HOW TO SUPERCHARGE

YOUR NATIONAL DIGITAL

TRANSFORMATION
By Rami Riad Mourtada, Stephanie Habib, Frank Felden, Alexander Türpitz,
and Miguel Carrasco

D igitization at the national level is

a high-stakes endeavor that countries
cannot afford to get wrong. BCG estimates
Too Much or Too Little Centralization of
Power. Governments vary widely in their
approach to digital transformations. Some
that e-government programs have the take a command-and-control approach, in
potential to deliver efficiency benefits of which power and funding flow through a
up to $50 billion a year globally by 2020, single entity. Others take a decentralized
but 70% to 80% of public-sector digital approach, delegating decisions and digital
transformations either fail outright or capabilities to the local government or to
achieve disappointingly limited success. individual public entities. Too much central-
(See “How Governments Can Get Tech­ ization can result in unduly rigid imple-
nology Transformations Right,” BCG mentation, while full decentralization can
article, June 2016.) lead to inconsistent standards, lack of
coordination, and unpredictable outcomes.
Though large-scale digital transformations
at the national level have many moving In successful digital transformations, gov-
parts—and rely on different approaches— ernment leaders adopt a nimble approach,
they tend to falter in predictable ways. To inspiring from the top, governing through
accelerate national digital transformations, the center, and engaging on the ground.
government leaders must avoid the mis- Leaders begin by defining a unified vision
steps that have hampered past efforts. for the transformation and establishing a
set of broad goals and specific outcomes to
drive continuous alignment with broader
Five Ways Digital national priorities. Then they engage with
Transformations Fall Short digital stakeholders in the public and pri-
Though many things can derail national vate sectors to detail the steps involved in
digital transformations, five serious prob- executing the transformation on the
lems are both common and avoidable. ground, and they explore and test innova-
 tive concepts with topic and industry ex- To what extent can digitization of the
perts. At a minimum, a government needs industry unlock social and economic
to select a centralized unit to coordinate its productivity for maximum impact? Will
transformation efforts. In some countries, digitization address urgent gaps? Is there
such as Sweden, a single entity within the potential for a multiplier effect in other
government leads the transformation. industries? One method of organizing these
­Other countries go a step further, setting questions and answers involves adopting a
up a standalone organization with a man- decision tree approach. (See Exhibit 1.)
date to coordinate, enable, and partially
exe­cute the transformation; Denmark’s In 2016, when Germany launched its 2025
Agency for Digitization and the UK’s Gov- Digital Strategy, the nation’s leaders fo-
ernment Digital Service are examples of cused on building a world-class infrastruc-
standalone organizations responsible for ture as a core national enabler. They pro-
driving digital transformation. vided a gigabit fiber network, supported by
strong data security and smart networking,
Disruption of Everything at Once. When and they made manufacturing the priority
designing a digital transformation, leaders sector for modernization. To support inno-
may be tempted to overhaul all economic vation and use of its high-performance dig-
sectors at once, but trying to do too much ital infrastructure, the strategy also called
at the outset can undermine the process. A for the government to help startups and
winning strategy will focus on sectors that small and medium-size enterprises to par-
have the greatest potential to unlock value. ticipate in Industry 4.0 initiatives by pro-
The appropriate first step is to identify viding support in key areas, such as hiring
no-­regret digital enablers—such as core digital talent, obtaining financing, and nav-
digital infrastructure, cybersecurity, digital igating taxes. By building a robust digital
identity, and payments—that can scale up infrastructure and removing obstacles to
across multiple sectors. The next step is to innovation, the government has enabled
identify and select a small number of entrepreneurs to maximize the possibilities
industries that will deliver the greatest of the digital economy. Today, more than
economic and societal benefits from 200 digital applications and test beds in
digitization. To identify the most promising manufacturing are live, according to Ger-
industries, leaders should ask several many’s Industry 4.0 platform. Germany is
questions: Is the industry integral to also the first country to have published a
national strategic priorities and objectives? standard architecture for Industry 4.0, pro-

Exhibit 1 | A Decision Tree Can Help Identify High-Potential Sectors for Digital Disruption

Strategic fit No
1 Top national priority that the current
ecosystem does not fully address?

