Challenges of the Interaction Economy

Challengesof the Interaction Economy

embracing complexity in the Public, Finance

and Health care sector

Thei Geurts

Challenges of the Interaction Economy; embracing complexity in the Public, Finance and Health care sector

Thei Geurts

May 7th, 2011

Version 2.3

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Contents 1. Mastering disruption – embracing complexity ........................................................................... 2

1.1 Introduction ............................................................................................................................... 2

1.2 Change and complexity: a paralyzing combination ................................................................... 2

1.3 Coping with complexity ............................................................................................................. 5

2. Public sector ................................................................................................................................ 8

2.1 Introduction ............................................................................................................................... 8

2.2 Facing complexity ...................................................................................................................... 9

2.3 Looking at the public sector from the blank canvas viewpoint: examples ............................. 11

2.4 Empowerment by embracing complexity ............................................................................... 13

3. Finance sector ........................................................................................................................... 15

3.1 Introduction ............................................................................................................................. 15

3.2 Facing complexity .................................................................................................................... 16

3.3 Looking at the finance sector from the blank canvas viewpoint: examples ........................... 19


4. Health care sector ..................................................................................................................... 25

4.1 Introduction ............................................................................................................................. 25

4.2 Facing complexity .................................................................................................................... 27

4.3 Looking at the health care sector from the blank canvas viewpoint: examples ..................... 30


Appendix ............................................................................................................................................ 34

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1. Mastering disruption – embracing complexity

1.1 Introduction

What is it that keeps a manager awake at night? It is either the myriad of snap decisions he1 has to

made every day on a seemingly increasing variety of issues. Or it is one of these far reaching

decisions that directly affect people (employees, customers or partners) and the future of the

organization? The answer can be ‘both’. Fact is that most of the managers perceive their current

environment as becoming increasingly complex. They have a natural tendency to keep control while

the circumstances beyond their control evolve with a mind-blowing speed and magnitude that is

virtually impossible to keep track with. It is this short term oriented control bias that leads to the

creation of seemingly sophisticated solutions that in the end make life even more complicated and

disturb the manager’s good night’s sleep.

In this white paper we will address the causes of complexity and how to deal with them in a goal and

future oriented way that brings the business back in control and empowers customers, employees

and partners. We will illustrate this approach by examples from the public, financial and health

sector.

1.2 Change and complexity: a paralyzing combination

Organizations are under constant pressure of social, regulative, economic and technological

challenges. They must deliver business effectiveness and efficiency while responding quickly and

correctly to changing business conditions. They must deliver more personalized, customized products

and services to meet the increasing demands of consumers and reduce costs at the same time. The

flood of new regulations on local, national and international level that has to be implemented,

increases all the time, despite the efforts to reduce red tape. Business operations are becoming

global, distributed and complex and are changing also all the time. Simple ‘step to step’ value chains

are transforming into highly dynamic and interactive networks that tap into distributed expertisei and

unlock the power of specializationii.

Organizations, both public and private, operate in an environment in which change is the new

Normal and …… change is continuous. They are in a constant transition from the old to the new. The

ones that will dwell to long in the old will become static and ultimately obsolete. The ones that ride

the waves of change in time will seize on new opportunities and survive. The ones that catch a wave

too early will be praised for their insight, but will not get the rewards.

Figure 1 Continuous change is the new Normal

1 Wherever we use ‘he’ for a person, this may be substituted by ‘she’ if this matches the preference of the reader.

3

Moving from one wave to another is in the pubic and business sector even more difficult than on the

surfboard in front of the Californian shores. These sectors have to cope with co-existence of the old

and the new. They are faced with multi-reality in which old products exist along new ones, old

business models along new models, old practices along new practices and old technology along new

technology. Dealing with this type of multi-reality and preventing that ‘the old’ paralyzes ‘the new’ is

in essence the real challenge in the ‘change game’ for our restless manager.

There are many theories and visions that provide their own interpretation of what causes this change

and the complexity we perceive. It all boils down to the fact that we have moved from a

manufacturing era in which transformations prevailed into an era in which interactions prevail. A

society that is based upon interactions is service oriented and deals predominantly with transactions

and interpretations. The processes are knowledge intensive which leads to a strong growth in the

number of knowledge workers in the economy of interactions.

Figure 2 Interaction economyiii

Of course have interactions been important in every economic age, but were considered a secondary

element rather than a primary source of value creation. Interactions in earlier economic eras were

largely hierarchical, stable, and predictable, and learning one’s role was more important than

learning how to interact between roles. In general, the source of coordination was compliance with

the dictates of authority. The vocabulary of the Interaction Economy shows how much all that has

changed. Terms such as “cross-boundary initiatives”, “horizontal processes”, “supply chains”, “value

networks”, “collaboration”, “connectivity”, “silos versus systems” and the “matrix organization” all

denote the prominence of interactions in developing and executing value creation strategies. The

source of coordination now is “mutual interest” because we need far more cooperation than we can

garner through compliance. Interaction Economy leaders must learn to evoke, connect with, and

orchestrate commitment rather than demand complianceiv.

Information technology did not keep up with the pace of the interactions. Traditional ICT focused on

supporting structured activities, like registration of objects or simple straightforward transactions.

This type of ICT solutions is not designed for change and is not human centric. The system is leading.

This approach is not sufficient to support more complex and decision centric activities in which

human interpretation is required or has to be supported. These activities tend to be unstructured

and they are in the majority in knowledge intensive processes. It is only recently that new

technologies provide the opportunity to support unstructured and less structured processes.

15 %

41 % 44 %

Transformation

TransactionInterpretation

13 %

39 %48 %

TransactionInterpretation

2005 2010

4

In this hyper dynamic world of interactions and change are private and public organizations

challenged by three types of complexity: social, dynamic and emerging complexityv.

Figure 3 Operating in an era of hyper complexity

Social complexity is about values and their underlying basic assumptions (beliefs,

perceptions, thoughts and feelings) that determine a person’s behaviorvi. The alternative of

not correctly addressing social complexity is irreparable reputation damage and customer,

employee and partner drain.

Dynamic complexity is the product of interdependences between the subcomponents of a

system. It is caused by a systematic delay or distance between cause and effect. This delay

makes it hard to assess the impact of decisions and to manage processes. This leads to

diminishing responsiveness, unnecessary high costs, decreased productivity and increased

competition.

Emerging complexity is characterized by disruptive change and the uncertainty that these

disruptions create. Organizations that are not able to deal with uncertainty risk to be

outperformed by new entrants and existing competitors. They also risk claims for not being

compliant to changing regulations and face high transformation costs of legacy operations

and systems.

What keeps a manager awake at night is how to act in a hyper-complex environment in which change

is the new normal and in which complete control of the dynamics and interactions in the networks in

which he operates has become a fixed idea. He feels powerless and as a result he focuses his actions

on short term improvements that fit within the traditional ICT and management paradigm.

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The result of this approach is devastating. Driven by the conviction of reducing complexity he in fact

accumulates complicatedness. Not being able to handle exceptions because of rigid IT-systems and

creating therefore additional isolated processes and systems is an example of this behavior. Instead

of becoming more empowered, the organization and its actors become more dependent on short

term solutions and accompanied silo behavior. The level of complexity seems to be risen, while in

fact sight is only blurred by self-generated complicatedness.

1.3 Coping with complexity

What the manager actually wants is a vision and methodology how to empower people, be customer

centric, create operational excellence, and be and remain innovative and adaptive at the same time.

This will only be possible if he embraces complexity, because complexity is going to stay. There is no

way to avoid or circumvent complexity. Complexity is a natural given and has always existed. The

present scale and speed of change makes it today more urgent to find a way of coping with

complexity. To be able to deal with complexity requires acceptance of changeability, the

simplification of processes and the facilitation, rather than control, of new options and trends. In this

context, efficiency should no longer be sought in the 'one best way', but in 'any way, all the way'.

