able to consume at the expected standard of living. Without trust, no
customers and without customers no business.
Transparency goes hand in hand with trust. Especially the economic crisis has catapulted
transparency to the highest level of customer and business interest. The complicated nature of many
products makes it hard for the industry to meet the anticipated level of transparency, let alone to
provide services that in a pro-active way inform customers about the impact of events and trends on
their portfolio.
Financial services are characterized by intangibility (impalpable and difficult for consumers to grasp
mentally), inseparability of production and consumption, perishability (need for short distribution
channels so that they can be produced on demand) and heterogeneity. Despite the heterogeneity,
services are also characterized by fiduciary responsibility and two-way communication. Fiduciary
responsibility refers to the implicit responsibility of financial services suppliers for the management
of their customers’ funds and the nature of the financial advice supplied to their customers. Two-way
communication refers to the fact that financial services, rather than being concerned with one-off
purchases, involve a series of regular two-way transactions between buyer and seller usually over an
extended period of time.
Financial services tend to be one-off purchases but ones which are required on a recurring basis with
the result that there is a clear need for financial services suppliers to establish initial relationships
with their prospects while at the same time maintaining and developing long-term relationships with
existing customers. Lifecycle management is a must for maintaining good relations and seize
opportunities for value upgrade.
Enterprise risk management is of vital importance to meet the trust and confidence levels of the
stakeholders. Enterprise risk management deals with risks and opportunities affecting value creation
or preservation. Goals are translated into controls which are implemented into the organization.
Audits are used to assure that the controls are executed conform standards. Strict operating
procedures, sophisticated risk profiles and up to date financial models, like actuarial models, are all
means used to manage risks. It follows that proven compliance to internal and external regulations
and procedures is also an essential element of the risk management process.

16
Portfolio management and asset pricing must also be up to date to seize opportunities and prevent
risks. Due to the heterogeneity of the sector, portfolios are very diverse but the types of stakeholders
that must be serviced is in fact limited. Clients are customers or their employers, other stakeholders
are for instance pension funds and similar organizations, shareholders, board members and
regulatory supervisors.
The impact of customers and regulators on the corporate performance is high. According to a
McKinsey Global Survey contribute customers for 74 percent to the economic value of companies
and governments and regulators for 53 percent. In may be expected that these percentages are
rather more than less in the financial services sector. Especially on the regulators side is the influence
increasing notably. The sector is confronted with a higher importance of using standards and being
accountable. Financial regulation is becoming stricter and regulators are more demanding. Also
reporting standards, accounting standards, record keeping standards, risk management standards
and the frameworks used for complying to the standards, are all having a direct impact on the
operations. Examples of such regulations and standards are: Basel II and III, Sarbanes-Oxley, GARP,
Dodd-Frank Wall Street Reform and Consumer Protection Act, EMIR, IFRS, GAAP and frameworks like
COSO and COBIT.
Business innovation proves to be a real challenge for many actors in the financial services sector. This
relates to the IT infrastructure as well to innovation of products and services. As a result, managers
are now challenged to innovate along multiple axes at the same time. The most visible axis is
innovation in customer centric services. Product out thinking has to be replaced by customer in
thinking. This results in offering 24/7 services. Self-service is becoming increasingly important in the
sector as a means to meet customer demands and reduce costs.
The sector has found out the hard way that this kind of services does not stop at the front office. An
integrated front- and back office process is required to deliver the by customers expected quality of
service. Service is not anymore a department but has to become an attitude. Moreover, by offering
online services, the competitor is only one mouse click away. New service providers offer prospects
the opportunity to compare products and to read reviews of these products. Products that were
presented in the past as being unique turn out to be comparable and assessable. Commoditization is
inevitable.
The self-service trend will not lead to the complete dissolving of the traditionally approach of
offering services via direct writing or intermediary brokers. Online services and face-to-face services
must both be supported by the same set of rules and appropriate instruments.
The financial services sector is also looking for new business models that can make a difference in the
competitive field. New models for emerging markets like micro banking is one of the examples of this
trend.
The financial services industry is very dependent on how it reacts to social complexity. Reputation,
expectation and perception must be totally in line to outperform competitors and meet the
customers’ demands. The sector is struck quite heavily by the economic crisis, since this crisis is in
essence a crisis of values. The societal reaction is twofold: at the one hand an ongoing sweeping
wave of regulations, and at the other hand cynicism and mistrust of customers, eroding customer

