Disrupting Government Business Models (The Innovators Dilemma meets the Cash Cow)

In the public sector, there are real opportunities for citizen service enhancement via online and mobile transactions with  strong enterprise information management and digital identity management strategies and architectural approaches. But in addition to the implementation challenges of these technologies, many states find that existing state legislation and policy do not support true innovation by state governments.

Let me give you an example. In Colorado, we had an enterprise information architecture strategy to deal with the technical and data limitations of existing systems. Service oriented architectures can go a long way to linking systems and applications together.  From the data side, it makes perfect sense to be able to share certain records (like birth and death) across agencies for eligibility screening and program management.

To improve the customer experience, why should we make a citizen provide a copy of his or her birth certificate for each of the myriad of social services and health care programs that individual may be eligible for? It takes precious time out of the individual’s day and increases the cost burden to them. Especially when we already have that data electronically in a system.

With death records, it makes sense to share that information – appropriately – to the agencies with which that individual was doing business so that services can be terminated and the state doesn’t continue to issue benefits (and money) to dead people.  Additionally, it can cut down on identity theft and fraud.

This sounds great, right? Improve and enhance service capabilities, reduce fraud and waste. But what about the unintended consequences?

At one of our early governance board meetings, a board member raised a very strong concern about sharing this information with other state agencies. He represented the agency that, among many things, was responsible for vital records. Surprisingly, his concern wasn’t really about the sharing of information across agencies. His concern was about the revenue impact to his agency. This agency also happened to be cash funded, meaning the majority of their operating budget came from moneys they earned themselves, not from general funds allocated by the state legislature to them. A major part of their revenue stream was sales of birth certificates to citizens, and sales of data (like death records) to other state agencies.

By doing what we proposed to do – in order to streamline government operations, improve customer service, and reduce waste, fraud, and abuse – we would drastically impact the revenue of this agency.  How else could they possibly make up that lost revenue? We did not have a good answer.

This is a really tough question that most states have not begun to tackle. True transformation of the government services delivery model also means the business and revenue models must be approached in new ways. This often involves changes to legislation, to state constitutions, or to state budgeting processes – none of which are easy. And requires a strong political will.

There are similar analogies in the private sector world, where new business channels and models threaten to cannibalize the traditional business models of organizations. Transformation through technology is relatively easy.  The willingness to tackle the political and cultural challenges requires true vision, leadership, and commitment.