The manager needs, as a matter of speaking, to set up his painter’s easel and

put a blank canvas on it. On this frame he can draw a design that is built for

change and for people. A design for the essence of the organization and its

operations. A design that fits within a dynamic environment and that enables

optimization and innovation at the same time. A design that can balance

between flexibility and control, between structured and unstructured activities,

between situational awareness and uncertainty. He has also to draw the lines

between the old and the new and to visualize how they will interoperate.

The blank canvas does not mean that the manager has to re-invent the corporation from scratch on.

It basically means that he has to take a step back and look at the organization from another, more

holistic, viewpoint. This approach will clarify in which areas unintentional complicatedness has been

created and how it can be removed. Reducing the complicatedness of procedures, systems and

services helps organizations to gain in terms of customer friendliness, operational efficiency, and

productivity. It also creates room for professionals to focus on challenging, complex issues. It

increases their motivation and organizations consequently gain in terms of creativity and

responsivenessvii.

An important design concept in the blank canvas approach is the use of what analyst firm Forrester

calls dynamic case management. If reality changes, the old “best practices” don’t hold anymore. The

reality of business processes has significantly shifted. To deal with business megatrends such as mass

customization and customer self-service, administrative processes have become more knowledge

intensive. Next to traditional business process management techniques and technologies, new

practices and technologies are needed. It is necessary to move from a process-based approach in

operations to a more case-based focus.

The great leap forward comes from abandoning the central concept of the old S-curve: the process-

centric approach. This approach dictates that transactions need to follow the process and the

moment transactions do not fit with the process, the process needs more hardcoded exceptions. In

more formal terms, this is called a prescriptive approach. The case-based approach proves that If you

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turn it around, the complexity problem disappears: put the case at the heart, not the process. A case

can be defined as all the work that needs to be done to achieve a certain result regarding for instance

a customer, or an object such as a building. The context of the case describes which activities are

needed in order to complete the case, and nothing else. There is no predetermined sequence or set

of activities that needs to be completed, there are no unnecessary steps. Using a more formal term,

this is called a declarative approach.

A second important design concept is the use of a model driven approach. In this approach stands

the model in the middle of the new design. It connects business objectives and structures (products

and services and organizational groups) to customers (or partners) and their requirements in a

specific context. The rules that apply in this situation, based upon procedural and legal regulations,

are infused into this connection. And last but not least enables the model driven approach to deal

with market trends, for instance the instant configuration of new products based upon existing

components or adapting risk profiles for specific groups or activities due to unforeseen incidents.

Figure 4 The model as connector

Changes in the model have to be applied only once and can become instantly active in all

combinations in which the model is used to generate services to empower customers, partners and

employees. The model driven approach enables the use of dynamic case management, because it

does not model the process. It just models the activities and dependencies, so that each transaction

can have its unique flow. In this approach is everything a business rule. Even exceptions are business

rules. This allows many knowledge-intensive, complex transactions to be handled by a single process.

The business rules, the 'know' are not hard coded or stored within a business system, but stored and

managed separately, so they can be reused. And if a business rule changes, the system changes

automatically with it. The complexity that users perceived in the past was created by embedding,

often in a hardcoded way, business rules in information systems. By separating 'know' from the

'flow', only a very simple process remains with just a few phases and states.

Last but not least allows the model driven approach in combination with dynamic case management

organizations to create a continuous loop of improvement. By using the policy of a ‘Model – Run –

Improve ‘-sequence, they can embed continuous change and innovation in their running operations.

Stakeholder

requirements

Business

objectives

Market trends

Regulatory requirements

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In the next section we will illustrate how complexity can be embraced and users can be empowered

in the Public, Finance and Health care sector.

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2. Public sector

2.1 Introduction

The main discriminator between the private and the public sector is the fact that the public sector

cannot go out of business. It can shrink and be reshaped, but will not disappear entirely. The same

applies to taxes or legislation. The latter will even be rather more than less.

The public sector is characterized by the huge variety of services it provides. They range from

deciding on permits and benefits to levying taxes, law enforcement and crisis management. One of

the specific features of the public sector is the prerogative it has on policy making and

implementation. The policy making process is carried out in a highly political arena. A balance must

be found between the interests of the various stakeholders and interest groups.

Another characteristic of the sector is the fact that individuals have varying personal interests and

roles in society i.e. they are citizens, voters and entrepreneurs, but also consumers and tax payers.viii

This causes dilemmas in providing public services that are adhere to the principles of good

governance, as well being effective and efficient at the same time. The challenge, and the dilemma, is

the natural limitation on public administration, in contrast with private business, in that it cannot

“choose” its ‘customers’. Public administration must serve all citizens equally, no matter the cost and

difficulty in doing so. And they must be efficient, doing more for less.

Figure 5 Dilemmas of burden reduction (Millard adapted by Archmann & Meyerhoff Nielsen, 2009)

The public sector is not only very heterogeneous, public sector organizations are also very

autonomous. This causes challenges in an era in which participation and collaboration in process

networks or value chains is a must. Autonomy tends to create silo solutions and silo behavior, which

is being reinforced by the hierarchical nature of public sector organizations. Attempts to improve the

interoperability between organizations and systems are often brought to a standstill by risk

adversity, inertia and even by fear for loss of position and status.

The foregoing explains also to some extend why there is a gap between policy making and policy

execution. Political interests can lead to policy intentions that are difficult to execute in the

envisioned manner. Execution agencies are not or only limited involved in the policy making process

and have to cope with the effects of the decisions taken. The same applies to citizens’ groups.

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Internationalization and the media do also have an increasingly strong impact on maneuverability

and priorities in the public arena. Internationalization limits the national decision room. The public

limelight of the media influences the behavior of actors in the public domain.

Last but not least, the public sector is a very knowledge intensive sector with a myriad of interactions

between organizations and individuals and between various organizations. The knowledge

insensitivity leads to need to take decisions all the time. Therefore, is decision making at the heart of

many public sector services.

2.2 Facing complexity

The public sector faces the same types of complexity as the private sector does. The first is social

complexity, that deals with values. Society’s expectations of public service delivery have by no means

diminished as citizens from the 1980s onwards have become more concerned with choice and

service quality. They suffer from high administrative burdens, long lead times and delays which lead

to growing cynicism and frustration. Citizens and enterprises expect a service oriented attitude that

is expressed in supporting in what Gartner coined the ‘process of me’ and in a coherent and

transparent set of multichannel services. Instead of that, citizens and business loose track,

confronted with an overwhelming amount of institutions, laws and regulations. They do not know

which rules apply in their specific situation. Trust in government and policy making practices is

quickly evaporating. Therefore, public administrations are under constant pressure to modernize

their practices to meet new societal demands in a highly individualized society with reduced budgets.

This led to the introduction of concepts like Citizen Centric Government and ignited vision of e

Government. Strategically, governments use e-Government today to pursue more than ever the

goals which are not specific to the crisis but that were embedded in public sector transformation

strategies and modernization efforts over the last 10 to 15 years. These include: increased efficiency

and effectiveness; structural and organizational change; regulatory reform/administrative

simplification; citizen-focus; quality of services; openness and transparency; and responsiveness in

policy-making and service deliveryix. Fostering transparency also leads to the need of increasing

accountability and broadening the sphere in which citizens can make or influence decisions and

building civic capacity. In this respect offers the concept of e-Participation instrumental value by

strengthening the evidence base for policy making, reducing the implementation costs and tapping

greater reservoirs of experience and creativity in the design and delivery of public servicesx.

Another manifestation of social complexity is the need to cooperate in networks between

organizations of different cultures, terminologies and attitudes. This poses not only social challenges,

but also managerial, operational and technical challenges that are related to dynamic complexity.