17
loyalty. Both have a severe impact that fundamentally affect the operations and profit generation
capacity of the financial services industry.
Financial services are based on customer trust and confidence, not only in the organization supplying
these services but also particularly in the customer contact employees themselves. Because of the
intangibility, inseparability and heterogeneity of services, there are fewer tangible cues to base
decisions on prior to purchase and therefore greater reliance is placed on experience qualities during
information and transaction, as well as after purchase and during consumption. This requires a
customer centric approach in which every customer is treated as being unique during his whole
lifecycle. The service suppliers must be able to handle an almost infinitely number of combinations,
which is not supported by the current practices and tools. This process of me, as it is coined by
Gartner, requires besides sophisticated information systems also attentive and knowledgeable
agents in the call centers as well in the direct customer facing contacts.
Transparency of what is being offered as well of what the financial impact for the supplying
intermediary is, requires an openness that was not common in the sector. In order to provide this
transparency revenue sharing models have to be adapted and therefore contracts with intermediary
brokers have to be renegotiated too. This can create commotion in an important part of the sales
channels.
Direct writers and intermediary brokers need more insight in the customer decision making process
in order to provide the service that matches the customers value system and behavior pattern.
Segmentation along value and behavioral lines is however in many cases not a standard element in
the existing customer segmentation approach.
Organizations must get the governance of their policies right. They have to make sure that the
appropriate policies are always applied correctly by their staff and automated processes. This relates
directly to the dynamic complexity the financial services industry faces. Financial products and
services are in general complex and increasingly subject to all sorts of regulations. This leads to the
situation where financial services companies are confronted with a variety of rules and regulations
from different sources. Complying with these rules proves to be a complex matter, even with the
simplest of activities. In addition, they are confronted with frequent changes in these rules and
regulations which are to be implemented in their processes, systems and their communication with
clients.
Keeping the focus on efficiency and effectiveness-oriented activities, together with activities that
make public service delivery more coherent, is difficult if the interdependency between the parts of
the system is unclear. This interdependency is one of the characteristics of dynamic complexity.
Insight and oversight of cause and effect relations within the own organization and within the
network in which one operates is hard to obtain, let alone to maintain. The same applies to
productivity, since increasingly complex legislation leads to more and more complex applications and
business processes to execute these laws. Productivity gains can be flushed away by new political
and legislative demands. Standardized processes are forced to accept exceptions which lead to the
creation of new processes and laborious exception handling.
The large volumes of customers and products require a level of mass customization that is hard to
meet. There is a need to increase the value upgrade potential for customers and move from Straight

18
Through Processing (STP) of mass processes to STP of mass customization processes. At the same
time there is a need to decrease the variation complexity. In traditional concepts this is done by
reducing the variability. In more contemporary concepts this is achieved by a component based
approach. The more sophisticated concepts even enable to achieve one to one processing of
individual cases by the same
mechanism as the mass
customization mechanism.
However, most IT-systems lack
the sophistication to deliver this
level of customer and processing
benefits.
The fourth quadrant in the
image is identified in a Harvard
Business review article as the
quadrant of nascent or broken
processes. These are processes
that are emerging or that are not or inadequate functioning. These have either to be removed or
embedded in one of the three quadrants.
Financial products and services are complex because they can consist of multiple components and
corresponding contract conditions that are brought together in a certain moment in time.
Components and conditions can change over time. Products can be combined, extended or split up.
Conditions can change due to economic or legislative requirements or to changes in the customers’
situation. Packages of products can be bundled and treated (and also traded) as a portfolio. The
complexity of the products makes it difficult to keep track of the interdependencies between
products, portfolios, rights and obligations. Mergers and acquisitions, as well as demergers, add
additional complexity in becoming and maintaining a clear overview of the portfolios and their value
and risks. This has of course also an impact on the efforts that are needed for risk management.
Traditionally, financial services companies have used a technology-driven approach to IT. Software is
purchased based on features, rather than the role the software could play in the bigger picture. Not
only does that lead to duplication of functionality (and license costs), IT departments also have to
spend too much time configuring this functionality, building interfaces to existing systems and
maintaining these increasingly complicated systems. This leads to more and more problems in
execution, rising IT-costs and failing projects. IT-complexity has become too high because rules are
buried in software code, hiding manageable policies behind vast amounts of software, processes,
manuals and other systems. This frustrates the insight, transparency and manageability of processes
and the ability to swiftly adapt to changes.
The extent to which organizations are able to cope with unanticipated events that change the arena
is crucial for their success in complex environments. Also the financial services industry has to deal
with emergent complexity. Emerging complexity is characterized by disruptive change. The sector
faces challenges to which the solution is unknown. It can even be that the problem itself is still
unfolding and not yet totally clear. The greater the emerging complexity, the less organizations can
rely on past experience. One has to deal with situations as they evolve. This requires an adaptive
approach and also calls for competences, methods and instruments that are oriented towards
Individual
processes
Nascent
or broken
processes
Masss
customization
Mass
processes
Low variability
Positive
Process environment
High variability
Negative
Valueofoutputvariationtocustomers
Straight Through Processing
Decrease variation complexity
Increasevalueupgradepotential
One to One Processing

