April 29, 2012Doug Hadden
Doug Hadden, VP Products
New technology is adopted asymmetrically. Some organizations adopt quickly, others lag. Geoffrey Moore has written the book (books) about the technology adoption curve, starting with the classic, Crossing the Chasm. Open government is crossing this chasm. The Open Government Partnership momentum validates the ‘vertical’ adoption characteristic of the ‘early majority’ stage.
What differs between the ‘early adopters’ and ‘early majority’? The ‘early majority’ needs proven business cases -intuition is not enough. This was the brainstorm subject I moderated on Saturday at Transparency Camp 2012: identify business case elements. This picks up from a blog post from earlier this month. Notes were taken by @JeanneHolm from NASA/JPL located at http://transparencycamp.org/sessions/161/
The business case problem
Business cases rely on well-known metrics like Return on Investment (ROI) and Economic Value Add (EVA). Measures are usually well understood – for the previous technology. Much of the positive impact of new technology cannot be calculated using the old measurements. And, we often forget the business case for existing technology because it has such widespread use that benefits are obvious. For example, It seems like nonsense to ask managers to justify the acquisition of telephones or fax machines today.
The ROI problem
Technology vendors produce ROI studies. Are these studies objective? Probably not. Some irony here: FreeBalance is a technology vendor with open government products. More on the business case problem in government at the end of the post.
Brainstormed Business Case Ideas
Return: The primary return factor identified were:
- Revenue, primarily in the form of increased tax collection through increased economic activity
- Efficiency, effectiveness and productivity through reduced cost per unit of work including cost avoidance
- Outcome improvements such as achieving higher levels of service delivery or improved health statistics
The use of, what Tim O’Reilly calls ‘government as platform‘, extends the notion of governments encouraging economic activity through infrastructure development to the digital word. The classic example is the economic activity generated through GPS. This seems to be the primary revenue use case for open government. I think that there could be a use case for increased sales of government products through open government. Perhaps even increased revenue for sales of government assets that are being disposed.
There are some special circumstances for developing nations. Improved transparency leads to improved governance scores (eg…) which leads to increased business confidence (increased investment leads to more tax collection), citizen confidence (higher tax compliance), donor confidence (more and better aid) and ex-pat confidence (reverse brain drain & increase remittances.)
- Lower procurement costs through increased completion and civil society oversight (example: open e-procurement systems)
- Lower transaction costs through open gov process integration with other tiers of government and grants to NGOs, business etc. (example: aid transparency through IATI)
- Lower health care costs through preventative advice
- Lower costs to manage Freedom of Information requests through proactive disclosure, as pointed out by David Eaves
- Reduced corruption because information is open and under scrutiny
- Improved productivity because public servants will be aware that information is transparent – this can also lead to merit-based systems that improve government effectiveness
- All the cost elements above can lead to improved outcomes. Other outcomes include:
- Improved citizen service delivery
- Improved outcomes in sectors like education, health, industrial development (premise: If people knew what pesticides were being released, behaviour in food purchasing or food cleaning may change)
- More effective disaster response (example: Ushahidi in Haiti earthquake response)
ROI in the physical world is a diminishing returns calculation. Each new market for toothpaste increases costs. The virtual world is one of increasing returns. Each new chunk of open data adds value to previous chunks of open data. And the costs to collect and maintain open data goes down because the infrastructure scales. (That’s why Amazon can provide such value for the Elastic Cloud.) This is called the network effect.
Special Problems in Government Business Case development
- Government organizes who sell data to the private sector lose this revenue source if the data is free. The resulting economic development may increase taxes, but the organization does not benefit directly.
- Cost avoidance and cost improvements are difficult to justify in the public sector if the outlay for technology is high. That’s because the initial investment increases the budget.
- Many benefits are specific to types of government, so it is unlikely that business cases vary by context.
- Risk avoidance among many public sector organizations may attribute lower benefits and higher costs to open gov projects than they should.
- Benefits may only accrue if civil society, businesses and citizens are trained.
There seemed general agreement that small wins are required to generate momentum and to help justify future business cases. There also seemed to be agreement that the ROI benefits may take a long time to accrue but that these benefits will be long standing.