Keeping the focus on efficiency and effectiveness-oriented activities, together with activities that

make public service delivery more coherent, is difficult if the interdependency between the parts of

the system is unclear. Insight and oversight of cause and effect relations within the own organization

and within the network in which one operates is hard to obtain, let alone to maintain. The same

applies to productivity, since increasingly complex legislation leads to more and more complex

applications and business processes to execute these laws. Productivity gains can be flushed away by

new political and legislative demands. Standardized processes are forced to accept exceptions which

lead to the creation of new processes and laborious exception handling.

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A basic problem in managing public sector operations is the lack of a “real” bottom line. Most

performance goals are put together to please those who must be pleased. Moreover, the goal posts

can be moved when it’s politically expedient to do so. This also applies to e-Government programs

which are at the heart of the effort to make the public sector more agile, simple and responsive to

internal and external demands. Governments are focusing on achieving second-order effects from

their economic crisis-related e-Government priorities but can reformulate the goals and outcomes

based upon the political situation at hand. Putting purpose into practice is not only difficult because

of the gap between policy making and policy execution, but also because of the moving targets.

Increased ICT use and user-centric service development presents an interesting dilemma in relation

to e-Government. Higher demands from the system in which public organizations operate require a

level of support that existing facilities fail to deliver. The present supporting infrastructure can be

characterized by isolation, fragmentation, non-responsiveness to change and an eminent lack of

crucial synthesizing support services. The knowledge intensive and decision making character of

public services and public policy calls for an enabling ICT that empowers users and can connect

structured and unstructured activities.

No wonder that the public sector has

huge difficulties in coping with the

third type of complexity, emerging

complexity. Emerging complexity is

characterized by disruptive change.

Governments face challenges to which

the solution is unknown. It can even

be that the problem itself is still

unfolding and not yet totally clear. The

greater the emerging complexity, the less government can rely on past experience. It has to deal with

situations as they evolve. This requires an adaptive approach and also calls for competences,

methods and instruments that are oriented towards continuous change. Traditional organizational

boundaries will not be sufficient to deal with the scale of the problem. More than thirty years ago

Thompson already wrote: “Uncertainty appears as the fundamental problem for complex

organizations, and coping with uncertainty, as the essence of the administrative process”xi.

Dealing with multi-reality is one of the greatest challenges public organizations face. They have to

cope with new regulative requirements and the time versions that arise from new legislation. Old

cases have to dealt with according to the old procedure and new according to the new procedure.

Citizens have to be treated as an individual citizen or as owner of an enterprise, depending on the

case. Services have to be provided across multiple channels while users can switch between channels

in between their process. New channels evolve due to for instance the mobility of citizens, while old

‘paper based’ services remain intact. New product can be offered, while old are still in place. New

participants with specific knowledge and competences must be instantly integrated in an incident

management operation along existing participants to unlock the power of specialization.

Emerging complexity calls for leadership that can deal with uncertainty, that is forward and outward

looking. It must be able to respond to unforeseen situations. This type of leadership must be able to

adapt, to influence and to generate. It has to transform public sector organizations into agile entities

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that are able to respond swiftly and dynamically on new political and economic challenges. Public

sector managers want to be enabled to scale their response accordingly and ensure that investments

made, have a broad longer-term economic impact. This focus will become more significant in the

years ahead according to the OECD xii.

2.3 Looking at the public sector from the blank canvas viewpoint: examples

From a purely objective point of view do many public sector processes only consist of a few steps. If

we take for instance the process of deciding upon permits, we can see that the process basically

consists out of four steps: Informing or orientation about the requirements and filing the request by

a citizen or business, followed by deciding upon the request and enforcing the decision by the

government organization. If preferred

the process can be drawn in more

detail by adding aspects like ‘advice’ at

the citizen side and ‘publication’ of the

decision at the government side. But

even then only a short list of steps

remains. Every step consists of a

limited set of activities, that can be

executed multiple times.

In the center of the process resides the

case file that connects the results of

the activities. After each step the

permit dossier will be in a specific

state, like ‘requested’, ‘approved’, ‘rejected’, ‘checked’ or ‘fined’. The rules that determine which

activities are allowed by whom, which deadlines apply and which regulations apply to the specific

permit request are managed separately and infused into the process at runtime. Exceptions do not

exist anymore; they are caught in the business rules. Data that are needed in the request and that

reside in government databases are also fused into the process, in order to prevent asking

information that government already knows.

A proven way of defining the context of the requester is the use of life events. These are common

events like birth, study, marriage, work, moving, being unemployed or death. In line with these life

events, also other events and appropriate scenarios can be defined that are specific for a certain type

of service. By identifying the actor and event we can reason about the rules that apply to the specific

combination. For instance, an au pair may be allowed to work in certain countries only if she is not

older than X-years or an enhanced risk profile will be applied for entrants from a specific country. The

following picture shows some examples of combinations that may illustrate how far reaching this

simple concept of ‘life events’ can be applied. They are all based upon the “I am, I want/need”

approach.

Interaction Transaction

Interpretation

Intervention

Case

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Figure 6 Using customer centric scenarios

One of the great benefits of this approach is that public services can be offered as self-service to

citizens and businesses. The users are addressed in a language that they understand. Their replies

and context is mapped upon the ‘government’ speak in a very transparent and manageable way. This

type of semantic interoperability is also vital for specialists of diverse practices that have to work

together in for instance an incident situation.

The dynamic case management approach can not only be applied to public services, but also to

political decision making. In the next image is as an example the process depicted of deciding upon a

proposal of the European Commission. It consists of four main steps and two types of support. One

for the political consultation

process and one for the

production process. The various

actors in the consultation process

have their own virtual case file

that they control themselves.

Only the approved products, like a

report to the parliament, are

transferred to the central case

file. This central case file is the

linking pin between all political

and production activities. The

same infuse and fuse approach is used to support the various actors and to interface with existing

data stores and production processes. Separate viewpoints can be generated to support for instance

e-Participation. Depending on the case it is possible to instantly involve other actors into the process.

In the background supports the dynamic case management service the logging of all data that are

required to prove compliance to the executed regulations.

I am a police officer

and want to book this

traffic offender

I am a citizen and want

a building permit for

this house

I am a judge and need

to assess the cost of

damage of this offence

I am a civil servant and

need to decide upon

this permit requestI am a enforcer and

want to check the

permit compliancy of

this company

I am a police offercer

and want to book this

traffic offender

I am a tax office and

need to levy tax for

this conglomerate

I am a policy maker

and want to consult

these bodies

I am a crisis manager

and need an

assessment of

cellulosetrinitrate

I am an au pair from

Thailand and want to

work in Belgium

I am a student from

Iceland and want to

study in France

I am a knowledge

worker from India and

want to work in

Germany

I am an unemployed

mother and need a

social benefit

I am an administrator

and want to calculate

this contribution

I am a notary and want

to know the specifics

of this cadastral object

I am a bar owner and

want to extend my

opening hours limit

I am an intermediary

and want to assist this

disabled person in his

claim

I am an inhabitant and

want to report damage

to the City playground

I am,

I want / need

Initiation EvaluationFormulation Implementation

Political GroupsCommission Council Committees Plenary

Political

Support

Activities

Other Participants and Stakeholders

Actors with

mulitiple roles

Hub

Production

Support

ActivitiesTranslation Registration Modelling Codification Publishing

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2.4 Empowerment by embracing complexity

By embracing complexity public sector organizations become capable of empowering their

stakeholders, leverage first class public services and closing the gap between policy and execution.

Existing value chains become even more valuable and new value chains can be created.

Interoperability problems between autonomous organizations are solved by introducing semantic

interoperability and dynamic case management support. Civil servants are released from doing

monotonous work by introducing straight forward processing in order to enable them to use their

expertise in solving more complicated cases and issues. Citizens and businesses can use self-service

and a single point of contact for public services. They have the possibility to monitor progress and

give feedback via their own personal dossier. Decisions are made faster and more consistent by using

the same rules for request, decision making and enforcement. Managers can monitor progress and

auditors and lawyers can trust upon the embedded compliance.

