The New Era of Digital Innovation: How Digitalization is Changing the Government and the Challenges and Opportunities It Brings
Over the past ten years, the public sector in the Netherlands has undergone a radical transformation, with the government increasingly transferring responsibilities to municipalities. Think of the Social Support Act (WMO), the decentralization of youth care, and the introduction of the Participation Act. At the same time, the government is trying to bring services closer to the citizens through digitization, with more efficient and accessible digital portals and online services. However, these reforms do not come without challenges, including aging populations, legacy systems, and a gap in digital skills.
The government has been significantly shaped by its own policies, which now require significant remediation. We are now collectively speaking out against scandals such as the Bulgarian fraud, the childcare benefits scandal, the COVID-19 pandemic, the Groningen earthquake dossier, and numerous failed ICT projects within the government. These are issues that have severely impacted the trust citizens have in the government. It costs society billions to repair the damage done.
For instance, the Bulgarian fraud was initially expected to cost only a few million euros, promising a set of measures leading to watertight control over the use of benefits. However, the Bulgarian fraud eventually laid the groundwork for the childcare benefits scandal, which, according to the latest estimates, will cost the government over eight billion euros to rectify. An important byproduct of the childcare benefits scandal is the introduction of the Open Government Act (WOO), which mandates the government to improve its information management. This has proven to be a complex task, expected to continue until at least 2026, and demonstrates how digitization has changed the government in recent years.
The government has transformed into a digital service provider and bank, where access is increasingly difficult for citizens. This highlights how, in the name of efficiency, the government has created more distance between itself and its citizens—citizens who increasingly expect tailored treatment. At the same time, these citizens are becoming less skilled. As of 2024, one in six citizens is functionally illiterate, and one in five lacks sufficient digital skills to independently file taxes, apply for personal budgets, or make appointments with the municipality. Governments must, therefore, find other ways to communicate. The municipality of The Hague, for example, increasingly uses videos in plain language to explain complex issues.
Through digitization, governments have been able to improve their services. Online portals allow citizens to handle matters more easily and quickly, even from abroad. In this regard, the Netherlands is unique. With the exception of Estonia and some Scandinavian countries, most neighboring countries still rely heavily on paper and cash.
Government information has become more transparent and accessible to the public through digitization. Open data initiatives have made a wealth of government data available to citizens, providing more opportunities for external oversight and engagement. However, the sheer volume of information has created a veritable information forest that is increasingly difficult to navigate. With the introduction of the Open Government Act (WOO), the number of documents is set to increase exponentially.
Digitization has helped streamline many government processes, leading to cost savings and increased efficiency. Automation of routine tasks has allowed civil servants to focus on more complex tasks that add greater value. The downside of this automation is an increase in regulations that the government must oversee.
Due to growing concerns about privacy and new European legislation, citizens are gaining more transparency and control over their personal data. Whether all citizens are capable of handling this remains to be seen. Today, most people accept cookies without thinking about the consequences.
The number of devices that store personal information and can be managed via the internet is increasing exponentially. The coffee machine, smart doorbell, cameras, and voice assistants will soon know more about you than the people in your physical environment. This could lead to a situation where citizens are continuously monitored, even in their own homes. While this has benefits for energy management and personal convenience, it also poses risks. Who, for example, has access to this data, and how is it used?
To address these issues, the government has significantly revalued its IT functions in recent years and implemented the so-called CIO framework, a governance structure designed to guide and coordinate the digital strategy, policy, and projects across the entire government. This framework aims to promote digital transformation within the national government, increase the efficiency of government services, and improve services to citizens and businesses. The expectation is that this will lead to better alignment between the IT strategy and the government’s overall organizational strategy, as well as more innovations.
The implementation of this framework varies significantly between government organizations. In some organizations, there is a policy-driven CIO who creates a strategy and checks whether implementation aligns with this strategy. In other organizations, the CIO is also responsible for the execution of the strategy. What stands out is that most strategies seek more agility, but there is difficulty in achieving this agility in practice. The execution often reveals hidden problems related to legacy systems.
With the introduction of the CIO system within the government, many governmental organizations have started appointing a CIO (Chief Information Officer). The background of this decision was that many governmental organizations make use of a Shared Service Centre which they wanted to have more control over.
There are many different interpretations regarding the role of the CIO and how this person should relate to the IT directorate responsible for execution. Some governmental organizations, therefore, have a CIO who is also responsible for execution, while others opt for a more policy-oriented CIO.
To make a considered decision, it is necessary to gain insight into the nature, scope, and impact of digitalization. Is it a modernization effort or a digital transformation, is it about many small projects or a set of large programs worth millions, and does it affect a part or all employees, and are they located in one or multiple locations? Depending on the answers to these questions, a merger of policy and execution is needed or a clear separation.
For the client in question, we concluded that integral management of policy and execution was necessary. The underlying reason was that a significant regulatory change was imminent, impacting both the organization of digitalization and its execution. To avoid duplicate command lines, a CIO was chosen who was responsible for both policy and execution.
The complexity of managing digitalization in a largely digital world requires short lines of communication and clear priorities. Separating policy and execution would lead to dual priority settings.
Virtually all governmental organizations have legacy systems and struggle to implement strategically desired changes. This is not only a technological issue but also a matter of people, processes, and not least, money. About ten years ago, we often encountered CIOs who believed that the more money was invested in digitalization, the lower the operational IT costs would be. After all, that was why one invested. In practice, with the increase in digitalization, more and more processes are also being digitized.
