THE CASE of Corinne Maier was one of the media events of the French silly season. Maier, an economist at Electricite de France (EDF), a pillar of the French corporate establishment, wrote a book called Bonjour paresse (‘Hello Sloth’) which landed its author in a bathful of eau chaude when it was splashed on the front page of Le Monde

Billed as a slacker’s manual and subtitled ‘of the art and necessity of doing as little as possible at work’, Bonjour paresse was a publishing sensation. But it also brought the author a summons to a disciplinary hearing on the grounds of damage to EDF’s prestige and the self-esteem of her colleagues.

Would she, wouldn’t she be sacked? In the event, having been given time to reflect by Maier’s defiant departure for a nice holiday (‘Everyone knows you can’t have a disciplinary hearing in France in August,’ she snorted), the company let her off with a warning, an outcome she accepted with remarkably bad grace, muttering darkly about ‘harassment’.

It’s not hard to see why EDF was cross. A nod to Francoise Sagan’s dark existential 1954 novel Bonjour tristesse (‘Hello Heartache’), Bonjour paresse does a rather more direct job on the existential void at the heart of business.

Stingingly written by a formidably well-read intellectual (Maier’s other subjects are literature and the famously abstruse psychoanalyst Jacques Lacan), her anti-business polemic pulls no punches. Much of corporate life, says Maier, is quite literally absurd, consisting of empty rituals and arbitrary actions whose only function is to provide the illusion of purpose.

Underneath is stasis – ‘everything has to change so that everything remains the same’ – in which the job of executives is to fill the time between pay cheques by doing nothing as actively as they can.

This hollowness is perfectly reflected in corporate speak, of which Maier produces several choice examples, some from EDF. ‘Rester leader implique securiser le sourcing et/ou le positionnement du groupe sur le midstream gazier, de meme qu’identifier un mix/portefeuille de production optimal en fonction du mass market,’ gives a flavour, its posturing self-importance even more offensive for its linguistic barbarity (‘no man’s langue,’ as Maier neatly dubs it).

Maier’s wrecking ball scores many bruising hits, for how could it not? But although she mercilessly exposes the unsayable – the gulf between the seriousness with which top managers regard their activity and the triviality of the object of their pretension, between the claims of flexibility and cool and the stultifying conformity beneath, between rhetorical benevolence and the reality of control – in one crucial respect Maier doesn’t go far enough.

She shares with the cartoon strip office worker Dilbert, whom she quotes, the unquestioned assumption that corporate existence is inherently meaningless. Hence the advice at the end of the book, which got her into trouble: to sap the business from within by going through the motions while doing as little as possible.

But – and this actually doubles the absurdity of today’s reality – there is no practical or intellectual reason why business should be like this.

Historically, business and trade were civilising influences. As Jane Jacobs has shown, ‘le doux commerce’ required honesty and trust as well as numeracy to flourish. The first use of writing was to record inventory – crudely, business made literature possible. As Maier herself notes, capitalism’s beginnings have been closely linked to the Protestant work ethic.

The original sin of modern business, if one can call it that, is not to do with its nature but the practical matter of its organisation. Back in the early days of mass production, standardised products seemed to demand standardised work to churn them out. Hence Fordisation, the defining characteristic of which was command and control and specialisation – the hiving off of thought, management and decision-making from frontline work.

Command and control may have enabled huge increases in productivity at the time, but with every day that passes we pay a heavier price for its continuing legacy, the evacuation of purpose from work. One result is the colossal inefficiencies that disfigure almost all organisations in both public and private sectors, with consequences that Maier so clinically describes.

She is right to be outraged. But the answer is not passive resistance. In a jokey aside earlier in the book, she fantasises that taking a leaf from French history and chopping off a few heads might be a step forward, a prelude to a new settlement that would at least bring a fairer division of the spoils between the industrial classes, if not a more meaningful existence.

Regime change, however, is exactly what’s needed. In effect, large companies are the ancien regime , the last surviving practitioners of central planning, as rusted, dysfunctional and archaic as latter-day Soviet Russia. But there’s no point in guillotining a few of today’s chiefs and replacing them with others of the same ilk. The whole apparatus of command and control must go.

So ignore the call to cultivate sloth. Instead, sweep away the entire top-heavy company superstructure, together with all the highly paid courtiers on the executive floor who do nothing but complicate the issues and weigh the company down. Liberate purpose. Put decision-making back into work. Adieu paresse , bonjour la revolution !

Simon.Caulkin@observer.co.uk

French lessons

‘The supreme goal of the organisation is to induce the employee to internalise the things that would otherwise have to be imposed on him or her from the outside,’ writes Maier. To combat this you must:

*Remember that white-collar work is today’s slavery: you work for your monthly pay cheque, nothing else.

*Bear in mind that trying to change the system is futile.

*Since your job is pointless – any idiot could do it (and will, given the chance) – spend time cultivating allies rather than working.

* Avoid responsibility, which brings extra work at small reward, and operational assignments like the plague. Give preference to ‘staff’ jobs (research, internal consultancy, communications) whose contribution is impossible to measure.

* Talk the talk but learn to recognise fellow doubters.

* Be courteous to temps, contractors and others brought in from outside. After all, they are the only ones who do any real work.

the Observer, 3 October 2004

IT’S PAYBACK time. As the election approaches, the government is demanding returns on an unprecedented period of IT spending. Massive programmes in health (the national programme for IT – nearly £2 billion this year), education (£2.6bn), local government (£3bn), defence (£1.9bn), justice (£1.2bn) and central government departments (£2.7 bn) take total public-sector spending on information technology up to £12bn this year, making the wider public sector the computer industry’s biggest customer. According to Kable, a research company, by 2006/7, the public-sector IT market will be worth more than £16 bn – 72 per cent higher than 2001/2.

