Chapter 9. Developing a digital transformation strategy

Establish a governance approach that supports effective co-ordination

Digital transformation policies need to be co-ordinated among all policy domains and actors affected by (and affecting) digital transformation. However, governments identify co-ordination as one of the major challenges to coherent and effective digital policies (OECD, 2017_[1]), despite the fact that the importance of co-ordination in other cross-cutting policies (e.g. innovation) is well-recognised (OECD, 2015_[2]). Such co-ordination should involve a wide range of actors in multiple parts and at multiple levels of government, as well as non-governmental stakeholders and international partners.

While well-designed governance is fundamental for effective co-ordination, there is no one-size-fits all approach to the governance of a DTS. Different approaches can reflect, for example, variations in countries’ institutions, government organisation, or administrative culture and capacity. In addition, governance arrangements are likely to evolve over time, for example with changes in government, technological progress and shifts in the constellation of actors driving digital transformation.

Almost all OECD countries have a national digital strategy in place, and most governments have developed some form of governance; however, the allocation of key responsibilities, such as for strategy development, co-ordination, implementation, and monitoring and evaluation, differs significantly across countries (OECD, 2017_[1]). More recent research by the OECD confirms this finding, and identifies two main approaches distinguished notably by their respective allocation of responsibility for strategic co-ordination. The first approach assigns responsibility at a high (above ministerial) level and the second approach at the level of one or several ministries. The discussion below is not intended to promote any particular approach, but rather documents the current governance landscape.

High-level leadership and centralised responsibility for strategic co-ordination above ministerial level, i.e. in most cases by the head of government, characterise the first approach (Figure 9.1). In this approach, the head of government also tends to be pro-active in promoting the country’s digital strategy domestically and abroad. Countries currently using this approach include Mexico and the Slovak Republic, where the Prime Minister holds a strong mandate for digital issues, including for the drafting of the strategy, executed through a dedicated co-ordination office. Other countries using this approach include Brazil, Chile, Estonia, Korea and Luxembourg, where certain functions are ensured by the Prime Minister, notably for strategic co-ordination, but where ministers still play an important role, both in providing input to strategy development and in the strategy’s implementation.

9.1. High-level strategic co-ordination of digital transformation policies

In all countries with high-level strategic co-ordination, stakeholders are involved in strategy development, usually through the co-ordination office. Operational co-ordination in the context of implementing the strategy tends to be ensured via focal points (e.g. chief digital officers) within each of the implementing ministries and agencies. The latter two usually also monitor implementation and report to the co-ordinating office, which in most cases ensures overall evaluation of the strategy, with oversight by the head of government.

Among the countries that centralise responsibility for strategic co-ordination above ministerial level, the central co-ordination office may be (part of) the centre of government. The centre of government usually supports the highest level of the executive branch of government. Examples include the German Chancellery, the UK Cabinet Office and the White House Executive Office (OECD, 2014_[4]). Centres of government tend to play a leadership role on strategic priorities and co-ordination, as well as on designing action plans in co-operation with relevant government departments.

A distinguishing feature of the second approach is the allocation of responsibility to a lead ministry for strategic co-ordination (Figure 9.2). In several countries, the lead ministry is exclusively dedicated to digital affairs, including in Belgium, the People’s Republic of China, Japan, Poland, Portugal and Slovenia. In other countries, this ministry has responsibility for several policy areas including a digital portfolio and, in a few countries, there is not one but several ministries in charge.1

9.2. Ministry level strategic co-ordination of digital transformation policies

In addition to strategic co-ordination, the lead ministry tends to be responsible for drafting as well as in some cases for implementing and monitoring the strategy. Strategy development tends to involve stakeholders, under the auspices of a ministerial council, which is usually hosted by the lead ministry and sometimes chaired by the head of government. Similar to the first approach, operational co-ordination is usually ensured by a dedicated co-ordination group made up of focal points from the implementing ministries and agencies. The latter two also tend to monitor implementation, reporting to the lead ministry and/or the ministerial council, which often also ensures overall evaluation of the strategy.

Irrespective of the actual design of a country’s governance approach, successful development and implementation of a DTS crucially depends on the skills and capacity of the people and institutions involved in its formulation and implementation. In general, the skills needed for a digital world of work (see Chapters 3 and 5) and life (see Chapter 6) are essential. More specific skills and capacity needed for a high-performing civil service and for public sector innovation include, for example, the skills to develop policy, such as the ability to define policy problems, design solutions and influence the policy agenda. In addition, skills to manage networks, for example to engage with citizens or stakeholders, such as public relations, knowledge and project management, co-ordination, communication and conflict resolution skills, are likewise important (OECD, 2017_[5]).

