Bytes and budgets: How the UK public sector is driving ROI through digital transformation

Many members of the public, whose interactions with government are infrequent and straightforward, may not have noticed, but the task of digitising government services has been occupying officials across Whitehall for a number of years now.  

The Covid-19 pandemic provided a very real stress test for this work.  It is widely acknowledged that the ability of our welfare system to scale in response to lockdown or of the Treasury to launch the furlough scheme were to a great extent, only possible because the underlying functions are now built using modern, cloud-based technology.  Similar examples helped the NHS to respond promptly to these challenges. Most of the government’s public-facing services are now largely digital-first and have been a great success.  With the promise that AI offers to further enhance civil service productivity now very much a reality, now is the time for the second revolution, focusing on the back office side of the public sector. 

According to our most recent report, Closing the Acceleration Gap: Toward Sustainable Digital Transformation, more than half (55%) of business leaders say the pace of digital transformation has slowed from where it was a year ago, or they expect it to slow down in the future. The public sector is no different. 

Addressing these challenges efficiently is paramount in ensuring the public sector fully reaps the rewards of a well-executed transformation in the back office, as well as its citizen services. While digital access has significantly improved the front end of government services, there is still a backlog for things like operations, passports, and other services which have come off the back of the pandemic. 

To solve these issues, and provide value, public sector organisations must once again embrace digital transformation to get better at managing their resources - this time of the systems that government uses to manage its money and its people.

Challenges and Effective Solutions 

Public sector organisations, like Innovate UK, the UK’s national innovation agency, often face top-down pressure to demonstrate the value they deliver in return for taxpayer’s money. As a data-rich organisation, they require systems to allow them to analyst and report in order to make more effective decisions. One significant challenge has historically been trusting the accuracy of information, especially when it comes to financial records and HR systems, which are often poorly integrated.

One way to overcome this challenge is the adoption of contemporary, cloud-based ERP (Enterprise Resource Planning) systems, which provides a single source of truth for financial records and HR.  By employing Workday, Innovate UK increased trust in its data, improved compliance with payroll regulations, and enhanced transparency.  In a similar way to their counterparts in commercial organisations, cost centre managers are now granted visibility into up-to-date spending, can perform reporting more easily, and access trustworthy, real-time data. This not only leads to more efficient operations but also positively impacts the economy by ensuring funds are allocated and utilised optimally.

Driving Change

For the public sector, change is driven by the necessity for transparency, efficiency, and compliance with regulations. Financial planning and HR systems – as part of wider digital transformation efforts – can help here too. For example, data can help organisations become more compliant with payroll regulations, reducing errors and providing instant access to payslips for employees. 

However, instilling change within an organisation is not without its obstacles, including resistance from those wary of new technology. According to our survey, only 1 in 5 government leaders say they’ve made progress deploying technologies to streamline or automate workflows and augment the capacity of the existing workforce, compared to 1 in 3 of all leaders.

Innovate UK tackled this by employing a digital delivery and change team that worked in conjunction with IT, finance, and HR teams. 

They utilised multidisciplinary delivery teams to think broadly about requirements, and innovatively rolled out new features for teams to experiment with, making everyone feel part of the design and delivery. This accelerated adoption and created an environment where doubters turned into advocates. 

Ensuring there is a shared purpose and language between teams will be key for any digital transformation programme, and this is no different.

Barriers to Data-Driven Decision Making 

Employing a data-driven approach to decision-making is vital. As mentioned, public sector organisations manage large amounts of data and must demonstrate the economic impact of their spending; particularly when being scrutinised by government. 

A common barrier is fragmented investment in IT systems across various silos within government organisations. This has long been a hindrance to data access and analysis. The need for a holistic approach is more pronounced than ever as governments and public sector organisations need to swiftly respond to emerging issues and measure the impact of their output. Public sector leaders must focus on connecting operational, financial, and people data to business outcomes, enable fast cycles between planning, execution, and analysis, and be adaptable in changing business processes. Yet, a staggering 69% of them acknowledge a deficit in these key capabilities within their teams. 

These barriers must be overcome by attracting the right talent and equipping them with modern workforce tools that enhance their jobs. This requires a shift from traditional approaches and embracing cloud technologies, which promise greater efficiency in a secure environment at reduced costs. Indeed, 34% of leaders say that advanced analytics and data visualisation skills will ensure that their teams can continuously meet evolving demands. These are the skills most sought after by IT leaders (35%) and finance leaders (34%). 

The public sector can’t ignore the growth of artificial intelligence (AI) and machine learning (ML). In the back office, AI and ML could take over routine and repetitive tasks, freeing civil servants and employees up to focus on more strategic, problem-solving tasks, and engaging with citizens.

These technologies can also help transform productivity by better harnessing the skills that already exist inside public sector organisations.  Systems like Workday’s Skills Cloud which is a comprehensive taxonomy of information about skills and the relationships between them, can enable novel HR practices like Talent Marketplaces, which connect employees with the right skills with opportunities inside their employer that require them.  This offers a true win-win outcome; better use of resources for the employer, and a more fulfilling and rewarding career for the individual. 

Ultimately, being smarter with data and deploying emerging technologies will aid the public sector in delivering valuable services within budget, at a time when resources are scarce.

Measuring the output 

The implementation of digital transformation initiatives can involve significant upfront costs and some short-term disruption. However, the long-term ROI, reflected in increased agility, better decision-making, and strategic preparedness, can be well worth the initial investment.  

While cost savings are a measurable and tangible benefit of digital transformation, there are several other indicators of success that public sector leaders should consider:

• Enhanced Agility: The ability to adapt to changes quickly is a significant benefit, and should be counted as an indicator of ROI. Digital transformation that enables the implementation of rolling forecasts and scenario planning allows companies to be agile, ensuring they can respond swiftly to various potential disruptions and economic shocks; which are key abilities in the public sector.

• Improved Decision-Making: The effectiveness of decision-making processes can significantly increase with digital transformation. By having up-to-date financial information and conducting ongoing planning, leaders can make informed decisions based on current and forecasted data.

• Strategic Preparedness: The capacity for scenario planning and what-if analyses can equip organisations with a strategic playbook for future disruptions, providing them with a data-led plan amidst uncertainty. The resilience of an organisation should be considered as part of the ROI of digital transformation.

In a world which is rapidly evolving, the cost of not transforming can be far greater, potentially leading to missed opportunities and decreased competitiveness. Therefore, the long-term ROI of digital transformation can justify the initial costs and disruption. 

Public sector organisations embarking on a digital transformation journey must anticipate and address challenges head-on. Central to this is the adoption of robust systems that centralise and leverage data for informed decision-making. Engaging multidisciplinary teams and involving staff in the transformation process will foster ownership and mitigate resistance. Successfully navigating this journey not only streamlines operations but can contribute positively to the economy by making our public services more effective, and cost-effective.