The result of this huge modernisation expenditure (‘no investment without reform’) is expected to be the automation of 100,000 civil-service jobs, removing 16.5 per cent from central-government running costs and ploughing more than £20bn back into frontline services such as hospitals, schools and criminal justice.

In the 21st century, for example, the government believes there’s no reason why every central department should have its own separate payroll, HR, finance and property management systems, or why the public sector as a whole should have 30,000 back offices collecting and processing information. There are similar opportunities, it believes, for rationalising front offices where officials transact with citizens face to face.

There’s no doubt about the spending. There’s no doubt also about the scope for improvement. But will the computers that are supposed to link the two actually live up to the government’s expectations by improving efficiencies and helping it win the next election? There are two reasons why this is, as they say, a big ask.

The first is history. The spending programme includes a number of huge and complex projects – NPfIT (for the Health Service) merging the Inland Revenue and Customs and Excise computer systems Department for Work and Pensions Criminal Records Bureau a 10-year Defence Information Infrastructure project, with identity cards and the unification of the justice system on the horizon – in which the UK’s track record is mixed, to say the least.

Figures quoted by the British Computer Society suggest that just 16 per cent of large UK projects meet all their goals. Other estimates are lower. Hence the steady stream of computer disaster stories: the 18-months-late £400m Child Support Agency computer, for example, or the £318m (so far) system for the magistrates’ courts, referred to by the chairman of the Public Accounts Committee as ‘one of the worst IT projects I have ever seen’.

When the Audit Commission looked at the well-publicised episode of the Passport Office computer, it found that the new system had raised unit costs by 30 per cent. The National Audit Office is now preparing to take a look at NPfIT.

The second reason for scepticism is method. Although the failure rate of such projects is partly to do with poor project management, more importantly their rationale is flawed from the outset.

When Michael Hammer wrote his celebrated ‘re-engineering’ manifesto, ‘Re-engineering Work: Don’t Automate, Obliterate’, in 1990, the kernel of the idea was the need to recast the way work was organised. He saw, from examples in Japan and elsewhere, that by abandoning a system in which work (processing an order or paying a bill, say) was passed sequentially from one department to another and instead managing it as a seamless process from beginning to end, huge improvements could be made: a bill could be paid (or housing benefit processed) in days rather than the months it traditionally took.

Hammer got many things right. He emphasised, for example, that the ‘re-engineered’ process worked by putting the decision point where the work was carried out. ‘The new principle suggests that the people who do the work should make the decisions and that the process itself can have built-in controls,’ he wrote.

In other words, re-engineering would reverse the fragmentation that made assembly-line jobs, whether in a factory or local or central government office, so soul-destroying. And by putting decision points in the flow of work it could get rid of suffocating bureaucracy and layers of management control.

Unfortunately, organisations overlooked these humanistic subtleties in favour of Hammer’s other prescription: that computers were an essential component of this large-scale reorganisation. The result was the exact opposite of his brave new world of work. Instead of obliterating departmental functions and boundaries and re-engineering work in an end-to-end flow, companies queued up to buy IT ‘solutions’ that not only preserved the bad old systems in aspic, they actually disabled further improvement by locking in the old methods in. Hence the subsequent finding that the majority of re-engineering attempts failed.

Unfortunately, in the public sector this tendency is only now reaching its apogee in the government’s current spending review. Almost all public services are ripe for reshaping and streamlining as a process from the customer’s point of view. But the current regime of specifications and targets, completely functionally and activity based, is utterly antithetical to any such project. One ex-civil servant remembers being instructed how to pick up a pencil faster in a desperate attempt to squeeze efficiencies out of the existing system.

In a travesty of ‘reform’, what is now being proposed is giant automated information-processing factories for mass-producing transactions – procurement, information collecting and processing – which will at the same time institutionalise the waste inherent in existing systems and perpetuate the dehumanisation of separating work from decision-making.

A classic example of the specification cart preceding the improvement horse, thus effectively bolting the latter in its stable, is e-government. The government mandate that all possible public services should be deliverable electronically by the end of 2005 will cost around £7.5 bn. But as departments and local authorities rush to meet the deadline, public takeup of the spanking new e-services is so disappointing that the government has launched a marketing campaign to boost it. A local authority or agency website, after all, is only another way into the shop. By specifying e-government without any idea of what matters to an e-citizen, the government will have simply added an expensive new entry channel to existing ones. Unsurprisingly, Kable estimates that on current trends e-government will never remotely cover its costs, let alone free up resources for the front line.

Mere pen-pushing to specification (‘reply to all queries with two working days’) and control is indeed demeaning and demoralising work. But that’s because of the way the work is designed. Contrary to the political discourse about bureaucrats and time-servers, the truth is that working to improve back-office support for front-line public service is both worthy and essential, work anyone could be proud of.

Improving public services could and should form part of the job of all civil servants. The tragedy of the current regime – assembly-line work driven by targets and specification – amplified by what’s now being proposed, is that it will make improvement impossible, alienating public service workers and lifting service levels only on the margin. The truth is that the real ‘reform’ that’s needed is that of the government’s approach.

Otherwise today’s IT bonanza will benefit the IT and consultancy industries more than those at the front end, whether citizens or those who deliver the services.

The Observer, 26 September 2004

HERE’S WHY service doesn’t get better – systems that managers install with the aim of improving service actually make it worse, as in the case of interactive voice response that we highlighted last week.

Take the case of a leaking water main experienced by an Observer reader. Repairing a leak (or anything else) is a common and straightforward type of service – something breaks, the customer asks for service, the company fixes it. But it’s frequently not that simple. In this case, a new customer rang the water company to ask it to mend a leaking main (she knew it was leaking because the meter kept spinning when the stopcock was shut).