19
continuous change. New business models, new entrants, new alliances and new channels are on the
verge and require a capacity to adapt and adopt and preferably also to generate for instance a new
playing field. Scenario planning can be one of the instruments to be prepared for various events and
outcomes.
Dealing with multi-reality is one of the greatest challenges financial services organizations face. They
have to cope with new regulative requirements and the time versions that arise from new legislation.
Old cases have to dealt with according to the old procedure and new according to the new
procedure. Services have to be provided across multiple channels while users can switch between
channels in between their process. New channels evolve due to for instance the mobility of
customers, while old ‘paper based’ services remain intact. New product can be offered, while old are
still in place. The sector must be able to assemble very quickly new product combinations, develop a
high standard in variants management and embed a kind of compliance in its operations that is
change resistant. Commoditization and individualization have to be supported at the same time.
Coping with multi-reality and combining ‘the old’ and ‘the new’ is a challenge of which the sector is
not yet very well prepared. The organizational transformation process will have a large impact.
In line with the approach for dealing with the variation in processes there is also a component based
approach required for accelerating product innovation. Ideally should the business itself be able to
assemble new products and offer them via one or more channels. Liability risks are then already
checked at the component level and need to be only checked at aggregation level.
It has to be said, however, that new business models, like micro banking or equivalent services for
insurance, are hard to introduce in an increasingly risk avoiding culture. Emerging complexity calls for
leadership that can deal with uncertainty, that is forward and outward looking. It must be able to
respond to unforeseen situations. This type of leadership must be able to adapt, to influence and to
generate.
3.3 Looking at the finance sector from the blank canvas viewpoint: examples
From a purely objective point of view do many financial sector processes only consist of a few steps.
If we take for instance the insurance process, we can see that the process basically consists out of
four steps: Informing or
orientation about the
requirements and options,
advising about which option fits
best in the specific context,
offering and contracting, followed
by servicing. If preferred the
process can be drawn in more
detail by adding aspects like
gathering information, assessing
or making quoting a separate
step. But even then only a short
list of steps remains. Every step
consists of a limited set of
activities, that can be executed multiple times. In the center of the process resides the case file that
Interpretation
Dedication
Case

20
connects the results of the activities. After each step the dossier will be in a specific state, like
‘requested’, ‘approved’, ‘rejected’, ‘checked’ or ‘claim closed’. The rules that determine which
activities are allowed by whom, which deadlines apply and which regulations apply to the specific
request are managed separately and infused into the process at runtime. Exceptions do not exist
anymore; they are caught in the business rules. Data that are needed in the request and that reside
in insurance databases are also fused into the process, in order to prevent asking information that
the insurance company already knows.
A proven way of defining the context of the requester is the use of life events. These are common
events like birth, study, marriage, work, moving, being unemployed etcetera. In line with these life
events, also other events and appropriate scenarios can be defined that are specific for a certain type
of service. By identifying the actor and event we can reason about the rules that apply to the specific
combination. This simple concept of ‘life events’ can be easily specified by using the “I am, I
want/need” approach. For instance, “I am a one-man company and want to insure my health risk” or
“I am an independent consultant and need a pension plan”. Life events can also be a trigger to re-
evaluate the customer’s portfolio and suggest appropriate conversion options. Risk profiles can be
applied, based upon the context of the requester. Similar to risk profiles, companies can also apply
behavior profiles to identified customers. The information provided and the way it is provided will in
this case depend on the behavioral type of customer, e.g. risk avoider, snap decision maker, detail
researcher or camp follower.
One of the great benefits of this approach is that financial services can be offered as self-service to
individuals and businesses. The users are addressed in a language that they understand. Their replies
and context is mapped upon the ‘finance’ speak in a very transparent and manageable way. This type
of semantic interoperability is also vital for specialists of diverse practices that have to work together
in for instance a claim handling or complex contract handling situation.
The productivity of processing cases can benefit from building a hybrid process in which cases are
handled via Straight Through Processing. Exceptions can be moved to a manual step if for instance
human interpretation is required. After the interpretation step the case is re-injected into the STP-
process.
Figure 8 Hybrid processing based upon STP
The interdependency between regulations and processes can be managed by using a regulatory
framework for the implementation and compliance of regulations and policies.