Figure 7 Value drivers for stakeholder empowerment

Many reforms in government in the last decades were based on increasing efficiency, effectiveness

and value for money without giving much attention to the policy process and the way it affects the

ability of policy makers to meet the needs of constituents in an increasingly complex, uncertain and

unpredictable world. Modernizing this core process by embracing complexity will yield considerable

economic and social benefits, including enhanced productivity, openness, transparency and

participation as well as actionable integrated and interoperable policy intelligence. Policy makers can

be empowered by semantic based support in legal drafting and by evidence based policy to meet

requirements for smart regulation. The concepts of Public Sector Information and Open data can be

extended to the use of open rules and concepts. Regulators can even start to offer public services

based upon their legislation. These services can then be re-used and embedded in the existing

services of other public sector organizations and private sector parties. Catalogues disclose the

contents and rules of basic registrations in order to increase the potential for use and re-use. Product

portfolios can be managed and adapted by the business owners themselves.

Citizen Centric Government

Single Point of Contact

Life events

Self service

Multi-channel, -law, -actor, -product

Semantic Interoperability

Decision making

Risk profiles

Request to cash (levy/benefit)

Request to appeal and enforcement

Public Sector Information

Embedded compliance

Personal dossier

Dynamic Case Management

Rule Governance

Impact Assessment

Scenarios

Predictive Analytics (simulation)

Inclusive policy making

Consultation

Transparency

Legislative design

Open rules and data

Vocabularies and definitions


Catalogues

Portfolio management


PublicEmbrace Complexity

Policy to Execution

Public Services

DomainFocusValue drivers

Design &

Continuity

Mantra

Quality assurance

Organizational design

Transformation support

Architectural design

Lifecycle management

Network & process management

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Managers are able to implement an expertise network that is tasked with design and continuity

responsibility. This network will keep distilling the essence of the operations and focusing on

supporting the essence in order to prevent the creation of new complicatedness. It will support the

transformation process of the organization and the overall management. It will support business and

ICT in working together to continuous improve the public service quality and manage the lifecycle of

services.

Managers can sleep comfortable at night because they have embedded and embodied complexity in

their organization.

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3. Finance sector

3.1 Introduction

Financial services can be defined as the products and services offered by institutions like banks of

various kinds for the facilitation of various financial transactions and other related activities in the

world of finance like loans, insurance, pensions, credit cards, investment opportunities and money

management.

For most of the products in financial services, transactions are essentially a set of promises being

exchanged between the buyer and the seller. From the buyer’s point of view much depends on what

exactly is being promised and the likelihood of such promises being delivered. The financial services

sector therefore essentially deals only with one product: TRUST. Trust is literally of vital importance

since customers have trusted their money to financial companies to be assured of sufficient means in

situations that determine the quality of life, like retiring on a pension, coping with a handicap,

relocating or basically being able to consume at the expected standard of living. Without trust, no

customers and without customers no business.

Transparency goes hand in hand with trust. Especially the economic crisis has catapulted

transparency to the highest level of customer and business interest. The complicated nature of many

products makes it hard for the industry to meet the anticipated level of transparency, let alone to

provide services that in a pro-active way inform customers about the impact of events and trends on

their portfolio.

Financial services are characterized by intangibility (impalpable and difficult for consumers to grasp

mentally), inseparability of production and consumption, perishability (need for short distribution

channels so that they can be produced on demand) and heterogeneity. Despite the heterogeneity,

services are also characterized by fiduciary responsibility and two-way communication. Fiduciary

responsibility refers to the implicit responsibility of financial services suppliers for the management

of their customers’ funds and the nature of the financial advice supplied to their customers. Two-way

communication refers to the fact that financial services, rather than being concerned with one-off

purchases, involve a series of regular two-way transactions between buyer and seller usually over an

extended period of time.

Financial services tend to be one-off purchases but ones which are required on a recurring basis with

the result that there is a clear need for financial services suppliers to establish initial relationships

with their prospects while at the same time maintaining and developing long-term relationships with

existing customers. Lifecycle management is a must for maintaining good relations and seize

opportunities for value upgrade.

Enterprise risk management is of vital importance to meet the trust and confidence levels of the

stakeholders. Enterprise risk management deals with risks and opportunities affecting value creation

or preservation. Goals are translated into controls which are implemented into the organization.

Audits are used to assure that the controls are executed conform standards. Strict operating

procedures, sophisticated risk profiles and up to date financial models, like actuarial models, are all

means used to manage risks. It follows that proven compliance to internal and external regulations

and procedures is also an essential element of the risk management process.

http://www.blurtit.com/q680868.html

16

Portfolio management and asset pricing must also be up to date to seize opportunities and prevent

risks. Due to the heterogeneity of the sector, portfolios are very diverse but the types of stakeholders

that must be serviced is in fact limited. Clients are customers or their employers, other stakeholders

are for instance pension funds and similar organizations, shareholders, board members and

regulatory supervisors.

The impact of customers and regulators on the corporate performance is high. According to a

McKinsey Global Survey contribute customers for 74 percent to the economic value of companies

and governments and regulators for 53 percent. In may be expected that these percentages are

rather more than less in the financial services sector. Especially on the regulators side is the influence

increasing notably. The sector is confronted with a higher importance of using standards and being

accountable. Financial regulation is becoming stricter and regulators are more demanding. Also

reporting standards, accounting standards, record keeping standards, risk management standards

and the frameworks used for complying to the standards, are all having a direct impact on the

operations. Examples of such regulations and standards are: Basel II and III, Sarbanes-Oxley, GARP,

Dodd-Frank Wall Street Reform and Consumer Protection Act, EMIR, IFRS, GAAP and frameworks like

COSO and COBIT.

Business innovation proves to be a real challenge for many actors in the financial services sector. This

relates to the IT infrastructure as well to innovation of products and services. As a result, managers

are now challenged to innovate along multiple axes at the same time. The most visible axis is

innovation in customer centric services. Product out thinking has to be replaced by customer in

thinking. This results in offering 24/7 services. Self-service is becoming increasingly important in the

sector as a means to meet customer demands and reduce costs.

The sector has found out the hard way that this kind of services does not stop at the front office. An

integrated front- and back office process is required to deliver the by customers expected quality of

service. Service is not anymore a department but has to become an attitude. Moreover, by offering

online services, the competitor is only one mouse click away. New service providers offer prospects

the opportunity to compare products and to read reviews of these products. Products that were

presented in the past as being unique turn out to be comparable and assessable. Commoditization is

inevitable.

The self-service trend will not lead to the complete dissolving of the traditionally approach of

offering services via direct writing or intermediary brokers. Online services and face-to-face services

must both be supported by the same set of rules and appropriate instruments.

The financial services sector is also looking for new business models that can make a difference in the

competitive field. New models for emerging markets like micro banking is one of the examples of this

trend.


The financial services industry is very dependent on how it reacts to social complexity. Reputation,

expectation and perception must be totally in line to outperform competitors and meet the

customers’ demands. The sector is struck quite heavily by the economic crisis, since this crisis is in

essence a crisis of values. The societal reaction is twofold: at the one hand an ongoing sweeping

wave of regulations, and at the other hand cynicism and mistrust of customers, eroding customer

17

loyalty. Both have a severe impact that fundamentally affect the operations and profit generation

capacity of the financial services industry.

Financial services are based on customer trust and confidence, not only in the organization supplying

these services but also particularly in the customer contact employees themselves. Because of the

intangibility, inseparability and heterogeneity of services, there are fewer tangible cues to base

decisions on prior to purchase and therefore greater reliance is placed on experience qualities during

information and transaction, as well as after purchase and during consumption. This requires a

customer centric approach in which every customer is treated as being unique during his whole

lifecycle. The service suppliers must be able to handle an almost infinitely number of combinations,

which is not supported by the current practices and tools. This process of me, as it is coined by

Gartner, requires besides sophisticated information systems also attentive and knowledgeable

agents in the call centers as well in the direct customer facing contacts.