The company replied that someone would phone her back (within five days according to the customer, two according to the company) to arrange an appointment. No, she told them, it’s an emergency: having just moved into the house, we don’t know where the main lies and the leak may be damaging the foundations. Anyway, aren’t we supposed to be conserving water?

No, replied the firm, an emergency is something like Boscastle it doesn’t apply to domestic repairs. We’ll phone you back to fix an appointment – which we guarantee will be within the following five working days. In other words, there could be a seven- or 10-day wait, depending on the versions, between reporting an incident and the first visit.

The first visit, because when the man from the water company arrived after what most of us would call two weeks (these are working days), he was a surveyor, not a plumber: a second visit would be necessary to fix the leak. In any case, he thought the leak was underground and outside. Underground meant excavation, and excavation required another operator. So… you need to ring the company. They’ll ring you back to make an appointment. That’s right, within five days (or two). And the excavator? Five days. Guaranteed.

By this time, with the meter still running more than two weeks after the leak had been reported and, she thought, potentially another fortnight in the offing, the customer quickly had the leak – which turned out to be under the house – fixed by another plumber.

Let’s be clear what this story is about. It’s not about incompetence or ill-will. There’s no reason to doubt the company’s worthy intentions about water conservation and customer service on its website. What interests the customer – and me – is the extraordinary discrepancy between what the company insists is ‘good service’ and her personal experience that it is not.

How can a company construct a system that allows it to live with such opposites, claiming in good faith excellent customer service and conservation at the same time as it leaves the water running for a month, give or take a few days? That requires a minimum of four transactions with the company, up to six if the leak is underground (work it out), to fix a domestic leak?

The answer is, very easily. This is the norm, rather than the exception, in service companies. You do it by managing the trees and ignoring the wood, in the name of efficiency breaking up the process of serving the customer into individual activities (phone the customer, send a surveyor, send a plumber) and managing the activities according to detailed specification. The underlying purpose gets lost in the process.

The purpose of a water company is, presumably, satisfying customers by delivering water as reliably and economically as possible. The repair ought to serve that purpose, so the quicker the better. That’s certainly what matters most to the customer.

You’d think, then, that the company would measure and manage the process from beginning to end: the complete repair cycle time from first phone call to the plumber’s van pulling out of the drive. But you’d be wrong. Not only does the company not manage overall repair times, it doesn’t even know what they are. It can tell you how well it meets the specifications for making an appointment or sending a surveyor or plumber, but not how long the overall process takes.

In other words, it has no way of measuring how well it is meeting its purpose of carrying out the repair. Result: it is perfectly possible, as in this case, for an urgent repair to take the best part of a month and everyone to meet their specification. So, again: because everyone is meeting their specification, service is impeccable – we can prove it. The customer must be mistaken. No one knows anything is wrong.

Does this sound familiar? It should. Fragmentation and specification are everywhere, and everywhere they have the same dire effects of building in inefficiencies and waste. Because of the inefficiencies – think of the wasted time, transactions, phone calls, mileage, not to mention water, and the large possibility of error in the multiple hand-offs – poor service is always more expensive than good, although managers (and politicians) can’t see this either.

Specifications and targets put in place to improve service are in fact incompatible with it, because they subvert purpose. Instead of minimising customer inconvenience, water company employees strive diligently to meet the specification – phone back or get someone out within the specified time. This isn’t their fault: they are doing what they are told. To a degree, this is true of the company as a whole. Incredibly, among the water regulator’s eight indicators of service levels, one is the time companies take to answer the phone – but not how long it takes to fix a broken main.

As always, there is an alternative. Stop measuring activities that are part of the whole, get rid of the accompanying specifications and targets, and manage the work as a piece from beginning to end. Put people to work solving customers’ problems rather than meeting specifications. Keep the water flowing – and staunch the flood of leaking customer confidence.

The Observer, 5 September 2004

LAST WEEK ‘the UK’s leading Orange dealer’ texted me the offer of a free mobile upgrade. I phoned back – and got its IVR (interactive voice response) system.

Oh God. First a long promotion spiel, then four options to select from: ‘If you are a pay-monthly contract customer whose phone is more than 11 months old and you would like to speak with a friendly upgrade adviser about upgrading to one of the new generation of colour camera phones entirely free of charge, press 1. If…’

I pressed 2 – only to get a second level of recorded response: ‘To enable us to give you information on our latest phones and tariffs, please state your name, your phone number and the expiry date of your contract so that…’

No – definitely not. Life’s too short. I want to talk to a person, not be patronised by a machine. The company approached me – there’s a limit to the amount of time and effort I’ll spend even for a free offer. And I haven’t thought about the contract for years. I haven’t a clue about the details. That’s their job!

This is a small example, but it sums up why IVR is the most hated management invention of modern times, despised by everyone including, no doubt, when they experience it from the other end, the managers who eagerly install it in their businesses. It is also one of the most misguided and counterproductive.

So how come managers are so keen to use it? The short answer is that they believe automation will cut the cost of providing service. By having customers auto-sort and filter calls as they come in, they think they can minimise the amount of expensive people-resource devoted to answering questions, and maximise the time they spend selling.

But the calculation is wrong in every respect. IVR is sold as an IT ‘solution’, and like any number of such ‘solutions’ the main thing it solves is the IT firms’ need to make sales. Far from containing costs it generally raises them – and worsens service. Companies, and certainly customers, would be better off without it.

Let’s go back to the beginning. What is the problem that IVR is supposed to be a solution to? The key issue in service is dealing with variety – amplified by the fact that the service is ‘co-produced’ in real time with the customer. My mobile query could have to do with any number of phone makes, types and tariffs, and I have no idea what my contract is. And I don’t want a colour camera phone, I want a headset. Although I might check the tariff too while I’m about it.