21
Figure 9 Knowledge base with integrated legal source browser
The framework contains the regulations and policies, the topics that have to be taken care of, the
requirements for these topics and the controls that are implemented in the specific processes to
meet these requirements. The basis of this framework is an authentic source in which the regulations
are execution-independent stored and maintained. From this source they are related to the
processes, actors, departments, products etcetera to which they apply. Changes in a rule can directly
be related to all instances in which this rule is applied.
The Regulatory Framework can also be used an instrument to identify and improve governance and
e.g. accounting policies, risk processes and data quality. The same applies also to risk profiles.
However, risk profiles can also be developed for e.g. market risks, credit risks or securitization
mitigation.
By embracing complexity financial sector organizations become capable of empowering their
stakeholders, leverage first class services and closing the gap between strategy and execution.
Organizations can bring their knowledge from the traditional back-office applications to the front-
office and to the internet (self-service). This delivers organizations huge cost savings (customers now
do what normally is done by expensive personnel), improved customer satisfaction (faster response,
better advice, more individual treatment), simpler registrations and therefore more flexibility.
The service consistency improves regardless of the service channel: all channels use the same rules
which are centrally managed. There is no uncontrolled proliferation of knowledge (product
definitions, operating rules, etc.). Context sensitive and event-driven advice and other services
deliver the “it’s about me” experience.

22
Stakeholders can be serviced in a tailor made way. For instance, participants of a pension scheme get
a clear view on their built up rights over their working life. They can understand the future
perspective at retirement and the gaps that need to be managed; and understand what decisions to
make to manage the acceptable target levels of future income. While employers get a clear view on
the current and future costs and obligations which enables them to deliver added value to their
employees and to be compliant with (changes in) rules and regulations. They can make better
decisions for the optimal premium structure and organizing pension schemes that will be effective
and attractive for the future retirements of their employees. And finally Pension Fund committees
get a clear view on the current and future obligations, working capital (liquidity) and get the ability to
manage proactively on asset and liability management, yield and portfolio investment strategy.
Operational excellence can be achieved by automating operational processes and decisions to a high
degree. The efficiency increases; less human effort is required to generate the same number or even
more decisions than before. This improves the potential for managing the organization and creates
opportunities for improving business operations. Applying goal driven and event driven approaches
to process management allows organizations to derive processes dynamically from the context of the
case. The rules decide how cases will be processed: may a case be processed automatically or must
the case pass the desk of an employee. Furthermore, the rules dynamically decide which tasks must
be executed to solve a case, thus avoiding unnecessary activities. Where possible decisions are taken
automatically (straight through processing). When necessary – due to subjective criteria, high risks,
missing information - human decision makers can manually handle the cases (case management
combined with decision support).
The high level of STP, in combination with decision support for knowledge intensive manual
operations ensures the correct application of rules, and prevents making mistakes, leading to
reduction of errors and less rework.
FinanceEmbrace
Complexity
Policy to Execution
Financial Services
Design &
Continuity
Customer Centric Services
Life events
Self service
Decision making
Risk profiles
Behavioral profiles
Order to cash
Lifecycle support
Embedded compliance
Personal dossier
Rule Governance
Impact Assessment
Scenarios
Consultation
Transparency
Policy design
Regulatory Framework
Catalogues
DomainFocusValue drivers Mantra
Quality assurance

