Understanding the factors that drive, shape and impede digital transformation
Livia Norström and Juho Lindman – University of Gothenburg and UGBlab, Sweden
Digital transformation is fundamentally a change process
Local governments are undergoing significant digital transformation, including experimenting with new technological solutions like blockchain. This article summarises the findings of a case study of three municipalities in Western Europe that are exploring the adoption of blockchain-enabled service solutions as part of the BLING project.
Public sector organisations need to make the right decisions in their digital transformation efforts, and use public resources in ways that align with public values: boosting government efficiency, improving citizen services, and boosting democracy and participation whilst staying inclusive and transparent.
Digital transformation is fundamentally a change process, enabled by the innovative use of digital technologies accompanied by the strategic leverage of key resources and capabilities. Local governments find it particularly challenging to cultivate a culture of innovation and to allocate enough time and resources to develop priority innovations. Municipal leaders must resolve trade-offs between i) making informed decisions on implementing modern technologies to avoid overspending and not meeting expectations, and ii) gaining empirical evidence how and where specific technologies bring the best value.
Blockchain is one example of a group of emerging technologies that can be implemented in numerous ways as a part of the digital transformation process. Despite its financial background, Blockchain has become a general-purpose technology with several possible benefits to the public sector, including: to notarise
transactions, to automatically execute transactions, and verify identity. These benefits echo the government’s three main functions: managing governmental registries, social transfers and benefits, and providing verified information.
Blockchain is not (yet) a fully mature technology, which causes uncertainty and scepticism around its usage. Most blockchain pilots are in early stages, which reflects governments’ lack of capacity to convert pilots into more mature projects.
Blockchain and digital transformation
The public sector is transitioning from the traditional public administration / new public management paradigm, which aims for efficiency and effectiveness. Emerging approaches focus on the adoption of new(er) technologies and stimulating the expansion of internal knowledge resources with external support. While the “old” governance model implies a top-down approach to social and economic activities, new models put interaction (e.g., with citizens and industry) at the heart of their activities.
Digital transformation has become an
integral part of this organisational change. Oversimplifying the important and difficult changes associated with digital transformation – by ignoring the public sector’s complex institutional environment – will understate the obstacles organisations face as they seek to transform themselves.
Looking at blockchain enabled transformations
The study analysed the digital transformation processes of 3 Northern European municipalities participating in the BLING project. These digital transformation processes include a range of activities that drive, impede, or shape these transformations.
The “driving” characteristic includes the forces and situations that motivate and drive digital transformation. The activities driving the
local government exploration of blockchain technologies are: the experimentation with new technology (which is seen as an essential activity if organisations are to be able to
adapt to future changes and be proactive in modern service delivery), addressing business/ societal needs (where technology is used
not only to digitise services but to improve them), improvement of service delivery (where blockchain could make services more flexible and scalable while protecting the privacy of citizens, or making processes more efficient and moving staff from the back-office to front-office), and creation of publicity for the Municipality (where the Municipality is seen to use novel technologies and to be innovative).
“Impeding” relates to characteristics that make digital transformation challenging.
In a blockchain exploration these include technology limitations (technology didn’t deliver theoretical promises), lack of human resources (for example projects are often driven by one person, and so are vulnerable to failure if that person leaves), external attention and the hype (publicity can be distracting, and there can be excessive expectations on the technology), and the difficulty of delivering within a regulated environment (such as GDPR).
“Shaping” refers to cultural characteristics that frame the digital transformation process. These characteristics don’t drive or impede but rather shape how the digital transformation process takes its form. These are organizational learning (managers are unsure of the outcomes and benefits of blockchain piloting, which impacts future investment/development), legal aspects (for instance “the right to be forgotten”), collaboration with industry (and government stakeholders), and the organization’s wider view of the role of public organizations (which affects their willingness to use approaches like smart contracts, and to decentralize decision making).
Digital transformation and blockchain in BLING
Governments’ innovation ambitions in the three case studies were driven by a range of factors, from the need to address specific business and societal needs, public value creation, publicity, or a general curiosity to test available tools. Those needs included protecting users’ privacy, providing better services, and automating bureaucracy. Change can be driven by an ambition to stay adaptive and proactive in public service delivery: conversely it can also be argued that there must be specific business needs driving experiments with new technologies.
Changes in both internal bureaucratic cultures and external relationships are needed if governments are to adapt to new demands and technologies and not be held back by conservative and cautionary approaches.
Organisations must be flexible and adaptive if they are to successfully adopt recent technologies. Decisions about the use of blockchain must be taken in light of local policy goals, public values, institutional structures, and social expectations.
During the blockchain’s 14-year life span, it has been altered and used in many applications and sectors with varying success. However, it is neither a “one-fits-all” nor a mature technology, as there are still many uncertainties associated with it.
Despite all the surrounding promises, technologies like blockchain need to demonstrate sufficient success before they become mainstream tools for local governments.
Mahula, S., Lindquist, M., Norström, L., and Lindman, J. (2022). Proceeding in DGO.2022: The 23rd Annual International Conference on Digital Government Research, June 15-17, 2022