It’s impossible to sort calls according to all the possible variables – nor should you try. Arbitrary categories, as in this case, simply create confusion (what do I do if none of the options fits my query/queries?) or resistance (I’m buggered if I’m doing any more of this). In the first case the result is unnecessary work (I press any old button, explain my query to the wrong person who has to pass me to another), which means extra cost in the second, non-completion – I drop out. This means lost sales, which of course managers can’t see.

All this happens because the menu options are invariably not designed according to demand – what matters to the customer – but according to supply – what matters to a remote marketing department. Using a device that customers hate is already courtroom evidence of a producer’s rather than a customer’s mentality.

The irony is that we both want the same thing: smooth service that helps me get most value out of my mobile phone. But you wouldn’t know it, because the robotised menu sets up an artificial opposition between the two: it prevents me getting the service I require.

Computers are great at routine and hopeless at variety. People, on the other hand, are wonderful at variety and bored and demoralised by routine. So what does IVR do? With the utmost perversity, it uses both people and computers for what they are worst at. It is therefore not surprising that it irritates the hell out of customers too – a full house of dysfunctionality.

What matters to me is having my questions answered and my order taken in the shortest possible time, in one call. The best way for the company to do this is to reverse the usual thinking, get rid of the IVR filter and put its best ‘upgrade advisers’ on the frontline phones, where they belong.

For most companies, this is counterintuitive, because they are obsessed with people-costs. They measure people to death with activity measures like time to respond, call duration, numbers of calls a day. But these are unrelated to the purpose of the activity – in this case selling phones, accessories and minutes – and therefore offer no guidance on how to do it better.

Meanwhile, they ignore the other costs – for example, of non-completers (like me) and customers who consume extra resources by having to ring a sec ond or third time. These are often substantial.

Unlike computers, people can relate to customers and pick up on these things. They can report back and adjust the offering accordingly. By stopping callers dropping out, they increase chances of making a sale by answering their questions first time, they prevent unwanted follow-on calls. The first increases revenues, the second effectively increases capacity. And you can further reduce costs by ending the IVR contract that you no longer need.

So – select from the following options: if you want to improve service, increase sales and cut costs, press button one and delete your IVR…

There are no further options.

the Observer, 29 August 2004

THERE is a minister for it, an academy for it, and companies and managers are signing up for it in droves: corporate social responsibility (CSR) is rapidly becoming management’s new conventional wisdom.

JK Galbraith, who invented the term, pointed out that conventional wisdom becomes so by being repeated so many times by those with axes to grind that it becomes the default position irrespective of its merits. As such, all conventional wisdom bears the beadiest scrutiny. CSR is no exception: what is actually going on behind these blandly reassuring words? Should it be welcomed or is it a dangerous distraction from business’s real role?

This is the question posed by David Henderson in The Role of Business in the Modern World (Institute of Economic Affairs, pounds 12.50). Henderson, a prominent academic economist and former head of economics and statistics at the OECD, is a CSR sceptic. But his scepticism derives not from the common reproach that CSR is trivial, a fig-leaf for runaway capitalism that does nothing to change it. His charge is that CSR may be too powerful, undermining the ‘primary purpose of business’ as the vehicle of economic progress and thereby damaging, rather than increasing, welfare.

Henderson has aired some of these concerns before but it’s a measure of how far the debate has moved on that he now aims not so much at the possible consequences of adopting CSR on the individual firm – he accepts that in some cases CSR can contribute to long-term profitability – as on the economy as a whole.

‘It is the possible economy-wide effects of CSR which are especially worrying,’ he says. His fear is that if managers allow corporate political correctness to take primacy over red-blooded entrepreneurialism, market opportunities will be neglected and competitive pressures weakened, making people in general worse off. ‘Such a trend towards a more regulated world, with social pressures serving to weaken competitive pressures, would cause the primary pur pose of business to be less well performed… The case against the general adoption of CSR by businesses… is not that it would necessarily be bad for enterprise profits, but that it would reduce welfare.’

There is a case to be made against CSR but this is not it. In fact, the overall welfare – and companies themselves – are far more at risk from the traditional ‘economic’ approach that he supports than from the ‘global salvationism’ or ‘new millennium collectivism’ that he identifies as the main danger.

Let’s agree with Henderson that, particularly over the last half-century, capitalist economies have produced huge increases in material welfare for their citizens and that companies, as the main engine of capitalist evolution, have an essential role to play in bringing new products to market and opening up new ones.

We live, in fact, in an organisational economy. Unfortunately, like almost all free-market economists, Henderson fails to take the logical next step and make the essential distinction between organisations and markets. A vibrant economy, to increase welfare, needs both, each fulfilling its own function: companies innovating to create temporary advantage for themselves, and markets competing that advantage away and handing the benefit on to consumers.

For companies, the real trouble comes not when they adopt CSR but when they obey the injunctions of free-market economists, which cause them to imitate markets. These are: to put short-term efficiencies before the creation of new resources through innovation to pursue profits or shareholder value explicitly at the expense of customers, suppliers and employees and to neglect the fact that, unlike blind economic forces, they are intentional entities with long-term purpose and choices.

It may well be true, as Henderson suggests, that in some areas corporate behaviour is in danger of becoming overregulated – in corporate governance, for instance, there is little evidence that companies that separate chief executive and chairman’s role or that have a preponderance of outside directors on the board do better than those that do neither. The codes may (possibly) deter wrongdoers, but they don’t make it easier for companies to be entrepreneurial.

But what brought about such regulation? Not companies pursuing CSR, but firms such as Enron and WorldCom that single-mindedly maximised profits – the preferred economic approach – at the expense of other stakeholders. Less spectacularly, Shell and Marks & Spencer have fallen from grace not because they neglected their profit-making function but because they put it before the maintenance of their values. As always, when the financial target becomes the corporate purpose, real priorities suffer.