23
Applying compliance and risk management rules and regulations directly in the operational process
enforces the right and consistent appliance of these rules, thus guaranteeing compliant execution.
Automatic recording of all activities and rule based decisions on all cases enables to trace “who has
done what, when and why” at all times. Compliance and traceability are embedded into the case
handling process.
This leads to less education & training efforts. Employees are context specific and timely informed
about changes in laws and regulations, customer agreements, regulations, etcetera. Staff can be
allocated at their own strength: experienced employees with much knowledge can concentrate on
handling exceptions, and focus on the execution of complex tasks which are difficult to automate.
And less experienced employees are able to deliver high quality, faultless output, due to the
embedded knowledge and decision support. This all resulting in improved employee satisfaction.
Routine operations are fully automated: the nature of the manual work changes considerably. As STP
increases, the manual activities that remain are more oriented to what people can do better than
computers: judge subjective situations.
Existing value chains become even more valuable and new value chains can be created.
interoperability and dynamic case management support.
The use of a Regulatory Framework and the introduction of rule governance leverages the re-use
potential of data and policies. Interdependency becomes visible and the impact of change scan be
analyzed before introducing the change into the service.
Policy scenarios can be drafted and simulated. Policy targets can be compared with the realized
outcomes and provide valuable feedback for continuous improvement. Portfolios can be analyzed
too and risks can be better mitigated. Transparency improves considerably for all stakeholders,
including regulators. For instance, banks can assess the future profitability of their existing
businesses based on the likely impact of the new regulatory requirements and the mitigation
potentials. In some instances, banks may want to explore opportunities to amend prices and reduce
costs to continue operating profitably. If that does not prove sufficient, banks may wish to consider
exit strategies, even if that implies a significant reduction of their total volume of activity.
By using the blank canvas approach to IT the huge cost saving potential of removing complicatedness
becomes clear. TCO-costs will implode. At the same time the business can act more agile because
they are empowered to define products and services and their conditions themselves. Changes in
products and services, regulations, work instructions are implemented fast and consistently. When a
change is modeled, it can be executed directly.
This will become increasingly important, since the greatest shift in the way we view innovation will
be that the innovation of business models will need to be as continuous a process as the innovation
of products has been over the last hundred years. It’s here that the greatest payback and value of
innovation has yet to be fully understood and exploited.
Managers are able to implement an expertise network that is tasked with design and continuity
responsibility. This network will keep distilling the essence of the operations and focusing on
supporting the essence in order to prevent the creation of new complicatedness. It will support the
transformation process of the organization and the overall management. It will support business and

24
ICT in working together to continuous improve the service quality and manage the lifecycle of
services.
their organization.

25
4. Health care sector
4.1 Introduction
Over the last 50 years there has been enormous economic and social progress in Europe and –
although there are large regional and social differences – Europeans are living longer than ever
before: on average eight to nine years more than in 1960. This coincides with other demographic
developments: fewer children are being born, which will mean fewer people paying into state
pension and healthcare systems, and a smaller pool of potential carers. The health care industry is
relying more and more on innovation and the use of IT to cope with the costs and increased
workload. Finally, prevention becomes an important part of the health care policy.
The health care industry is very heterogeneous. It covers both care and cure. There is a large and
diverse group of actors each with its own practices and interests. On a high level these groups can be
dividend as depicted in the beneath picture, based upon a report of the Dutch Court of Audit.
Figure 11 Actors in the health care industry
The Health care industry is challenged by three interlocking crises that make present health care
systems unsustainable:
1. Rising costs,
2. Changing demographics.
3. Quality of care.
All three crises have become drivers for change.
According to a survey of Frost and Sullivan in 2007 healthcare spending will double claiming 20-30%
of the GDP in 2050. Health care cost continue to upward spiral; it seems to be a recession resistant
industry. The premium growth continues to exceed increases in inflation and workers’ earnings. As a
consequence of the rising demand and increasing costs the resent insurance model for health care
costs becomes unsustainable.
Patient & Client
Organizations
Patient / Client
Policy holder
Sector & Professional
Organizations
Insurance
Companies
Government
/
Regulator
Health Care PurchaseHealth Care Provider Health Care Insurer
Supervision of:
- Quality of care
- Enforcement of the Care Institutions (Quality) Act
regulations
Extra regulations, directives, instructions (if required)
Providing responsible care
- Developing in consultation with Client Organizations
and Insurers
- Organizing responsible care by means of a operational
quality system
- Accountability via yearly quality statement
Based upon a report of the Dutch Court of Audit; 2009 © Schwandt Infographics

26
The changing demographics leads to the need for anytime, anyplace care. Care and cure have to be
provided outside the traditional residential boundaries. Telemedicine and tele monitoring become
new disciplines. Self-care becomes more important.
Figure 12 Continuous change in the health care economy
The quality of care can be improved by continuous innovation. New medicines, insights and practices
can bring relief to existing problems. On the other hand, however, is the quality at constant risk. The
error rate is too high, information systems are not
interoperable and a unified patient view is lacking. This
makes it very hard to fulfill the need for patient centricity.
Complexity and workload is crippling physicians and
hindering their ability to deliver high quality care. Clinicians
in healthcare face problems like patient overload,
bureaucratic red tape, loss of autonomy, loss of respect and
low reimbursement rates. This results in low morale and
burn outs that in combination with staffing problems affect
the quality.
The pressure of governments and regulators to control
quality and costs increases. Governments want to know
where every invested Euro or Dollar goes and what he
delivers. At the same time new quality regulations increase
the bureaucratic burden of the health care system. Medical and administrative liability leads to the
creation of huge information containers and flows across organizations that become unmanageable
and lead to more errors.
As a result of the focus on costs the power balance between the organizations in the health care
industry is shifting. Insurers are more and more dictating which medicines can be provided and
which treatments are insured. Reputation management becomes important, because ill performing
providers are getting excluded from new contracts. The applied policies and conditions are in
constant change.
Demographics
• Silver society
• Anytime, anyplace health
• Telemedicine/-monitoring
• Self-care
Quality of Care
• Reduction oferrors
• Increased risk identification
• Continuous innovation
• Patient centricity
Rising Costs
• Growth towards 20% of GDP
• Increase in demand & supply
• Industry resistance to inflation
• Unsustainable insurance model
Drivers of Change

