Business Model Transformation

Peter Grant

Advisor, IBRS

0417 005 500

Toughest Job in Government

Businesses

• Surveying

• Quarry

• Water and Sewerage 

• Road Construction

• Parks Maintenance

• Fleet Services

• Business Licencing

• Animal Management

• Development Assistance

• Water Billing

• Building Approvals

• Local Law Enforcement

• Call Centre

• Customer Service Centre

• Rates and Searches

• Environmental Licencing

• Youth Development

• Library Services

• Caravan Parks

• Sports Development

• Swimming Pool and Life Guards

• Tourism Venues

• Childcare

• Counter Disaster

• Cemetery

• And many more…

The Pressure of Government

1. Increasing community demands across a broad range of products and services

2. Increasing regulation

3. Shrinking revenue sources and significant price sensitivity.

4. Resource Constraints (Skills and Numbers)

5. An IT vendor community that has learned to be sluggish.

The World is Changing Around Us

Digital Disruption

IT Industry Changes

Advice What Next

The Digital Challenges

Peter Grant - IBRS7

Peter Grant - IBRS8

Some Digital Disruption Examples

Peter Grant – IBRS July 10 2014

Peter Grant – IBRS July 10 2014

Models for Distribution in Music

1. Music Industry Sold Physical Media

2. Digital Revolution brought a new approach.

– Napster (Disruption but unsustainable – nobody was paid)– iTunes (sells the consumer a licence to play music that you buy)– Spotify (sells access to all the music in the world for a monthly

fee or advertising)– Pandora (like Spotify but can predict which music you like)

3. Who lost?

– Warner, Sony, EMI, Universal Studios, Middlemen

Peter Grant – IBRS July 10 2014

Peter Grant – IBRS July 10 2014

Blockbuster Video

Blockbuster Video

• Short History of Blockbuster Video

– Blockbuster Video was a $1 Billion business in 2009.– Customers put up with the limitations of physical media until there was

something better. (NetFlix)– Blockbuster was dismantled in 2012.

• Standard DIGITAL DISRUPTION Mistakes

– Slow to react. Believed they were on the right track.– Ignored customer desires – one could argue they did not know

what their customer’s desires were. – Initial response was to cut costs by $330 Million – seemingly

in the belief that the business model only needed tuning rather than a complete replacement.

– Last resort was to have a web site showing a list of videos.

Australia Post – Digital Disruption

Don’t improve what you can eliminate!

We can eliminate $100 million in Mail activity (generated from billing) from governments every year by ACTIVELY looking to REMOVE unnecessary transactions.

Where does this leave Aussie Post and it’s bill payment service?

Queensland Government Example

• Motor Vehicle Registration

– 6,500,000 vehicles -12,000,000 registration renewals p.a.

• Currently:

– Send out letters informing people their car registration is due.– People take action and pay the fee – counter, BPay, etc.– Government prints sticker and sends them in the mail.

• That’s 24 Million letters that SHOULD NOT BE SENT

There is a LOT of change happening

and

your community are doing it

with or without YOU.

Digital Disruption

IT Industry Changes

Advice What Next

A Brief History of IT

1. 1965 – IBM 360 Mainframe computer

2. Late 1970s – Advent of the Mini computer (Wang, Digital, IBM S34)

3. 1990 – Client Server computing (Microsoft, Sun)

4. 2000 – Internet becomes mainstream (TCP/IP is the standard)

5. 2010 – The Big Five Emerge Simultaneously !– Cloud Computing– Mobility as the default access mode– Consumerisation– Social Networking – Big Data– Internet of Things– Geospatial Computing

It’s clear our approach to ICT in 2009 won’t work in 2020.

And then there is the Server Industry!

WARNING

When people say CLOUD make sure you ask which TYPE they mean?

IaaS SaaS BPaaSRun existing IT systems onto someone else’s hardware on a pay as you go basis.

Tactically sensible but NOT a response to digital revolution

Infrastructure - as a Service

Software - as a Service

Business Process - as a Service

Savings possible!

Use someone else’s software and hardware on a pay as you go basis.

Allows for rapid adoption, wide collaboration.

Customer has high levels of control over vendors. Savings are significant.

Have an external party provide an entire business process – but represent this as your organisation.

Generally used for non-core but specialist functions like Payroll.

Can I build an entire business on these innovative SaaS and BPaaS services?

Lines of Business

Cloud Service Broker (Aggregation, Integration, Customisation)

Lines of Business

What’s the UP Side for ICT?

• ICT will be way way cheaper to deploy

• ICT will be way way easier to deploy

• Things will work (quality will be very high)

• There is a huge backlog of innovative things we can do right now.

– Many have been delayed because they were seen as being too hard.

Digital Disruption

IT Industry Changes

Advice What Next

Who is Advising You

IT Team

Expert at running all that IT stuff we don’t want / need

anymore.

Perceive their jobs are threatened by digital

revolution.

Generally too busy to keep up with potential

opportunities – and probably not valued for

that.

IT Vendors

Product range built around yesterday’s IT offerings.

KPI’ed Quarterly based on sales of EXISTING

products.

Connected at the hip to consulting partners whose

job it is to sell their partner’s products to

YOU.

Association

Build expertise for your vertical over time.

Keep a performance history on vendors.

Interested in the success of the local government

sector.

Digital Disruption

IT Industry Changes

Advice What Next

The Key Things to Do• There needs to be some core capabilities to manage connections to

cloud offerings.

– Too big for existing councils but perfect for shared infrastructure.

• Need to recognise the Digital Revolution WILL IMPACT YOUR ORGANISATION.

– Lack of recognition and lack of early response is why organisation have already failed.

– Work out what you DON’T HAVE TO DO ANYMORE as a first step.

• Need to understand (at a high level) the right technology options for Cloud. Pick the wrong one and you might get some savings but you will miss an opportunity to leverage the Digital Revolution.

• Support your IT teams. Without support they may be fearful of giving you the best advice. Encourage them to be the digital thought leaders.

Valuable and Hard To Copy

People and Culture

It’s all about Business Model Change

Questions