Ironically, CSR only exists as the obverse of the misguided strict economic approach. It is the understandable response of managers and companies that feel obliged by conventional wisdom to focus on the economic imperative but are uneasily aware that their actions are increasingly having harmful effects, such as obesity, climate change, declining fish stocks, growth of allergies, asthmas and chemically induced ill nesses. No wonder CSR is growing so fast: it’s corporate guilty conscience.

As CK Prahalad points out in his stirring new book, The Fortune at the Bottom of the Pyramid , CSR is a sideshow compared to the need – and opportunity – to bring the world’s 4 billion poor into the global economy.

That requires firms to recommit themselves to their proper vocation of innovation – rather than philanthropy – to meet social need. In the same way, it’s not CSR that requires managers to be as frugal as possible in their use of resources and their emission of harmful wastes: it’s their duty as trustees of the company’s long-term future, a role of which Henderson approves.

‘The search for profit is fully compatible with professionalism, humanity, and the wish to act honourably,’ he writes. But current economic doctrine, by putting the need to make profit first, explicitly absolves managers from any sense of moral responsibility.

As the late Sumantra Ghoshal wrote in his last published piece, what we badly need are theories that acknowledge the patent reality that ‘companies survive and prosper when they simultaneously pay attention to the interests of customers, employees, shareholders and perhaps even the communities in which they operate’.

In other words, those that bring responsibility in from the cold and place it inside the firm. At that point, we all can happily agree that CSR is an irrelevance: it no longer needs to exist.

The Observer, 22 August 2004

YOU MIGHT imagine that the dotcom boom is over. So it is, in the private sector. Among companies, investment in internet ventures dried up more or less overnight three years ago. It now exists as a kind of residual hangover – a fading if embarrassing reminder that overindulgence in hi-tech investment can damage corporate health.

The news doesn’t seem to have percolated through to the public sector, however, which is in the middle of a binge that, if it happened in a pub, would be subject to agonised hand-wringing and questions in Parliament.

According to the research company Kable, which tracks public sector ICT (information and communications technology) spending, e-government – the government’s requirement that all local and central government services should be available electronically by the end of 2005 – will cost the taxpayer £7.4 billion by 2006. Since 2001, the e-government gusher has been spouting at an average rate of £1.5bn a year. Central government’s share of the total will be some £4.4bn, local government £3bn. (These figures don’t include education, health and defence.)

It’s an article of faith that e-government is ‘a good thing’. Progress towards e-government gets local authorities brownie points in their official comprehensive performance assessments – authorities that invest in ambitious computer-based ‘solutions’ such as contact centres, customer relationship management (CRM) databases and comprehensive web portals get higher marks than those that don’t. As further inducement, over the last four years they have received £675 million in central government funding for e-government projects – a figure that is, however, dwarfed by the £4bn mopped up by government departments for the same purpose.

But what’s it all for? The accepted line is that, by making essential information available online, e-government can foster democracy and inclusion and improve the quality of service to citizens and business. In theory, too, it can contribute to efficiency by cutting the cost of service delivery – electronic transactions can be much cheaper than paper-based ones.

So now, with the next election approaching and public services high on the political agenda, the pressure is on to turn the promise into reality. In the just-published expenditure round, Gordon Brown demanded returns from his expensive investment. Government agencies have been given until December to tell him how they are going to persuade the public to use their e-services.

You mean… that’s right: until now no one has bothered to find out what people actually want from e-government. As the 2005 deadline approaches, so little is known that the Office of the Deputy Prime Minister, which is responsible for pushing local authorities online, has launched a £2.5m ‘e-citizen national project’ (www.e-citizen.gov.uk) – a marketing wheeze to discover ‘what makes an e-citizen tick’ and to catapult e-government take-up to success.’

You might think that was something to be done before spending £7.4bn. As it is, while in some cases e-transactions can work well (see right), overall the picture is unpromising. Kable reckons that by 2006 savings from the e-government investment will total a princely £819m. As the graph shows, even taking the figures out to 2015, on current form e-government savings will never even equal current spending.

The reasons for this are summed up in another Kable report, ‘What do they mean by ‘yes’? Shared services and the Gershon agenda’ (www.kablenet. com/kablereport). One of the most important is that in the rush to to meet the 2005 online deadline, people have forgotten the underlying point of improving service – as always happens, the target has become the de facto pur pose, to the detriment of the real one.

The result, says one local authority boss, is ‘a field day for consultants and IT vendors’. An e-government specialist adds: ‘We’re building all these capacities and now we have to help the services find ways of using them. They’re solutions looking for problems… everyone is busy working on the solutions and no one on the problems.’

Regulatory pressures compound the issue. Councils have to invest in e-government to pass their audit tests – but putting services online does nothing to raise customer-satisfaction ratings. ‘So who are we working for?’ asks a puzzled chief executive. ‘Government inspectors, or citizens?’

In any case, while putting basic transactions online may make sense, for more complex issues, for instance around social need, human contact is needed. ‘A lot of it is fundamentally misguided, because it is people who are good at absorbing variety, not machines,’ says a systems specialist quoted by the report.

Finally, the financial approach to e-government has also been as ill-thought-out as the wildest dotcom. ‘Just adding e-government as another access channel to service is the worst of all worlds,’ complains a leading academic observer. ‘E-government as a free good, with departments allowed to do ludicrous ‘invest to save’ bids, is clearly unsustainable.’

Crap service delivered over the internet, as a chief executive puts it, is still crap. In this perspective e-government, far from being the harbinger of a brave new service economy, is turning out to be a monument to the bad old one. You can have any service you like so long as it’s what we’ve decided to provide: what better definition of the producer interest could there be than that?