Transparency of what is being offered as well of what the financial impact for the supplying

intermediary is, requires an openness that was not common in the sector. In order to provide this

transparency revenue sharing models have to be adapted and therefore contracts with intermediary

brokers have to be renegotiated too. This can create commotion in an important part of the sales

channels.

Direct writers and intermediary brokers need more insight in the customer decision making process

in order to provide the service that matches the customers value system and behavior pattern.

Segmentation along value and behavioral lines is however in many cases not a standard element in

the existing customer segmentation approach.

Organizations must get the governance of their policies right. They have to make sure that the

appropriate policies are always applied correctly by their staff and automated processes. This relates

directly to the dynamic complexity the financial services industry faces. Financial products and

services are in general complex and increasingly subject to all sorts of regulations. This leads to the

situation where financial services companies are confronted with a variety of rules and regulations

from different sources. Complying with these rules proves to be a complex matter, even with the

simplest of activities. In addition, they are confronted with frequent changes in these rules and

regulations which are to be implemented in their processes, systems and their communication with

clients.

Keeping the focus on efficiency and effectiveness-oriented activities, together with activities that

make public service delivery more coherent, is difficult if the interdependency between the parts of

the system is unclear. This interdependency is one of the characteristics of dynamic complexity.

Insight and oversight of cause and effect relations within the own organization and within the

network in which one operates is hard to obtain, let alone to maintain. The same applies to

productivity, since increasingly complex legislation leads to more and more complex applications and

business processes to execute these laws. Productivity gains can be flushed away by new political

and legislative demands. Standardized processes are forced to accept exceptions which lead to the

creation of new processes and laborious exception handling.

The large volumes of customers and products require a level of mass customization that is hard to

meet. There is a need to increase the value upgrade potential for customers and move from Straight

18

Through Processing (STP) of mass processes to STP of mass customization processes. At the same

time there is a need to decrease the variation complexity. In traditional concepts this is done by

reducing the variability. In more contemporary concepts this is achieved by a component based

approach. The more sophisticated concepts even enable to achieve one to one processing of

individual cases by the same

mechanism as the mass

customization mechanism.

However, most IT-systems lack

the sophistication to deliver this

level of customer and processing

benefits.

The fourth quadrant in the

image is identified in a Harvard

Business review article as the

quadrant of nascent or broken

processes. These are processes

that are emerging or that are not or inadequate functioning. These have either to be removed or

embedded in one of the three quadrants.

Financial products and services are complex because they can consist of multiple components and

corresponding contract conditions that are brought together in a certain moment in time.

Components and conditions can change over time. Products can be combined, extended or split up.

Conditions can change due to economic or legislative requirements or to changes in the customers’

situation. Packages of products can be bundled and treated (and also traded) as a portfolio. The

complexity of the products makes it difficult to keep track of the interdependencies between

products, portfolios, rights and obligations. Mergers and acquisitions, as well as demergers, add

additional complexity in becoming and maintaining a clear overview of the portfolios and their value

and risks. This has of course also an impact on the efforts that are needed for risk management.

Traditionally, financial services companies have used a technology-driven approach to IT. Software is

purchased based on features, rather than the role the software could play in the bigger picture. Not

only does that lead to duplication of functionality (and license costs), IT departments also have to

spend too much time configuring this functionality, building interfaces to existing systems and

maintaining these increasingly complicated systems. This leads to more and more problems in

execution, rising IT-costs and failing projects. IT-complexity has become too high because rules are

buried in software code, hiding manageable policies behind vast amounts of software, processes,

manuals and other systems. This frustrates the insight, transparency and manageability of processes

and the ability to swiftly adapt to changes.

The extent to which organizations are able to cope with unanticipated events that change the arena

is crucial for their success in complex environments. Also the financial services industry has to deal

with emergent complexity. Emerging complexity is characterized by disruptive change. The sector

faces challenges to which the solution is unknown. It can even be that the problem itself is still

unfolding and not yet totally clear. The greater the emerging complexity, the less organizations can

rely on past experience. One has to deal with situations as they evolve. This requires an adaptive

approach and also calls for competences, methods and instruments that are oriented towards

Individual

processes

Nascent

or broken

processes

Masss

customization

Mass

processes

Low variability

Posi

tive

Process environment

High variability

Negati

ve

Valu

e o

f o

utp

ut vari

ati

on to

cust

om

ers

Straight Through Processing

Decrease variation complexity

Incre

ase

valu

e u

pgra

de p

ote

nti

al

One to One Processing

19

continuous change. New business models, new entrants, new alliances and new channels are on the

verge and require a capacity to adapt and adopt and preferably also to generate for instance a new

playing field. Scenario planning can be one of the instruments to be prepared for various events and

outcomes.

Dealing with multi-reality is one of the greatest challenges financial services organizations face. They

have to cope with new regulative requirements and the time versions that arise from new legislation.

Old cases have to dealt with according to the old procedure and new according to the new

procedure. Services have to be provided across multiple channels while users can switch between

channels in between their process. New channels evolve due to for instance the mobility of

customers, while old ‘paper based’ services remain intact. New product can be offered, while old are

still in place. The sector must be able to assemble very quickly new product combinations, develop a

high standard in variants management and embed a kind of compliance in its operations that is

change resistant. Commoditization and individualization have to be supported at the same time.

Coping with multi-reality and combining ‘the old’ and ‘the new’ is a challenge of which the sector is

not yet very well prepared. The organizational transformation process will have a large impact.

In line with the approach for dealing with the variation in processes there is also a component based

approach required for accelerating product innovation. Ideally should the business itself be able to

assemble new products and offer them via one or more channels. Liability risks are then already

checked at the component level and need to be only checked at aggregation level.

It has to be said, however, that new business models, like micro banking or equivalent services for

insurance, are hard to introduce in an increasingly risk avoiding culture. Emerging complexity calls for

leadership that can deal with uncertainty, that is forward and outward looking. It must be able to

respond to unforeseen situations. This type of leadership must be able to adapt, to influence and to

generate.

3.3 Looking at the finance sector from the blank canvas viewpoint: examples

From a purely objective point of view do many financial sector processes only consist of a few steps.

If we take for instance the insurance process, we can see that the process basically consists out of

four steps: Informing or

orientation about the

requirements and options,

advising about which option fits

best in the specific context,

offering and contracting, followed

by servicing. If preferred the

process can be drawn in more

detail by adding aspects like

gathering information, assessing

or making quoting a separate

step. But even then only a short

list of steps remains. Every step

consists of a limited set of

activities, that can be executed multiple times. In the center of the process resides the case file that


Interpretation

Dedication

Case

20

connects the results of the activities. After each step the dossier will be in a specific state, like

‘requested’, ‘approved’, ‘rejected’, ‘checked’ or ‘claim closed’. The rules that determine which

activities are allowed by whom, which deadlines apply and which regulations apply to the specific

request are managed separately and infused into the process at runtime. Exceptions do not exist

anymore; they are caught in the business rules. Data that are needed in the request and that reside

in insurance databases are also fused into the process, in order to prevent asking information that

the insurance company already knows.

A proven way of defining the context of the requester is the use of life events. These are common

events like birth, study, marriage, work, moving, being unemployed etcetera. In line with these life

events, also other events and appropriate scenarios can be defined that are specific for a certain type

of service. By identifying the actor and event we can reason about the rules that apply to the specific

combination. This simple concept of ‘life events’ can be easily specified by using the “I am, I

want/need” approach. For instance, “I am a one-man company and want to insure my health risk” or

“I am an independent consultant and need a pension plan”. Life events can also be a trigger to re-

evaluate the customer’s portfolio and suggest appropriate conversion options. Risk profiles can be

applied, based upon the context of the requester. Similar to risk profiles, companies can also apply

behavior profiles to identified customers. The information provided and the way it is provided will in

this case depend on the behavioral type of customer, e.g. risk avoider, snap decision maker, detail

researcher or camp follower.