Articulate a strategic vision and ensure coherence

The development of a coherent DTS benefits strongly from a strategic vision (or direction) for the digital transformation of a country. Such a vision helps shape the main priorities and objectives of a DTS and facilitates coherence among different policy issues addressed within the strategy. A strategic vision may also clarify how digital transformation can contribute to economic growth and social prosperity, address “grand challenges” such as those related to health or climate change, and help achieve high-level policy objectives such as inclusive growth, well-being and sustainable development. Some of these high-level objectives may be included in other agendas or strategies (Figure 9.3). An important condition for shaping a strategic vision is to gain a holistic understanding of digital transformation. This involves identifying key properties (“vectors”) of digital transformation that affect policies and regulation across a range of areas (see Chapter 1).

9.3. Ensuring coherence between a digital transformation strategy and other strategies

To ensure coherence, existing national and/or international strategies and policy objectives need to be taken into account when developing a DTS. For example, a government may have a national development plan or an inclusive growth strategy. At the international level, governments may consider overarching agendas such as the United Nations’ Sustainable Development Goals or, in the case of European countries, the Digital Agenda for Europe.

A DTS also needs to be coherent with other higher and/or lower level strategies and/or policy objectives relevant to digital transformation. This concerns strategies and policies on any key issue covered by a DTS, such as jobs, skills and innovation. It is crucial to avoid overlaps and conflicting approaches and to identify possible synergies, including ways in which a DTS may help co-ordinate elements of other strategies that strongly relate to digital transformation. In addition, a DTS is likely to cover topics that are also addressed in more specific strategies and policies, for example broadband development or digital security. Finally, sub-national digital economy/transformation strategies and/or policies should complement and increase the effectiveness of a national DTS.

Assess key digital trends, related policies and regulations

Each country is at a different stage of digital development. Understanding where a country stands requires thorough monitoring and analysis of relevant trends, and effective evaluation of policy impacts. Measurement, monitoring and evaluation are critical for the design and governance of digital policy, and allow policy makers and analysts to: 1) assess the contribution of digital transformation to achieving social and economic objectives and stimulate informed debate (e.g. among key stakeholders); 2) understand drivers of and obstacles to digital transformation, which is crucial for designing effective policies; 3) evaluate the effectiveness of different policy approaches, thereby enabling governments to make informed decisions about priorities, policy measures and instruments, and the allocation of funds; and 4) continuously improve the design and administration of programmes and enhance accountability, legitimacy and credibility of government interventions (OECD, 2015_[2]).

Within the overall policy cycle, monitoring and evaluation follows the implementation of a strategy and/or policies. It should enable learning, prioritisation and improvement of policies over time and, in turn, form the basis of any new strategy and/or reform of existing policies. The vast majority of OECD countries are currently implementing a national digital strategy and many will soon need to evaluate and either update their current approach or develop a new DTS (OECD, 2017_[6]). Any new strategy should include a plan for monitoring and evaluation to ensure continuous improvement of the quality and effectiveness of public policy and expenditures (OECD, 2015_[2]).

Wherever a country stands within the implementation cycle of its current strategy and/or policies, the OECD’s Going Digital Integrated Policy Framework provides practical guidance on the policy areas to be considered for monitoring and evaluation (OECD, forthcoming_[7]). This approach not only helps to ensure a comprehensive assessment of all relevant trends and policies, some of which may not have been covered by an existing digital strategy. It also enables policy makers to systematically prepare a new DTS. The two main elements of the assessment are: 1) quantitative monitoring of key trends; and 2) evaluation (quantitative and/or qualitative) of the impacts and effectiveness of policies implemented to date (Figure 9.4).

9.4. Assessing where your country stands: Monitoring and evaluation

The monitoring of key trends helps governments identify strengths and weaknesses in the digital development of their country and scope main priority areas to be addressed by a DTS. The indicators defined in the monitoring and evaluation plan of an existing strategy, as well as more generally national statistics and alternative data sources that help quantify and monitor key trends and developments, serve as a starting point for the monitoring exercise.

International benchmarking, for example with the indicators produced by the OECD that map to the Integrated Policy Framework (OECD, forthcoming_[7]), is also important. A comprehensive set of indicators is presented in the accompanying publication Measuring the Digital Transformation: A Roadmap for the Future (OECD, 2019_[8]). These indicators and the underlying data can be accessed and downloaded on the Going Digital Toolkit portal,2 which allows countries to self-assess and benchmark domestic trends to other countries.

Policy evaluation helps governments understand the impacts of existing policies, including through regulatory impact assessment, and to evaluate their success in reaching their strategic objectives (OECD, 2017_[9]). This exercise also pinpoints gaps in existing policy and/or regulatory frameworks as well as issues of in-coherence (OECD, 2014_[10]).

Policy evaluation may in the first place rely on domestic analysis, including feedback from stakeholders, but should also take into account international comparisons and practices. Policy evaluation can be significantly improved by making better use of digital technologies, for example by directly monitoring policy outcomes (Box 9.2).