The CIO system within the government is thus a crucial part of the strategy to modernize the Dutch government and prepare it for the challenges of the digital future. However, the practice of digitalization is stubborn. Outsiders often only see the overly expensive IT projects and hear about what went wrong behind the scenes. Knowledge and understanding of why things go wrong are limited among both executors and recipients and supervisors.
As QA Consulting, we have been observing programs and projects within the government and semi-government for ten years. So, if you ask us why large IT projects often go wrong there, our answer is: there is a confluence of causes and circumstances:
1. Special Requirements and Wishes
While the private sector easily stores and manages information worldwide, the government rightly requires that data remains in Europe and often even in special government data centres. These are centres that thirty years ago were already concluded to be less well managed and operated than the market. In the future, managing their own data centres for the government is estimated to be five to ten times more expensive than leaving information storage to the market. It is therefore expected that governments will also transfer their information to ‘the market’, particularly to the domains of Amazon, Microsoft, and Google.
2. No Standardized Processes
While the private sector operates from globally standardized processes, most government processes are completely different from those of the surrounding countries. Look at departments like the tax office or UWV. No country around us has similar legislation and has digitized its services as much as the Netherlands. The number of European tenders is also nowhere as high as here. Because we want to be an attractive business climate, the Netherlands has many specific, customized procedures and rules for companies. For example, the Tax Office has so-called ‘rulings’, statements from inspectors on how to handle specific cases. Think of IKEA, Starbucks, Procter & Gamble, Nike, and UBS, all companies that made fiscally favourable agreements with the Dutch tax office about their tax obligations. All these agreements lead to deviations in the rules, which are all put into a digitized system.
3. Change Fatigue
Knowledge of many of the points mentioned under 1 and 2 is scarce and slowly disappearing. Due to aging and staff turnover, much depends on individuals with specific knowledge and skills. Individuals under a lot of pressure who often need to be in ten places at once. Combined with the complex consultation structures and many organizational changes over the years, people have become ‘change tired’. They no longer see the usefulness of yet another new way of working.
4. Too Large Projects
Many projects and programs within the government are large. For years, the ICT Advisory Board (AC/ICT), formerly BIT, has been stating that projects should be smaller. But how do you do that when you have to replace an entire system, such as that of value-added tax? Unfortunately, you can’t do that piece by piece. At the same time, the whole is too large to replace at once. A devil’s dilemma that applies to many government systems.
5. Lack of Knowledge among Administrators
Many administrators still have inadequate knowledge of digitalization. In the majority of vacancies at the General Administrative Service (ABD), the word digitalization, IT, or ICT does not appear. The ABD does offer training in digitalization, but managing programs and projects is not something you learn in a course. Experience provides the most insight into what is possible, what risks there are, and what the best approach is. Furthermore, many people who do have that digital experience and sensitivity do not have enough voice at the administrative top. They are simply not heard or understood.
The above list could be discouraging. However, there are indeed solutions available. As we described above, banks and insurance companies made the necessary digital transformation twenty years ago, integrating digitalization into the user side of the organization instead of having an IT department performing tasks for the organization. These companies have strict requirements regarding team size (4 to 6 in most banks), ways of working (agile), and they evaluate a lot. Not to analyse what went wrong, but to emphasize what went right and how it can be even better. Administrators are substantively involved and have their own experience with digitalization.
Many governmental implementation organizations nowadays resemble banks more than classical government; they are essentially primarily benefit and payout agencies. Yet, they are often still managed as if they were a classical governmental organization. In the board of directors, there is no director responsible for digitalization. An exception to this is the UWV. Since 2023, a member of the Board of Directors there has had responsibility for digitalization.
The average age of a civil servant in the national government hovers around fifty years. The government will have to anticipate the changing labour market – aging – and must invest in continuous retraining and reskilling of civil servants to ensure they (continue to) have the right competencies in a rapidly changing technological environment. Attracting young talent and diversifying the skill pool will be crucial in this.
To offer effective and secure public services, all rapid developments in technology must be closely followed, such as artificial intelligence, blockchain, and the Internet of Things (IoT). This requires not only investment in technology but also in knowledge and skills to responsibly integrate these technologies into government services.
Cyber defence against an increasing number and more advanced cyber-attacks must be strengthened, especially on critical infrastructure. This means a continuous process of updating security protocols, training personnel in cybersecurity awareness, and collaborating with international partners to share best practices. Addressing cybersecurity challenges must also take into account the rise of quantum computing. Quantum computing promises a significant acceleration in computing power, making current encryption methods potentially vulnerable. This development requires a proactive stance from the government in strengthening its cyber defence against the potentially disruptive impact quantum computing can have on the security of digital communications and stored data.
The government must seek a balance between using data for public services and maintaining privacy and data protection. This requires strict compliance with privacy legislation and developing technologies that ensure privacy by design. This means thinking about the privacy implications right from the moment information is collected.
The digital divide must be bridged to ensure all citizens have access to digital services and the skills to use them. This means investing in digital infrastructure in less accessible areas and providing training and support for citizens who are less digitally proficient.
The above challenges require a coordinated approach where policymaking, technology, and education are central, as well as cooperation between different government levels and with the private sector. The government will need to develop agile and flexible governance structures capable of quickly responding to new developments. This requires a cultural change within the government, with openness, collaboration, and continuous innovation as driving core values.
The success of the government in the digital age will not only depend on the technology it implements but mainly on how it integrates it into its services and involves citizens. By viewing digital transformation as a continuous project rather than a one-time process, the government can position itself as a resilient and responsive entity ready for the future.