One of the great benefits of this approach is that financial services can be offered as self-service to

individuals and businesses. The users are addressed in a language that they understand. Their replies

and context is mapped upon the ‘finance’ speak in a very transparent and manageable way. This type

of semantic interoperability is also vital for specialists of diverse practices that have to work together

in for instance a claim handling or complex contract handling situation.

The productivity of processing cases can benefit from building a hybrid process in which cases are

handled via Straight Through Processing. Exceptions can be moved to a manual step if for instance

human interpretation is required. After the interpretation step the case is re-injected into the STP-

process.

Figure 8 Hybrid processing based upon STP

The interdependency between regulations and processes can be managed by using a regulatory

framework for the implementation and compliance of regulations and policies.

21

Figure 9 Knowledge base with integrated legal source browser

The framework contains the regulations and policies, the topics that have to be taken care of, the

requirements for these topics and the controls that are implemented in the specific processes to

meet these requirements. The basis of this framework is an authentic source in which the regulations

are execution-independent stored and maintained. From this source they are related to the

processes, actors, departments, products etcetera to which they apply. Changes in a rule can directly

be related to all instances in which this rule is applied.

The Regulatory Framework can also be used an instrument to identify and improve governance and

e.g. accounting policies, risk processes and data quality. The same applies also to risk profiles.

However, risk profiles can also be developed for e.g. market risks, credit risks or securitization

mitigation.


By embracing complexity financial sector organizations become capable of empowering their

stakeholders, leverage first class services and closing the gap between strategy and execution.

Organizations can bring their knowledge from the traditional back-office applications to the front-

office and to the internet (self-service). This delivers organizations huge cost savings (customers now

do what normally is done by expensive personnel), improved customer satisfaction (faster response,

better advice, more individual treatment), simpler registrations and therefore more flexibility.

The service consistency improves regardless of the service channel: all channels use the same rules

which are centrally managed. There is no uncontrolled proliferation of knowledge (product

definitions, operating rules, etc.). Context sensitive and event-driven advice and other services

deliver the “it’s about me” experience.

22

Stakeholders can be serviced in a tailor made way. For instance, participants of a pension scheme get

a clear view on their built up rights over their working life. They can understand the future

perspective at retirement and the gaps that need to be managed; and understand what decisions to

make to manage the acceptable target levels of future income. While employers get a clear view on

the current and future costs and obligations which enables them to deliver added value to their

employees and to be compliant with (changes in) rules and regulations. They can make better

decisions for the optimal premium structure and organizing pension schemes that will be effective

and attractive for the future retirements of their employees. And finally Pension Fund committees

get a clear view on the current and future obligations, working capital (liquidity) and get the ability to

manage proactively on asset and liability management, yield and portfolio investment strategy.

Operational excellence can be achieved by automating operational processes and decisions to a high

degree. The efficiency increases; less human effort is required to generate the same number or even

more decisions than before. This improves the potential for managing the organization and creates

opportunities for improving business operations. Applying goal driven and event driven approaches

to process management allows organizations to derive processes dynamically from the context of the

case. The rules decide how cases will be processed: may a case be processed automatically or must

the case pass the desk of an employee. Furthermore, the rules dynamically decide which tasks must

be executed to solve a case, thus avoiding unnecessary activities. Where possible decisions are taken

automatically (straight through processing). When necessary – due to subjective criteria, high risks,

missing information - human decision makers can manually handle the cases (case management

combined with decision support).

The high level of STP, in combination with decision support for knowledge intensive manual

operations ensures the correct application of rules, and prevents making mistakes, leading to

reduction of errors and less rework.


FinanceEmbrace Complexity

Policy to Execution

Financial Services

Design &

Continuity

Customer Centric Services


Life events

Self service



Decision making

Risk profiles

Behavioral profiles

Order to cash

Lifecycle support

Embedded compliance

Personal dossier


Rule Governance

Impact Assessment

Scenarios


Consultation

Transparency

Policy design

Regulatory Framework



Catalogues



DomainFocusValue drivers Mantra

Quality assurance






23

Applying compliance and risk management rules and regulations directly in the operational process

enforces the right and consistent appliance of these rules, thus guaranteeing compliant execution.

Automatic recording of all activities and rule based decisions on all cases enables to trace “who has

done what, when and why” at all times. Compliance and traceability are embedded into the case

handling process.

This leads to less education & training efforts. Employees are context specific and timely informed

about changes in laws and regulations, customer agreements, regulations, etcetera. Staff can be

allocated at their own strength: experienced employees with much knowledge can concentrate on

handling exceptions, and focus on the execution of complex tasks which are difficult to automate.

And less experienced employees are able to deliver high quality, faultless output, due to the

embedded knowledge and decision support. This all resulting in improved employee satisfaction.

Routine operations are fully automated: the nature of the manual work changes considerably. As STP

increases, the manual activities that remain are more oriented to what people can do better than

computers: judge subjective situations.

Existing value chains become even more valuable and new value chains can be created.


interoperability and dynamic case management support.

The use of a Regulatory Framework and the introduction of rule governance leverages the re-use

potential of data and policies. Interdependency becomes visible and the impact of change scan be

analyzed before introducing the change into the service.

Policy scenarios can be drafted and simulated. Policy targets can be compared with the realized

outcomes and provide valuable feedback for continuous improvement. Portfolios can be analyzed

too and risks can be better mitigated. Transparency improves considerably for all stakeholders,

including regulators. For instance, banks can assess the future profitability of their existing

businesses based on the likely impact of the new regulatory requirements and the mitigation

potentials. In some instances, banks may want to explore opportunities to amend prices and reduce

costs to continue operating profitably. If that does not prove sufficient, banks may wish to consider

exit strategies, even if that implies a significant reduction of their total volume of activity.

By using the blank canvas approach to IT the huge cost saving potential of removing complicatedness

becomes clear. TCO-costs will implode. At the same time the business can act more agile because

they are empowered to define products and services and their conditions themselves. Changes in

products and services, regulations, work instructions are implemented fast and consistently. When a

change is modeled, it can be executed directly.

This will become increasingly important, since the greatest shift in the way we view innovation will

be that the innovation of business models will need to be as continuous a process as the innovation

of products has been over the last hundred years. It’s here that the greatest payback and value of

innovation has yet to be fully understood and exploited.

Managers are able to implement an expertise network that is tasked with design and continuity

responsibility. This network will keep distilling the essence of the operations and focusing on

supporting the essence in order to prevent the creation of new complicatedness. It will support the

transformation process of the organization and the overall management. It will support business and

24

ICT in working together to continuous improve the service quality and manage the lifecycle of

services.


their organization.

25

4. Health care sector

4.1 Introduction

Over the last 50 years there has been enormous economic and social progress in Europe and –

although there are large regional and social differences – Europeans are living longer than ever

before: on average eight to nine years more than in 1960. This coincides with other demographic

developments: fewer children are being born, which will mean fewer people paying into state

pension and healthcare systems, and a smaller pool of potential carers. The health care industry is

relying more and more on innovation and the use of IT to cope with the costs and increased

workload. Finally, prevention becomes an important part of the health care policy.

The health care industry is very heterogeneous. It covers both care and cure. There is a large and

diverse group of actors each with its own practices and interests. On a high level these groups can be

dividend as depicted in the beneath picture, based upon a report of the Dutch Court of Audit.

Figure 11 Actors in the health care industry

The Health care industry is challenged by three interlocking crises that make present health care

systems unsustainable:

1. Rising costs,

2. Changing demographics.

3. Quality of care.

All three crises have become drivers for change.