Develop a comprehensive and coherent strategy

Leveraging a governance approach that supports effective co-ordination, a strategic vision that ensures coherence, and key insights from monitoring and evaluation of previous strategies and/or policies, a comprehensive and coherent DTS should be developed. The process of strategy development may be different in each country, however, involving all relevant stakeholders is essential, e.g. to vet key priorities and objectives, identify policy measures to achieve the objectives, and develop an action plan to implement the strategy successfully (see next section). Key actors to involve include officials from all relevant parts and levels of government, non-governmental stakeholders, as well as international partners.

Co-ordination across a wide range of national and subnational government bodies and public entities can be challenging. For example, high transaction costs, power and information asymmetries, and different governance approaches across levels of government can make co-ordination and negotiations cumbersome. The person (and body) in charge of strategic co-ordination, e.g. the head of government or the lead minister responsible for strategic co-ordination and drafting the strategy, holds important responsibility for effective co-ordination. In turn, each body involved in developing and/or implementing the strategy requires a focal point to ensure co-ordination and continuous engagement in the strategy.

Digital transformation is not only driven by governments, but also by people, businesses and other non-governmental stakeholders. An inclusive process of strategy development needs to involve non-governmental stakeholders, including business associations, civil society organisations, trade unions, and technical and scientific communities (Box 9.1). Stakeholder dialogue can help identify barriers, exchange best practices, and create opportunities for self-regulation, stakeholder-led standard setting, and public-private partnerships. Widely used forms of stakeholder engagement include feedback from the general public, advisory groups and preparatory committees, and formal consultations with selected groups such as social partners. The use of digital technologies increasingly facilitates stakeholder engagement, for example through web-based consultations (OECD, 2018_[11]).

While international partners are usually not directly involved in the development of national strategies, they can determine some outcomes of a DTS. Issues on which international partners may be consulted, including private actors, include trade, cross-border data flows, foreign direct investment, regulation as well as questions related to Internet governance. While some of these may be addressed in the context of multilateral co-operation and agreements, for example in multilateral institutions, other issues may be agreed upon in bilateral co-operation, formal agreements, treaties or common standards.

Implement the strategy successfully

The main value of any strategy lies in its successful implementation. Even if a DTS is well co-ordinated and widely supported, challenges to implementation may arise, for example, from poor strategy design, such as unrealistic objectives, or from rigid institutions and organisational structures that impede efficient resource allocation. Administrative capacity, a clear division of labour, and complementarity among different parts and levels of government are crucial. Existing policy frameworks and social preferences can also hinder implementation (OECD, 2015_[2]).

An important condition for successful implementation is broad-based support for the strategy. This requires stakeholder engagement and may include an electorate mandate. Effective communication, constructive negotiation, and co-operation with stakeholders during the implementation, is crucial. In addition, the targeting and sequencing of measures must be well-thought through, e.g. by acting first on those that are a prerequisite for the success of others to minimise trade-offs and enable synergies between policies (OECD, 2018_[12]). Improving several aspects of policy making and implementation, digital technologies offer opportunities to improve the conditions for success (Box 9.2).

In more operational terms, successful implementation requires a sufficiently detailed translation of the strategic objectives into actions, i.e. specific policy measures and instruments, generally provided by an action plan. Measures and instruments include advocacy (e.g. awareness raising and education), investment, incentives and/or taxation, public services and programmes, and legislation and/or regulation, among others. Importantly, for all measures the action plan should allocate clear responsibility for implementation. This concerns not only officials and departments in ministries, agencies and other bodies implementing the strategy, but also non-governmental stakeholders, especially in the case of public-private partnerships.

All policy measures in the action plan that involve public spending or investment should identify the required amount and the source(s) of funding. While most OECD governments have a budget associated with their current digital strategy, approaches to budgeting differ widely across countries (OECD, 2017_[6]). For example, some countries have a budget specifically dedicated to their digital strategy, while others fund implementation measures via different budget lines of the ministries and agencies involved. In rare cases, the entity in charge of overall co-ordination has a budget to finance measures that are at least partially financed by implementing ministries and agencies. This can facilitate additional steering of the implementation and can be used to incentivise co-operation among different actors to work towards the same objective (OECD, 2018_[14]).

Finally, two crucial ingredients of successful implementation are a clear time-frame for the implementation of each measure and quantifiable targets and related indicators to monitor progress. Progress should be monitored using the specific targets identified in the action plan that underpins the overarching objectives stated in the strategy, as well as other related high-level policy objectives at the domestic and international levels. In addition, some countries closely link the timeline for implementation with their annual budgets and periodically re-assess their initial budgetary assumptions and revise as needed. At the end of the strategy’s implementation cycle, systematic monitoring and assessment is needed to enable an overall evaluation of the strategy in view of updating the existing strategy or preparing a new one.