27
One of the answers to the challenges is the increased use of technology. Technology impact will be
visible in diverse areas like medical technology, consumer electronics, communication technology
and of course information systems.
Important means in the use of information systems are:
1. The Electronic Medical Record (EMR)
2. Interoperable Health Care Information management systems
3. Decision support systems
4. Interoperable Health Care insurance systems
The use of technology is needed to improve the patient safety, improve the process e.g. (waiting
time), improve the quality of practices and the regulatory compliance. There are however also
barriers that hamper the use of IT like privacy concerns, conflicting interests and lacking
standardization.
Another answer to the challenged mentioned before is the shift from reaction to prevention. More
and more tend governments and health care professionals do
stress the importance of prevention. The present system
contains some perverse incentives: hospitals and physicians get
paid helping people once they are sick as opposed to keeping
people healthy. Also, hospitals compete against each other,
there is medical arms war. Specialization and economy of scale
in IT and medical technology are used to get a competitive
advantage.
It is to be expected that the focus will shift in the coming decennia towards more prediction and
prevention. The options to predict in very early stages the possible risk of getting for instance
diabetes are expected to improve dramatically. This will give an extra boost to prevention programs
and stressing the importance of lifestyle management. Self-responsibility of citizens will become an
important criterion.
The complexity that the healthcare industry faces will by no means diminish, on the contrary it will
expand.
The health care industry faces various forms of complexity as can be analyzed based upon the
preceding paragraphs. In the domain of social
complexity, we can situate the emergence of the e-
Patient. e-Patients are health consumers who use
the internet to gather, share and produce
information about a medical condition of particular
interest to them. e-Patients are increasingly active
in their care and are demonstrating the power of
the Participatory Medicine or Health 2.0 / Medicine
2.0 model of care. They are equipped, enabled,
empowered, engaged, equals, emancipated and
Reaction
Prediction
Prevention

28
experts. They use the internet as the primary source of information.
Results of a recent survey in Germany show that e-Patients put their trust far more in general health
care portals, portals with patients exchange possibilities and sites of official support groups. The
websites from hospitals, pharmacies, health care insurances and the pharma industry scored way
below these groups. The obvious lack of trust in the industry complicates the interaction between
health care providers and consumers. It leads to an increase of second and third opinions, medical
migration, reputation damage and claims. It is also a blocking stone for the industry to play a major
role in the trend to self-responsibility, prevention and self-care.
With respect to dynamic complexity one can state that the health care sector is among the most
active and evolving value chains. “Under construction” seems to be the only constant. Governments
are continuously looking to control and reduce cost, given the magnitude of government spending.
Through privatization, many governmental organizations in any country seek to reduce costs by
introducing market discipline, creating a value chain, spanning both public sector as well as
commercial enterprise. As a result of all these transformations, financial regulations and processes
have become mind-bogglingly complicated. Unfortunately, it means that governmental bodies as
well as both the “cure” and the “care” side of public and private healthcare spend valuable budget
on managing that budget, cost and other financial flows. All these complexities and complications
lead to more opacity instead of the desired transparency.
Besides the financial processes have also the medical processes become more complex. Medical
technology, drugs and practices are constantly changing. Evidence based medicine has become an
integrated part of the industry. The number of actors that is involved in the treatment of a patient is
often large and case dependent. The introduction of an electronic medical record advances only
slowly because of privacy concerns, established interests and halfhearted government and industry
support. Changing disease patterns, consumer behavior (e.g. refusal of vaccination), political
importance and care accessibility do add to the complexity.
The health industry has also to deal with emerging complexity. Emerging complexity is characterized
by disruptive change. The sector faces challenges to which the solution is unknown. It can even be
that the problem itself is still unfolding and not yet totally clear. The greater the emerging
complexity, the less organizations can rely on past experience. One has to deal with situations as
they evolve. This requires an adaptive approach and also calls for competences, methods and
instruments that are oriented towards continuous change. New business models, new entrants, new
alliances and new channels are on the verge and require a capacity to adapt and adopt and
preferably also to generate for instance a new playing field. Scenario planning can be one of the
instruments to be prepared for various events and outcomes.
An recent opinion on future trends in the health care economyxiii
lists the following trends:
• Open world: From markets defined by boundaries to markets defined by flows
o Expanding global patient populations, internationalized labor resources, and
globalization of biomedical innovation and production will create markets defined by
flows of knowledge, human & capital resources rather than regional, national, or
geographic boundaries.
• Ecologies of risk: From institutional to individual risk management