Yes Global outlook No

2 Aligned with megatrends and
global market dynamics?

Yes Socioeconomic contribution No

3 Large, quantifiable impact on the SECONDARY
economy and its citizens? FOCUS

Yes Likelihood of success No

4 High potential to achieve early
success, with no major barriers?

Yes Multiplier effect No

5 Potential to enable and disrupt other PRIMARY
sectors, creating further impact? Yes FOCUS

Source: : BCG analysis.

The Boston Consulting Group | How to Supercharge Your National Digital Transformation 2
 viding businesses with a uniform frame- or schedule a doctor’s appointment with a
work and supporting the interoperability single click, the bar for digital transactions
of applications. is very high. Digital natives—young people
who grew up with digital everywhere—­
Excessive Caution in Pursuing Digital-First expect government services to be seamless,
Initiatives. Citizens go online—and stay intuitive, always available, and optimized
there—only if they can manage all of their for mobile. To meet these expectations,
transactions from beginning to end, without government agencies are creating new
printing out documents or visiting a service smart channels and services to communi-
center, and if they see a concrete benefit or cate directly with digital natives. For
incentive for doing so. In priori­tizing digital-­ example, the Australian Tax Office (ATO)
first initiatives, governments should target developed a 24/7 intelligent virtual assis-
nondigital services that are most expensive tant called “Alex” to answer general
for the government to provide but also are questions about taxes. Alex understands
in highest demand from citizens. conversational English and continues to
improve with every interaction, reducing
According to BCG’s Digital Government the high volume of call center inquiries
Services Survey, the three most widely used and enabling consumers to serve them-
digital services across 21 governments are selves. In the first 18 months after its
real-time transportation information, tax release, Alex engaged in 2 million conver-
returns, and job searches. (See “Digital sations and had a first-contact resolution
Government Services by the Numbers,” rate of 81%. The ATO has begun to use
BCG article, April 2017.) To create a seam- Alex in other government agencies as well,
less experience for users, agencies should making it easier for citizens to resolve
overhaul the digital journey of high-priority issues on the spot.
services from end to end and should strive
to eliminate all mandatory paper forms, To understand digital natives’ expectations
phone calls, and nondigital interactions. and to deliver high-quality digital experi-
Once the online process has become fool- ences, governments need to take a different
proof and user-friendly, governments approach to hiring than they did in the
should offer citizens tangible incentives to past: they must actively recruit and develop
use it. These may be both positive (tax digital talent. This means up-skilling exist­
breaks and rewards for using digital ser- ing staff and building an organizational
vices) and negative (higher prices or longer culture that attracts innovative and entre-
processing times for nondigital services), preneurial thinkers. Governments should
leading to the ultimate goal of phasing out also assess the digital readiness of the over-
nondigital services altogether. all population and use targeted programs
to improve the nation’s digital savvy across
As part of an aggressive push toward a the board.
cashless economy, the government in India
has demonetized high-value currency notes Fixation on a Master Plan. It is common in
and has used a combination of discounts, developing large-scale projects to construct
free add-on services, and tax breaks to in- a multiyear master plan, punctuated with
centivize digital payments for government hard deadlines. However, leaders should
services. For example, citizens receive a avoid making these plans too rigid, de-
10% discount and free accident insurance tailed, and precise with regard to formulat-
when they purchase railway tickets online. ing specific solutions. Technology and users’
In one year, the Reserve Bank of India says, needs are changing fast. Digital initiatives
the government increased digital payments must be nimble, flexible, and quick to pivot
by 33% in volume and by 59% in value. if the strategy fails to deliver real-­world
impact. A digital transformation should aim
Failure to Keep Pace in Fostering a Digital to achieve sustainable results by following
Culture. In an era in which consumers the LEAD approach. (See Exhibit 2.) This
expect to make purchases, transfer money, approach consists of four steps:

The Boston Consulting Group | How to Supercharge Your National Digital Transformation 3
 Exhibit 2 | A Four-Step (LEAD) Approach Enables Nations to Digitally Excel
DIGITALLY EXCEL
ACCELERATE ADOPTION
EXECUTE WITH AGILITY
LAY THE FOUNDATION
Innovate digitally
• Invest in and promote innovation
Increasing impact of digitization

• Pilot and build skills in emerging tech

Disrupt high-priority sectors
• Partner with private sector to roll out digital platforms in key sectors
• Share government data to stimulate innovation
Digitize the government
• Roll out an e-government digitization program, introducing incentives for adoption
• Create Centers of Excellence to promote government innovation
Nurture digital culture and talent
• Roll out digital literacy programs nationally
• Align the education system with the digital economy’s needs
Build infrastructure and national assets
• Optimize Internet accessibility and affordability
• Roll out national digital assets (such as digital identity and digital policies)

Progressing timeline of digital transformation

Source: BCG analysis.

•• Lay the foundation by building a strong ing or hiring a chief customer officer (CCO)
digital infrastructure and identifying to analyze how businesses and citizens
initiatives that will deliver quick wins. interact with the government, to seek inno­
vative ways to radically improve citizens’
•• Execute with agility by launching digital experience, and to ensure transpar-
high-priority pilots and iterating rapidly. ency and consistency in broad government
initiatives. In the US, five federal agencies—
•• Accelerate adoption by giving users the Bureau of the Census, the Department
incentives to go online and stay online. of Veterans Affairs, the Export-Import
Bank, Federal Student Aid, and the General
•• Digitally excel by optimizing end-to-end Services Administration—have already
services and involving the public sector appointed CCOs. Many other US agencies
where appropriate. are looking to follow suit.

In addition to bringing in a CCO, govern-

Three Key Foundational ments can respond to disruptive opportuni-
­Elements for Avoiding Pitfalls ties by partnering with the private sector,
Digital transformations require new ways particularly in areas where the govern-
of working, not just new digital solutions. ment’s internal capabilities or know-how
To sustain the transformation, governments are lacking or where partnerships can sup-
must shape a more innovative, entrepre- port rapid economic development. Public-­
neurial culture—and this requires estab- private partnerships enable governments
lishing a solid foundation in three areas. to access world-class resources so they can
scale up initiatives quickly. These partner-
Run the transformation like a business. A ships can be tricky to navigate, so govern-
digital transformation is not just a matter ments must proactively identify obstacles
of putting forms online or launching new that discourage companies in the private
apps. It also entails addressing unmet needs sector from partnering, such as intellectual
in the marketplace and pursuing business property rights and market openness, and
opportunities to fill those needs. To better must devise innovative, win-win solutions.
understand citizens’ wants and needs, Governments should especially seek out
more and more governments are appoint- partnerships with small and medium-size