According to a survey of Frost and Sullivan in 2007 healthcare spending will double claiming 20-30%

of the GDP in 2050. Health care cost continue to upward spiral; it seems to be a recession resistant

industry. The premium growth continues to exceed increases in inflation and workers’ earnings. As a

consequence of the rising demand and increasing costs the resent insurance model for health care

costs becomes unsustainable.

Patient & Client Organizations

Patient / Client

Policy holder

Sector & Professional

Organizations

Insurance

Companies

Government/

Regulator

Health Care PurchaseHealth Care Provider Health Care Insurer

Supervision of:

- Quality of care

- Enforcement of the Care Institutions (Quality) Act

regulations

Extra regulations, directives, instructions (if required)

Providing responsible care

- Developing in consultation with Client Organizations

and Insurers

- Organizing responsible care by means of a operational

quality system

- Accountability via yearly quality statement

Based upon a report of the Dutch Court of Audit; 2009 © Schwandt Infographics

26

The changing demographics leads to the need for anytime, anyplace care. Care and cure have to be

provided outside the traditional residential boundaries. Telemedicine and tele monitoring become

new disciplines. Self-care becomes more important.

Figure 12 Continuous change in the health care economy

The quality of care can be improved by continuous innovation. New medicines, insights and practices

can bring relief to existing problems. On the other hand, however, is the quality at constant risk. The

error rate is too high, information systems are not

interoperable and a unified patient view is lacking. This

makes it very hard to fulfill the need for patient centricity.

Complexity and workload is crippling physicians and

hindering their ability to deliver high quality care. Clinicians

in healthcare face problems like patient overload,

bureaucratic red tape, loss of autonomy, loss of respect and

low reimbursement rates. This results in low morale and

burn outs that in combination with staffing problems affect

the quality.

The pressure of governments and regulators to control

quality and costs increases. Governments want to know

where every invested Euro or Dollar goes and what he

delivers. At the same time new quality regulations increase

the bureaucratic burden of the health care system. Medical and administrative liability leads to the

creation of huge information containers and flows across organizations that become unmanageable

and lead to more errors.

As a result of the focus on costs the power balance between the organizations in the health care

industry is shifting. Insurers are more and more dictating which medicines can be provided and

which treatments are insured. Reputation management becomes important, because ill performing

providers are getting excluded from new contracts. The applied policies and conditions are in

constant change.

Demographics• Silver society

• Anytime, anyplace health

• Telemedicine/-monitoring

• Self-care

Quality of Care• Reduction of errors

• Increased risk identification

• Continuous innovation

• Patient centricity

Rising Costs

• Growth towards 20% of GDP

• Increase in demand & supply

• Industry resistance to inflation

• Unsustainable insurance model

Drivers of Change

27

One of the answers to the challenges is the increased use of technology. Technology impact will be

visible in diverse areas like medical technology, consumer electronics, communication technology

and of course information systems.

Important means in the use of information systems are:

1. The Electronic Medical Record (EMR)

2. Interoperable Health Care Information management systems

3. Decision support systems

4. Interoperable Health Care insurance systems

The use of technology is needed to improve the patient safety, improve the process e.g. (waiting

time), improve the quality of practices and the regulatory compliance. There are however also

barriers that hamper the use of IT like privacy concerns, conflicting interests and lacking

standardization.

Another answer to the challenged mentioned before is the shift from reaction to prevention. More

and more tend governments and health care professionals do

stress the importance of prevention. The present system

contains some perverse incentives: hospitals and physicians get

paid helping people once they are sick as opposed to keeping

people healthy. Also, hospitals compete against each other,

there is medical arms war. Specialization and economy of scale

in IT and medical technology are used to get a competitive

advantage.

It is to be expected that the focus will shift in the coming decennia towards more prediction and

prevention. The options to predict in very early stages the possible risk of getting for instance

diabetes are expected to improve dramatically. This will give an extra boost to prevention programs

and stressing the importance of lifestyle management. Self-responsibility of citizens will become an

important criterion.

The complexity that the healthcare industry faces will by no means diminish, on the contrary it will

expand.


The health care industry faces various forms of complexity as can be analyzed based upon the

preceding paragraphs. In the domain of social

complexity, we can situate the emergence of the e-

Patient. e-Patients are health consumers who use

the internet to gather, share and produce

information about a medical condition of particular

interest to them. e-Patients are increasingly active

in their care and are demonstrating the power of

the Participatory Medicine or Health 2.0 / Medicine

2.0 model of care. They are equipped, enabled,

empowered, engaged, equals, emancipated and

Reaction

Prediction

Prevention

28

experts. They use the internet as the primary source of information.

Results of a recent survey in Germany show that e-Patients put their trust far more in general health

care portals, portals with patients exchange possibilities and sites of official support groups. The

websites from hospitals, pharmacies, health care insurances and the pharma industry scored way

below these groups. The obvious lack of trust in the industry complicates the interaction between

health care providers and consumers. It leads to an increase of second and third opinions, medical

migration, reputation damage and claims. It is also a blocking stone for the industry to play a major

role in the trend to self-responsibility, prevention and self-care.

With respect to dynamic complexity one can state that the health care sector is among the most

active and evolving value chains. “Under construction” seems to be the only constant. Governments

are continuously looking to control and reduce cost, given the magnitude of government spending.

Through privatization, many governmental organizations in any country seek to reduce costs by

introducing market discipline, creating a value chain, spanning both public sector as well as

commercial enterprise. As a result of all these transformations, financial regulations and processes

have become mind-bogglingly complicated. Unfortunately, it means that governmental bodies as

well as both the “cure” and the “care” side of public and private healthcare spend valuable budget

on managing that budget, cost and other financial flows. All these complexities and complications

lead to more opacity instead of the desired transparency.

Besides the financial processes have also the medical processes become more complex. Medical

technology, drugs and practices are constantly changing. Evidence based medicine has become an

integrated part of the industry. The number of actors that is involved in the treatment of a patient is

often large and case dependent. The introduction of an electronic medical record advances only

slowly because of privacy concerns, established interests and halfhearted government and industry

support. Changing disease patterns, consumer behavior (e.g. refusal of vaccination), political

importance and care accessibility do add to the complexity.

The health industry has also to deal with emerging complexity. Emerging complexity is characterized

by disruptive change. The sector faces challenges to which the solution is unknown. It can even be

that the problem itself is still unfolding and not yet totally clear. The greater the emerging

complexity, the less organizations can rely on past experience. One has to deal with situations as

they evolve. This requires an adaptive approach and also calls for competences, methods and

instruments that are oriented towards continuous change. New business models, new entrants, new

alliances and new channels are on the verge and require a capacity to adapt and adopt and

preferably also to generate for instance a new playing field. Scenario planning can be one of the

instruments to be prepared for various events and outcomes.

An recent opinion on future trends in the health care economyxiii lists the following trends:

• Open world: From markets defined by boundaries to markets defined by flows

o Expanding global patient populations, internationalized labor resources, and

globalization of biomedical innovation and production will create markets defined by

flows of knowledge, human & capital resources rather than regional, national, or

geographic boundaries.

• Ecologies of risk: From institutional to individual risk management

29

o As institutions are no longer willing or able to offer risk protection, individuals will

have to manage the full range of health-related risks made more challenging given

the relationships between these risks.

• Do-it-yourself anytime: From passive patients to co-creators of health

o Whether by choice or by force, individuals will have increasing responsibility for

managing their health. They will respond to this burden of empowerment with three

do-it-yourself behaviors: self-agency, self-customization, and self-organization.

• Anyplace health: From traditional clinical settings to new points of care

o Cost-pressures, the changing role of hospitals, non-institutionalized care for seniors,

and new communication & diagnostic technologies will expand care setting into the

community, the home, and into niches of time and place in the course of daily life.

• Health-aware environments: From computing to sense-making

o As objects, places, and even humans are embedded with technologies that sense,

understand, and act upon their environment, we will gain the ability to track and

monitor our physical, social, and emotional well-being, creating new options for

personal health management.