29
o As institutions are no longer willing or able to offer risk protection, individuals will
have to manage the full range of health-related risks made more challenging given
the relationships between these risks.
• Do-it-yourself anytime: From passive patients to co-creators of health
o Whether by choice or by force, individuals will have increasing responsibility for
managing their health. They will respond to this burden of empowerment with three
do-it-yourself behaviors: self-agency, self-customization, and self-organization.
• Anyplace health: From traditional clinical settings to new points of care
o Cost-pressures, the changing role of hospitals, non-institutionalized care for seniors,
and new communication & diagnostic technologies will expand care setting into the
community, the home, and into niches of time and place in the course of daily life.
• Health-aware environments: From computing to sense-making
o As objects, places, and even humans are embedded with technologies that sense,
understand, and act upon their environment, we will gain the ability to track and
monitor our physical, social, and emotional well-being, creating new options for
personal health management.
• Better then well: From therapy and treatment to enhancement and extensions
o Self-improvement approaches extremes as people experiment with digital,
pharmacological, biomechanical, and medical tools to alter, enhance, and extend
their bodies in profoundly different ways, in turn reinventing their bodies, minds &
identities.
The field of play of health care is therefore changing as depicted in the following image.
Figure 13 Field of play health care industry
There will be a growing use of medical devices, the nature of prescriptions will change, health
benefits will be sought too in food, the make-over culture will expand and the information ecology
will be dominated stronger by collective intelligence.
Biopharma
Health Care Providers
Sector & Professional
Organizations
Patient & Client Organizations
Health Care Insurers
etcetera
Health Care Industry
Government / Regulators
Medical
Technology
Beauty
Nutrition
Consumer
Electronics
Information

30
All these trends offer opportunities and threats to which the industry has to respond. The biggest
challenge however is to become resilient to change and open to innovation.
4.3 Looking at the health care sector from the blank canvas viewpoint: examples
From a purely objective point of view do many health care sector processes only consist of a few
steps. If we take for instance the patient treatment process, we can see that the process basically
consists out of four steps:
Checking of health followed by
medical diagnosis (somatic and
non-somatic) by a specialist
which leads to medical
treatment, residential or non-
residential. The process ends
with medical discharge. If
preferred the process can be
drawn in more detail by adding
aspects like information
gathering, referral and
consultation. But even then only
a short list of steps remains.
Every step consists of a limited set of activities, that can be executed multiple times. In the center of
the process resides the patients case file that connects the results of the activities. This is a virtual
Electronic Medical Record. After each step the dossier will be in a specific state, like diagnosed,
referred, hospitalized or released. The rules that determine which activities are allowed by whom,
which deadlines apply and which procedures apply to a specific situation are managed separately
and infused into the process at runtime. Exceptions do not exist anymore; they are caught in the
business rules. Data that are needed in the case and that reside in various databases are also fused
into the process, in order to prevent asking information that is already known. Also correspondence,
medication, results of tests and other registrations can be linked to the case file.
The productivity of processing the financial aspects of health care cases can benefit from building a
hybrid process in which cases are handled via Straight Through Processing. Exceptions can be moved
to a manual step if for instance human interpretation is required. After the interpretation step the
case is re-injected into the STP-process.
Figure 14 Hybrid processing based upon STP
Interpretation
Reporting (decursus)
Case

31
Interoperability between registrations of the health care sector and public registrations is needed to
process a case in which for instance the cost are covered by multiple parties (insurance, welfare
benefits and personal contribution based upon income tax).
The interdependency between regulations, procedures and processes can be managed by using a
regulatory framework for the implementation and compliance of regulations and policies. Beneath is
an example of such a framework in the financial sector. The used principles apply also to the health
care sector.
Figure 15 Knowledge base with integrated legal source browser
The framework contains the regulations and policies, the topics that have to be taken care of, the
requirements for these topics and the controls that are implemented in the specific processes to
meet these requirements. The basis of this framework is an authentic source in which the regulations
are execution-independent stored and maintained. From this source they are related to the
processes, actors, departments, products etcetera to which they apply. Changes in a rule can directly
be related to all instances in which this rule is applied.
The Regulatory Framework can also be used an instrument to identify and improve governance and
e.g. operating procedures, risk processes and data quality.
By embracing complexity health care sector organizations become capable of empowering their
stakeholders, leverage first class services and closing the gap between strategy and execution.
The Electronic Medical Record applied as a virtual case file enables organizations to become more
patient centric. Decisions are made faster and more consistent by using the same information and
rules. Managers can monitor progress and auditors and lawyers can trust upon the embedded
compliance. Services can be organized around patients and their stakeholders.

