Time to Change Your Value Chain?

With electronic infrastructure now so widely available, writes Jerry Mechling, the next step for government is reorganizing, re-allocating and redefining agencies and functions.
November 7, 2007
Jerry Mechlin
By Jerry Mechling  |  Contributor
A consultant and former faculty member of the Harvard Kennedy School

E-government has successfully changed one link in the value chain. Now it's time to rise to the challenge of changing the entire chain.

It was only seven years ago when we faced Y2K. At the time, everything was coming up "e." For business, e-commerce was all the rage, which paved the way for e-government. Microsoft was one of the world's most valuable firms. Google wasn't in sight. Despite what "The Graduate" had said, the word wasn't "plastics," it was "dot.com."

Shortly after Y2K came the dot.com bust. That was followed by 9/11 and then by financial problems in state and local governments. Investment in e-government has continued to grow, but at a slower rate than before.

What's the future? Will the slowing of IT-enabled innovation continue, or will the rate of investment and change pick up again as we head into new territory?

And, we are headed into new territory. To understand what's been happening--and what's going to happen--it is helpful to analyze the value chain, and especially the difference between the individual links and the chain itself.

The value chain (or production function, as economists have called it for years) relates the inputs, steps, and outputs of a production process, where the steps are the links in the chain. Resources go in, fueling the steps that link together to create goods and services. Analysis of the steps and their relationships can help optimize overall performance. We analyze and then optimize, for example, the steps for responding to a fire emergency, processing a tax return, or letting a contract.

For most e-government work, we've focused on a particularly valuable and short segment of the chain: the final, service-delivery steps. We have loosened the relationships between the links. We've moved from face-to-face, same-time delivery to remote, asynchronous delivery over the Internet. We have also loosened other links between producers and consumers. For example, we've converted some of the work of producers to computer code, which enables self-service by the consumer. Citizens can go "online, not in line," and they can help themselves.

Thus has service delivery, in many variants, been transformed. Once the Internet reached critical mass--once the TCP/IP protocols were used widely enough to stitch together previously isolated networks, once HTML and browsers allowed data to be readily found, accessed, and transmitted over the Internet--then information-based services in business and government could reach customers through a powerful new delivery channel.

Building and using that channel produced a powerful yet silent revolution. Service delivery became "24/7," "one stop/non-stop," and "anything from anywhere." The benefits for recipients and producers were significant. And, they didn't require much fuss or new behavior except from people who were ready for change, i.e., --the individuals and organizations who wanted to reach government and those who wanted to build networked infrastructure.

Again, only the delivery links needed to be modified. The others--such as resource acquisition, logistics, production management, and overhead management--were largely undisturbed. However, this all is about to change.

With electronic infrastructure now so widely available, we are recasting links throughout the value chain. Like before, these new changes are occurring first in the private sector with government following its lead. What is driving these larger reforms is pressure to move work to places where more cost-effective resources are now accessible. Corporations and jurisdictions that fail to sense and respond to the new pressures will lose ground and lose jobs.

It is clear, however, that refashioning multiple links, and introducing new regions throughout the chain, will not be as win-win a proposition--and, therefore, not as voluntary--as what we've handled in the past. Some people will be forced to change jobs and organizational relationships whether they want to or not. It was much easier to change service delivery alone, which had broad support and almost no opposition.

Still, changes extending throughout the value chain will be inexorable, and thus will follow the historic pattern for disseminating technology innovation. At first, innovations simply substitute for particular elements of previous methods (e.g.for example, cars as horseless carriages). Over time, however, change ripples out through entire industries and communities.

IT-enabled change is now affecting the entire value chain, on a multi-institutional basis. Previously, the loosening of service links only extended to remote, asynchronous, and self-service connections. Now, links are being loosened throughout the value chain. Where work was once coordinated through face-to-face interactions--in the factory, office, hospital, or school--it will increasingly be coordinated through global networks of people and technology. The unit of change will not be the individual program and its recipients, but will grow to include entire communities of interest. We will thus change the structure and functions of the health care community, the criminal justice community, the education community, the homeland security community, to name a few.

As we do this, the pace of IT-enabled change will again accelerate. We must work now to identify and coordinate ripe communities of interest through new and more flexible technologies, such as service-oriented-architectures. Of course, we can't make the mistake of thinking of these changes as primarily a technology problem. At its heart, the move to networked production and governance requires societal commitment and political leadership. If we are to succeed with the challenges ahead, we urgently need this commitment and leadership throughout the value chain.