Additional research by Robert Colvile

The Observer, 15 August 2004

THERE’S AN email joke going around about the latest US position to be outsourced to India: President of the United States.

Is the new appointee a bit shaky on some of the issues? To enable him to answer those he doesn’t understand, says the spoof announcement, he will be given call centre-type scripts to follow. This will allow additional savings to be realised ‘as these scripting tools have already been used by Mr Bush in the US’.

Actually, leaving Bush out of it, the joke may be nearer the mark than many people suppose. Behind press stories about the shift of call centre and low-level number-crunching jobs abroad, something much more fundamental is afoot, which will have implications for Western companies across the board.

We already know, for instance, that by using better methods, some Indian firms are producing software that is not just cheaper but of far higher quality than almost all their Western counterparts.

But in many other areas, too, from banking to shampoo to health, the testing conditions of the developing world are giving birth to cost and quality innovations that dramatically undercut the bloated business models of the West.

Some are recounted in CK Prahalad’s new book, The Fortune at the Bottom of the Pyramid (Wharton School Press). While some are well known – for example, the extraordinary success of the Grameen Bank’s microlending concept in Bangladesh – others are less so.

Take Casas Bahia, which has built one of Brazil’s largest retail chains selling consumer goods to the shanty towns or India’s Aravind eye hospital, which may be the best place in the world to have a cataract removed. At its four sites, Aravind treats 1.4 million patients and carries out 196,000 operations a year. The cost per cataract: $25, compared with $1,500-$2,000 in the US.

As these examples show, to put down today’s shifts as ‘outsourcing’ – a transfer of employment scraps from the rich man’s table – is patronising and simplistic. It’s not just the international division of labour but the whole ecology of business that’s changing. And among the prized Western entities in the front line are brands.

Look at it like this. It’s now a given that you can get any commodity item you like, industrial or consumer, from the Far East without sacrificing reliability or quality. What you can’t get (yet) is a brand.

But the brand, points out Paul Pankhurst, chairman of innovation consultancy PDD, while increasingly critical, is also becoming harder to sustain. For instance, he notes that ‘there are now turn-key design services in India and Taiwan – so you can take not just the manufacture of an athletic shoe or mobile phone offshore, but the design and development work too’.

You can also mobilise a workforce the size of the population of Guildford in a week to ramp up production. Few Western firms can compete with that. The implications are profound. Brand holders have been pushed right to the top of the value chain. This means that they have less and less of the total activity to make their money from: just distribution and the brand itself.

That puts a premium on innovation. But – as companies are starting to comprehend – innov ative capacity is traditionally closely linked to manufacturing (new products often being dependent on new processes). By the same token, as the new turn-key houses are growing up, the in-house innovation capability of the brand owners is inexorably going down.

Outsourcing, as some of us have maintained all along, is not a one-way street. In return for lower costs (maybe) in the short term, ‘advanced’ firms in the developed economies have fragmented and given away increasingly high-level know-how which is being elegantly reassembled and sold back to them – and their competitors. Which means there’s a differentiation problem, too. Says Pankhurst: ‘The more you embrace outsourcing, the more you lose control.’

Testimony to the shift is his own firm, which has recently set up a subsidiary called Carbonate to develop and incubate new ideas. Carbonate’s first new product, the Deck, is a multipurpose exercise platform that was the brainchild of Loughborough University. Carbonate helped to develop and design it (in return for equity) and, crucially, matched it to a brand (Reebok) which can give it much better distribution than it could manage on its own.

The Deck, says Pankhurst, sums up many of the changing aspects of innovation. On the one hand, university departments and small companies are finding it harder and harder to mobilise the clout to commercialise their intellectual property on the other hand, brand owners are in desperate need of new ideas.

The ‘brand bit’ is now absolutely key, he says. In the past, a leading consultancy would have sold engineering and behavioural research now it’s marketing, brand planning and product mapping – ‘stuff we didn’t even think about five years ago’.

Western companies will have to have a solid brand and distribution to survive, he says. That goes for companies not just in consumer goods but also in business-to-business sectors. But they’ll have to be a lot better at it than they are now. A good start would be learning to value and husband the unique know-how they have been so nonchalantly dissipating. Without innovation, there’ll be nothing left to outsource.

the Observer, 8 August 2004

IN 1750, RECOUNTS the great historian Eric Hobsbawm, the first things the foreign visitor to England noticed as he or she stepped ashore in Kent were the tidiness of the countryside and the eye-watering prices of the inns.

Nothing much new there, then. In its latest annual calculation of living costs, Mercer Human Resource Consulting reported in May that London is now the second-most expensive capital city in the world, 19 per cent dearer than New York, the baseline, and trailing only Tokyo.

‘Start the morning with a glass of orange juice and you can forget about that vacation. Restaurants should just merge with second-mortgage companies,’ gagged a Time correspondent. Others gasp at the world’s highest rail, Tube and taxi fares. Last winter, two enterprising Londoners won headlines (but little astonishment) by recounting how they had saved money on a trip to Liverpool to watch a football match by flying via Belgium rather than taking the train.

Prices that are out of whack with the UK’s no-more-than-average wages are storing up problems for the future.

The spiralling price of housing in southern England is now both socially divisive and economically dangerous, according to Shelter. One supermarket group buses staff from Tottenham (north London) to Croydon (south London) because the low-paid can no longer afford to live near their work. Officials admit that London’s reputation for costliness is driving away not only businesses and tourism, but its own citizens: up to a third of UK residents are thinking of leaving the country in search of a lower cost and higher quality of life, according to one recent survey.

