Survey: Budget pressures could lead to new business models

Looming budget pressures are causing business and government leaders to look at new organizational and business models to deliver better services, a new survey shows.

Those pressures, leaders said, require new approaches such as competitive sourcing, public/private partnerships, shared services and vouchers to deliver more effective public services, especially in the government, health care and education sectors.

The IBM Global Business survey, released today, queried 765 chief executive officers and high-level government officials about their ideas on innovation in three areas: products, services and markets, business models and operations.

Nicole Gardner, vice president of IBM’s global innovation team for the public sector, said commercial and government leaders are paying attention to business model changes.

She said three major themes emerged from the public-sector respondents:

• Government officials believe they must enhance existing organizational capabilities and business models to manage the anticipated magnitude of change that budget pressures will create.


• They agree business and technology must be better integrated.


• They agree they must collaborate with citizens, constituents and others to “gain flexibility and drive innovation.”

As an example, Gardner cited the Internal Revenue Service’s electronic returns program and the U.S. Postal Service’s many new ways for customers to buy stamps. “They haven’t changed their core business – tax collection and mail distribution,” she said, but they have created new ways of doing business.

But in the public sector, she said, the survey revealed “huge silos in domain separateness” and little crossover among various disciplines such as processes and technology. Almost 90 percent of public-sector officials said it was important to integrate services, but less than 50 percent said they believed they were doing that well. “That was very different from the commercial sector,” Gardner said, and the biggest gap in the survey.

Government executives “don’t tend to go to their constituents,” she said. “They tend to go elsewhere, whereas in the commercial sector, they tend to go to their customers.” For government, the top choice was to consult with academia, she added.

Jonathan Breul, a partner in IBM’s Business Consulting Services, said the consulting question was one of the biggest areas of divergence in this second biannual study. CEOs put academia at the bottom of their list of consulting favorites, with customers ranking first. He added that overwhelmingly business leaders thought they were consulting effectively.

Breul, who was a government official, said there is a striking alignment of views between the private and public sectors once certain differences, such as profit and loss and customer base, are eliminated. But he added that the public sector has not explored new business models as extensively as private industry.

And although both sectors say they believe in the importance of performance measures, “the public sector is way behind the private sector in using such measures,” he said. “That gap is a serious one.”