32
Health information can be supplied in a more tailor made way, e.g. by using the concept of life
events. The health care sector can work together with interest groups to improve and assure the
quality of information. Patients can participate in the process. This could stop the trend of demisting
trust in the sector.
Health care quality can be improved without affecting privacy protection of individuals. Transparency
increases by embedding compliance and traceability into the case handling process.
interoperability and dynamic case management support. Existing value chains become even more
valuable and new value chains can be created. Value chains can be provided with their own case file,
which allows them to work together on a case without the need to share every piece of information.
Only the results of a test or e.g. an internal consultation round can be shared. A Physician Workplace
can be used to collaborate on cases, exchange opinions and practices.
Employees are released from doing monotonous administrative work by introducing straight forward
processing in order to enable them to use their expertise in solving more complicated cases and
issues. Patients and financial parties get up-to-data and coherent information. Contact centers can
offer self-service by providing the same source of financial information as they use themselves.
The use of a Regulatory Framework and the introduction of rule governance leverages the re-use
potential of data and policies. Interdependency becomes visible and the impact of change scan be
analyzed before introducing the change into the service. Policy scenarios can be drafted and
simulated. Policy targets can be compared with the realized outcomes and provide valuable feedback
for continuous improvement.
Employees are context specific and timely informed about changes in laws and regulations and new
operating procedures. This leads to less education & training efforts. Staff can be allocated at their
HealthEmbrace
Complexity
Policy to Execution
Health Services
Design &
Continuity
Patient Centric Services
Life events
Self service
Decision making
Risk profiles
Straight Through Processing
Order to cash (including levy/benefit)
Embedded compliance
Personal dossier
Rule Governance
Impact Assessment
Scenarios
Consultation
Transparency
Policy design
Regulatory Framework
Catalogues
DomainFocusValue drivers Mantra
Quality assurance

33
own strength: experienced employees with much knowledge can concentrate on handling
exceptions, and focus on the execution of complex tasks.
The information management environment becomes sustainable, efficient and effective. By using the
blank canvas approach to IT the huge cost saving potential of removing complicatedness becomes
clear. TCO-costs will implode. Changes in products and services, regulations, work instructions are
implemented fast and consistently. When a change is modeled, it can be executed directly. New care
models and new business models can be supported without creating a parallel universe for the new
approach.
their organization.

34
Appendix
ii
John Seely Brown, Scott Durchslag and John Hagel III. Loosening up; how process networks unlock the power of
specialization. THE McKinsey Quaterly. 2002 Special edition on Risk and Resilience
iii
2010 data: http://www.mckinsey.com/mgi/publications/us_jobs/pdfs/MGI_us_jobs_full_report.pdf
2005 data: http://mckinseyhightech.com/ftp/Podcasting/HT_Labor_Interactions.mp3
Transformation – transaction (routinized / rule based / automated / scriptable) – tacit (complex problem
solving)
iv M Connolly. The interaction economy. 2006.
v Otto Scharmer. Theory U; Leading from the Future as it Emerges. 2009.
vi H. Schein. Organizational Culture and Leadership. 1985.
vii Deciding for excellence. Gartner newsletter. 2010.
viii Anna Kelly and Morton Meyerhoff Nielsen. Scandinavia 2.0: Efficiency, cooperation and innovations to alleviate the
Economic Crisis. European Journal of ePractice www.epracticejournal.eu. Nº 11 · March 2011 · ISSN: 1988-625X
ix Barabara-Chiara Ubaldi. The impact of the Economic and Financial crisis on e-Government in OECD Member Countries.
European Journal of ePractice · www.epracticejournal.eu Nº 11 · March 2011 · ISSN: 1988-625X.
x Focus on Citizens; public engagement for better policy and services. OECD studies on public engagement. OECD. 2009.
xi Thompson, J. Organizations in action: social science bases of administration theory. New York, 1976.
xiiThe Financial and Economic Crisis – Impact on E-Government in OECD Countries, November 2009, OECD, Paris, France.
xiii A. Fleshler, Future trends of healthcare. Study done by the Institute for the Future. 2009.
See: http://www.slideshare.net/annafleshler/future-trends-of-healthcare

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