Meanwhile, a committee of MPs concluded this week that Britons aren’t saving enough because they don’t trust financial service companies not to rip them off in the future, as they have done in the past. Price comparisons and other new services that would make markets work better are stunted by telephone companies keeping broadband prices two or three times higher than in France, for example.

In theory, prices that are too high can’t exist for long in a competitive marketplace. Consumers will stop buying and new entrants will be attracted by fat profit margins. As Adam Smith pointed out, the rate of profit is naturally higher in poor countries than in rich ones, where it is normally competed away.

In a few cases, this happens according to the textbook. In scientific publishing, traditional high-price, high-margin incumbents are being challenged by new entrants with a lower-cost distribution model built round the internet. The newcomers insist they will still be profitable – but margins will be thinner.

Or take the UK’s private healthcare industry. When the government initially asked for tenders from private firms to carry out day surgery for the NHS, no domestic company made the list: UK consultants, it transpired, charged double the rates per operation of their foreign counterparts. In a more recent contest, however, UK firms were more competitive. The consultants had brought their charges into line. More cynically, you could say they couldn’t get away with it any more. And here’s a clue.

Part of the reason for high prices is high costs – at least some of which is down to poor management. The counter-intuitive lesson of ‘lean’ production methods is that poor service is always more expensive to produce than good service. Too few UK companies are lean, a factor that is reflected in the country’s poor relative productivity performance.

But another factor in price levels is the intensity of competition. Competitive intensity has several elements, one of the most important being customer expectations. Good firms tend to have demanding customers, which stands to reason: picky customers keep you up to the mark by requiring value for money and telling you if you don’t give it.

And we are not demanding enough customers – something that enrages visitors almost as much as the prices. As the Time writer put it: ‘New Yorkers believe an almost-sort-of-affordable city is a civil right, and anyone who threatens that right deserves to be screamed at and tipped really poorly. Londoners believe a city is a noble and costly test of endurance.’

There is academic support for the idea that this does us no favours. Customers, says Chris Voss, professor of operations management at London Business School and leader of a team which has compared consumer behaviour in the UK and US, play a vital part in develop ing service quality. Confirming the stereotype, his research found that the British complain less about poor service than do Americans. ‘We don’t give as much feedback, so organisations have less knowledge about how to improve service: sometimes managers don’t know just how bad it is,’ Voss says.

The cause is cultural, but the result is a self-fulfilling prophecy: service is bad because that’s what we expect and let companies get away with. Alongside government and managers, consumers can’t escape their responsibility for making the economy more competitive.

You can see what’s coming next. If we get the service we deserve, the conclusion is self-evident. Stop suffering in silence. Loosen the stiff upper lip. Go on: rant, rave, whinge, moan, shout, scream and complain. Be as embarrassing as possible. It’ll make you feel better – and it’s your personal contribution to raising the standard of British management.

The Observer, 1 August 2004

FIFTY YEARS ago this month, a 19-year-old white truck driver walked into a recording studio in Memphis and almost by accident cut two lithe, sexy and ferociously self-confident tracks that redefined a culture and set the music industry on its ear.

Actually, Elvis Presley was far from the first recording idol. ‘That’s All Right’ certainly wasn’t the first rock’n’roll record, and although it was a sensation locally it wasn’t even a national hit. For Memphis to claim 2004 as the 50th anniversary of the birth of rock’n’roll is self-serving braggadocio to rival some of the early rock’n’rollers.

Still, that’s showbiz, an industry whose relationship with reality has never been more than a one-night stand. Ironically, 2004 is more likely to be remembered for the traditional music industry’s funeral – killed off by the new economy in the shape of Apple’s iTunes and GarageBand. These two innovative products, from a different industry altogether, let consumers download and share files over the internet and make their own music – that is, do what they wanted all along.

In fact, for anyone with a sense of history, the ghostly reverb of 1950s guitar solos is plainly detectable behind the unmaking of the industry today. For the downfall of the majors – the merger approved by the EU last week between Sony and BMG is the last bar of a knackered old record rather than the first of a new – is not so much the new economy as the repetition of a very old pattern of behaviour: such rapaciousness and stupidity was already well in evidence as rock’n’roll was born.

So hear my story, sad but true… Like many adults (‘Who is this Elmer Prescott?’ asked my mother bemusedly), despite today’s rewriting of history, the music establishment was initially baffled by rock’n’roll, missing and then denying the real significance of those first Memphis recordings as unerringly as it would do several subsequent industry turning points.

What Presley invented (and if he hadn’t, someone else would) wasn’t a new musical form but a new image for an old one. Quickly reinforced by a stream of contemporaries, he created a mass market for a black-inflected music that white radio stations would play and white kids could buy – which they did, in their millions.

The music industry was appalled. The effect of the incomprehensible words and sexed-up rhythms on the kids was one thing, but to the record majors the wider import of songs like ‘Tutti Frutti’, ‘Great Balls Of Fire’ and ‘Rip It Up’ was as clear as a ringing bell: they were losing control of the business. The inmates were taking over the institution and needed to be put back in their place.

By 1959 the establishment had pretty much succeeded. It bought up the indies’ best artists, covered the originals with polite white singers, and watered down the lyrics. It helped that many of the main protagonists (Presley, Buddy Holly, Chuck Berry, Eddie Cochrane and Little Richard) had self-destructed or were otherwise out of commission. After just five years, the first wave of rock ‘n’ roll was dead.

Trouble was, in reasserting control, the industry had also flattened the market that the rock’n’rollers had created. It was only resurrected by another injection of self-generated energy, this time not from southern America but, improbably, from a north British seaport. In context, the surprising thing about the Beatles is not that an unfortunate A&R man turned them down, but that anyone had the gumption to pick them up. The same could be said of punk a decade and a half later.