The Boston Consulting Group | How to Supercharge Your National Digital Transformation 4
 enterprises—a growth engine for most growth, or employment to benefit Den-
economies. (See the sidebar, “South Korea mark and Danish society. If a project fails
Leverages Its Private Sector to Develop to fulfill these objectives, IFD ceases to sup-
Seoul as a Digital City for Citizens.”) port it. In 2018, IFD will invest approxi-
mately €190 million in promising projects.
Don’t just ask for funding—raise it. Instead
of requesting additional budget allocations Position a digital unit at the center. A
to fund the digital transformation, govern- centralized unit dedicated exclusively to
ments should think creatively about how to the national digital transformation can
self-fund the journey, from their current play a critical role in setting a clear digital
operating budget or from cost savings that agenda, filling skill and resource gaps over
result from digitization. In some cases, the short term, and ensuring that funda-
governments may be able to use dedicated mental enablers are in place to make the
innovation funds, but only to support highly transformation happen. This unit should
creative or experimental concepts that have the freedom and autonomy to work
would otherwise go unfunded—and they independently and make decisions unhin-
should award these competitively to teams dered by lengthy and complex government
that propose high-quality concepts that processes. It can drive critical areas of the
align closely with strategic objectives. transformation, such as incubating new dig-
ital opportunities, developing policies to
In 2014, Denmark created Innovation Fund accelerate digitization, removing obstacles
Denmark (IFD) to invest in new initiatives to swift progress, and guiding adoption of
that have the potential to generate growth emerging technologies. The unit can also
and employment in Denmark. This com- pursue digital white spaces—untapped
petitive fund focuses on highly strategic, op­p ortunities, such as the gig economy, that
innovative, and early-stage projects. Al- don’t fall into the domain of any govern-
though IFD does not require that funded ment entity. And the centralized unit can
projects give it a stake in the project or that experiment with partnership models to
they repay the funding it provides, IFD fol- outsource short-term needs, such as system
lows the project closely from start to finish design, architecture, and implementation,
to ensure that it is creating knowledge, while simultaneously ramping up internal

SOUTH KOREA LEVERAGES ITS PRIVATE SECTOR TO

DEVELOP SEOUL AS A DIGITAL CITY FOR CITIZENS
As part of its Seoul Digital 2020 initia- Adopting a public-private partnership
tive, the South Korean government (PPP) model, Seoul provided the core
invested in Smart City technologies and infrastructure, including free Wi-Fi,
launched Internet of Things (IoT) test sensors, closed-circuit TV, and applica-
beds. The initiative started in 2015 in tion programming interfaces. Using this
Bukchon village, a popular destination infrastructure, the private sector devel-
that attracts more than a million visitors oped and commercialized services; and
yearly. These visitors create major the government decided, on the basis of
inconveniences related to littering, residents’ feedback, which services to
parking, and noise pollution that local continue and which to discontinue.
residents have to deal with. The govern-
ment invited 30 startups and global The PPP led to a 64% increase in IoT
companies to pilot IoT initiatives to companies in South Korea between 2015
address these local problems, offering and 2016, a 43% reduction in waste
the companies the infrastructure, collection costs in Bukchon, and the
administrative, and financial support creation of 17 smart services in 100 areas.
needed to address residents’ needs.

The Boston Consulting Group | How to Supercharge Your National Digital Transformation 5
 capabilities in core areas, such as portfolio neously improves citizen’s lives and fuels
management and customer journey economic growth. This calls for investing in
development. Initially, the unit should have initiatives that have a multiplier effect
a broad mandate, but the mandate should across industries and maintaining a flexi-
scale back as the digital ecosystem matures ble, forward-­thinking ­approach to digitiza-
and becomes more self-sufficient. tion. The digital landscape is constantly
changing—and while digital leaders contin-
ue to innovate, digital laggards fall farther

I n today’s digital society, governments

cannot afford to drag their heels when
pursuing a national digital transformation.
behind. Governments must act quickly to
stay ahead of the curve.

A digitally savvy government simulta­

About the Authors

Rami Riad Mourtada is an associate director in the Dubai office of The Boston Consulting Group and a
member of the Technology Advantage practice. You may contact him by email at [email protected].

Stephanie Habib is a project leader in the firm’s Dubai office. You may contact her by email at
[email protected].

Frank Felden is a senior partner and managing director in BCG’s Cologne office. You may contact him by
email at [email protected].

Alexander Türpitz is a partner and managing director in the firm’s Dubai office. You may contact him by
email at [email protected].

Miguel Carrasco is a senior partner and managing director in BCG’s Canberra office. You may contact
him by email at [email protected].

The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advi-
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The Boston Consulting Group | How to Supercharge Your National Digital Transformation 6