• Better then well: From therapy and treatment to enhancement and extensions

o Self-improvement approaches extremes as people experiment with digital,

pharmacological, biomechanical, and medical tools to alter, enhance, and extend

their bodies in profoundly different ways, in turn reinventing their bodies, minds &

identities.

The field of play of health care is therefore changing as depicted in the following image.

Figure 13 Field of play health care industry

There will be a growing use of medical devices, the nature of prescriptions will change, health

benefits will be sought too in food, the make-over culture will expand and the information ecology

will be dominated stronger by collective intelligence.

Biopharma

Health Care Providers

Sector & Professional

Organizations

Patient & Client Organizations

Health Care Insurers

etcetera

Health Care Industry

Government / Regulators

Medical Technology

Beauty

NutritionConsumerElectronics

Information

30

All these trends offer opportunities and threats to which the industry has to respond. The biggest

challenge however is to become resilient to change and open to innovation.

4.3 Looking at the health care sector from the blank canvas viewpoint: examples

From a purely objective point of view do many health care sector processes only consist of a few

steps. If we take for instance the patient treatment process, we can see that the process basically

consists out of four steps:

Checking of health followed by

medical diagnosis (somatic and

non-somatic) by a specialist

which leads to medical

treatment, residential or non-

residential. The process ends

with medical discharge. If

preferred the process can be

drawn in more detail by adding

aspects like information

gathering, referral and

consultation. But even then only

a short list of steps remains.

Every step consists of a limited set of activities, that can be executed multiple times. In the center of

the process resides the patients case file that connects the results of the activities. This is a virtual

Electronic Medical Record. After each step the dossier will be in a specific state, like diagnosed,

referred, hospitalized or released. The rules that determine which activities are allowed by whom,

which deadlines apply and which procedures apply to a specific situation are managed separately

and infused into the process at runtime. Exceptions do not exist anymore; they are caught in the

business rules. Data that are needed in the case and that reside in various databases are also fused

into the process, in order to prevent asking information that is already known. Also correspondence,

medication, results of tests and other registrations can be linked to the case file.

The productivity of processing the financial aspects of health care cases can benefit from building a

hybrid process in which cases are handled via Straight Through Processing. Exceptions can be moved

to a manual step if for instance human interpretation is required. After the interpretation step the

case is re-injected into the STP-process.

Figure 14 Hybrid processing based upon STP


Interpretation

Reporting (decursus)

Case

31

Interoperability between registrations of the health care sector and public registrations is needed to

process a case in which for instance the cost are covered by multiple parties (insurance, welfare

benefits and personal contribution based upon income tax).

The interdependency between regulations, procedures and processes can be managed by using a

regulatory framework for the implementation and compliance of regulations and policies. Beneath is

an example of such a framework in the financial sector. The used principles apply also to the health

care sector.

Figure 15 Knowledge base with integrated legal source browser

The framework contains the regulations and policies, the topics that have to be taken care of, the

requirements for these topics and the controls that are implemented in the specific processes to

meet these requirements. The basis of this framework is an authentic source in which the regulations

are execution-independent stored and maintained. From this source they are related to the

processes, actors, departments, products etcetera to which they apply. Changes in a rule can directly

be related to all instances in which this rule is applied.

The Regulatory Framework can also be used an instrument to identify and improve governance and

e.g. operating procedures, risk processes and data quality.


By embracing complexity health care sector organizations become capable of empowering their

stakeholders, leverage first class services and closing the gap between strategy and execution.

The Electronic Medical Record applied as a virtual case file enables organizations to become more

patient centric. Decisions are made faster and more consistent by using the same information and

rules. Managers can monitor progress and auditors and lawyers can trust upon the embedded

compliance. Services can be organized around patients and their stakeholders.

32

Health information can be supplied in a more tailor made way, e.g. by using the concept of life

events. The health care sector can work together with interest groups to improve and assure the

quality of information. Patients can participate in the process. This could stop the trend of demisting

trust in the sector.

Health care quality can be improved without affecting privacy protection of individuals. Transparency

increases by embedding compliance and traceability into the case handling process.


interoperability and dynamic case management support. Existing value chains become even more

valuable and new value chains can be created. Value chains can be provided with their own case file,

which allows them to work together on a case without the need to share every piece of information.

Only the results of a test or e.g. an internal consultation round can be shared. A Physician Workplace

can be used to collaborate on cases, exchange opinions and practices.

Employees are released from doing monotonous administrative work by introducing straight forward

processing in order to enable them to use their expertise in solving more complicated cases and

issues. Patients and financial parties get up-to-data and coherent information. Contact centers can

offer self-service by providing the same source of financial information as they use themselves.


The use of a Regulatory Framework and the introduction of rule governance leverages the re-use

potential of data and policies. Interdependency becomes visible and the impact of change scan be

analyzed before introducing the change into the service. Policy scenarios can be drafted and

simulated. Policy targets can be compared with the realized outcomes and provide valuable feedback

for continuous improvement.

Employees are context specific and timely informed about changes in laws and regulations and new

operating procedures. This leads to less education & training efforts. Staff can be allocated at their

HealthEmbrace Complexity

Policy to Execution

Health Services

Design &

Continuity

Patient Centric Services


Life events

Self service



Decision making

Risk profiles

Straight Through Processing

Order to cash (including levy/benefit)

Embedded compliance

Personal dossier


Rule Governance

Impact Assessment

Scenarios


Consultation

Transparency

Policy design

Regulatory Framework



Catalogues



DomainFocusValue drivers Mantra

Quality assurance






33

own strength: experienced employees with much knowledge can concentrate on handling

exceptions, and focus on the execution of complex tasks.

The information management environment becomes sustainable, efficient and effective. By using the

blank canvas approach to IT the huge cost saving potential of removing complicatedness becomes

clear. TCO-costs will implode. Changes in products and services, regulations, work instructions are

implemented fast and consistently. When a change is modeled, it can be executed directly. New care

models and new business models can be supported without creating a parallel universe for the new

approach.


their organization.

34

Appendix ii John Seely Brown, Scott Durchslag and John Hagel III. Loosening up; how process networks unlock the power of

specialization. THE McKinsey Quaterly. 2002 Special edition on Risk and Resilience

iii 2010 data: http://www.mckinsey.com/mgi/publications/us_jobs/pdfs/MGI_us_jobs_full_report.pdf 2005 data: http://mckinseyhightech.com/ftp/Podcasting/HT_Labor_Interactions.mp3 Transformation – transaction (routinized / rule based / automated / scriptable) – tacit (complex problem solving) iv M Connolly. The interaction economy. 2006. v Otto Scharmer. Theory U; Leading from the Future as it Emerges. 2009. vi H. Schein. Organizational Culture and Leadership. 1985. vii Deciding for excellence. Gartner newsletter. 2010. viii Anna Kelly and Morton Meyerhoff Nielsen. Scandinavia 2.0: Efficiency, cooperation and innovations to alleviate the Economic Crisis. European Journal of ePractice www.epracticejournal.eu. Nº 11 · March 2011 · ISSN: 1988-625X ix Barabara-Chiara Ubaldi. The impact of the Economic and Financial crisis on e-Government in OECD Member Countries. European Journal of ePractice · www.epracticejournal.eu Nº 11 · March 2011 · ISSN: 1988-625X. x Focus on Citizens; public engagement for better policy and services. OECD studies on public engagement. OECD. 2009.

xi Thompson, J. Organizations in action: social science bases of administration theory. New York, 1976. xiiThe Financial and Economic Crisis – Impact on E-Government in OECD Countries, November 2009, OECD, Paris, France. xiii A. Fleshler, Future trends of healthcare. Study done by the Institute for the Future. 2009. See: http://www.slideshare.net/annafleshler/future-trends-of-healthcare

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http://www.epracticejournal.eu/

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