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