Incomprehension and short-sightedness was also the story in technology, which twice baled out the industry in spite of itself. Tapes had the unfortunate drawback of allowing consumers to record what they wanted, but the record companies were soon reconciled by the discovery that the demand for music on the go didn’t oblige them to do anything new, just sell the old stuff in a new format – a wheeze that was even more satisfying when pulled off again, more expensively, with CDs.

But the whirligig of time, as a more elevated wordsmith once wrote, brings in his revenges.

When, in the final instalment, the internet arrived, the music companies again missed the beat. It took ingenious young consumers and a computer firm to figure out how to make and distribute music in digital form. But by now the industry was out of luck as well as tune, its credit with both consumers and musician/suppliers as usable as a worn-out 78. They had been ripped off too often by poor quality, excessive prices and cynical issuing policies to experience anything but pleasure when technology at last offered them the chance to help themselves. Unsurprisingly, a commercial policy of suing the keenest consumers for piracy turned out to have limited effect.

Rock’n’roll is long gone, and Presley (another irony of today’s celebrations) ended up not the king but the perfect symbol of the music’s decay, corrupted into a grotesque parody of the sentimental ‘entertainment’ the music industry preferred.

But what rock’n’roll had briefly but exuberantly hinted at, the internet confirmed: although companies can control what, when, and how a product is delivered for a while, it can’t do it forever. At that point, it’s too late to discover that it’s the customer that really matters, not the technology. Fifty years on, with a little help from their friends, customers have killed off the seller’s market and the music companies that exploited it for so long. Read my lips: awopbopaloobopalopbamboom.

The Observer, 25 Julay 2004

CAN IT be done? Will it be done? Although the headlines in last week’s papers were all about the 100,000 civil service jobs scheduled to go in the government’s latest spending round, whether it can achieve its goals will depend not on downsizing but on the biggest shakeup of the way government does business in 100 years.

As acknowledged in Sir Peter Gershon’s efficiency review, which was published last week, taking more than 16 per cent out of central government running costs, removing pounds 21.5 billion from administration and converting it into hospitals, schools and policemen requires nothing less than the transformation of the relationship between central government and the front line.

This is why, when 40 top central and local government officials were interviewed for a report on what the ‘reforms’ looked like to those who would have to carry them out (www.kablenet.com/ kablereport), the research team, of which I was a part, found a paradox: while everyone agrees that the scope for improvement in efficiency is huge, actually getting there would be a heroic achievement. Cuts, yes. But not many insiders believe they will benefit ordinary citizens.

Why is it so difficult to do the bleeding obvious? After all, it is stupid and unacceptable that every government department has its own non-communicating payroll, human resources, finance and property management arrangements; that the public sector has 30,000 back offices collecting and processing information, only 2 per cent of which are big enough to stand alone; or that, as Soham horribly underlined, there is no national criminal intelligence system, partly because the 52 separate police authorities’ computers (and sometimes officers as well) won’t talk to each other.

The barriers are formidable. ‘There is no culture of sharing across Whitehall’, noted one report respondent – rather the reverse. Civil service incentives favour empire-building, not sharing for the common good, and distrust between departments is pervasive. Each Yes, Minister rerun scores a palpable hit: Sir Humphrey is alive and well in every department.

Local service providers, which handle 80 per cent of official interactions with the public, bitterly resent one-size-fits-all policies and methods handed down from on high without regard to local circumstances.

‘Central government takes a central-government-centric view of public services. Elsewhere people are quietly – and sometimes quite efficiently – getting on with it,’ says a commentator. If the reforms are seen as just another top-down cost-reduction target – ‘bend over, here it comes again,’ as one cynic described them – they will fail.

Likewise for technology. So far the government has committed pounds 8bn to obliging the public sector to e-enable service delivery, with no evidence of payback or customer appeal. If – as seems likely from Gordon Brown’s statement – it does the same with back-office services, mandating investment without regard for the citizen/customer, the results will similarly fall short.

The reality is that the government, let alone the rest of the public sector, is not a unified whole but a vast and untidy agglomeration, with thousands of decision-making locations bristling with different agendas.

Like a pile of random iron filings, the interests of the myriad actors point every which way – downwards to customers, upwards to ministers, inwards to themselves, switching unpredictably with political currents. These randomised interests can’t be managed on traditional lines. They can’t be aligned by fiat, appeals to efficiency, nor, as the government seems desperately to hope, by IT. There are no levers to pull.

In his review, Gershon noted that success of the programme depended on political will, incentives for managers to take tough efficiency decisions, and the creation of ‘change agents’ to get things done. But this is the wrong way round. The spending round has lost sight of the reason and purpose for the activity in the first place: the customer/citizen.

The only force strong enough to magnetise the filings to face in the same direction is focus on the citizen: improving service at the point of delivery.

It’s not enough just to command more infantry into the front line. There needs to be a method. How many doctors, teachers and policemen? What kind of support services? It’s only by going back to the customer – establishing real demand, measuring current capacity against that purpose and then reorganising the work to do it better – that method can be established and competing interests pulled into line.

As hundreds of initiatives across the wider public sector have demonstrated, starting from customer needs pulls everything into place after it. It tells you how many people you need and where. It tells you what services can be shared, and what kind of automation you need to do it. In short, it tells you what can be cut and what needs to be spent.

And that is invariably less than the centre supposes. For the best news is that this dynamic dispatches the assumption (perversely as strong in government as anywhere else) that better service costs more. On the contrary, bad service always costs more to deliver than good. The better the service, the less need for regulation, inspection and audit (cost: pounds 7 billion a year), the less need for targets, corrections and rework, and management interference. It goes beyond management by compliance and gives public servants back their vocation. As our report concludes, it is possible to achieve public-sector efficiency by improving service to the customer – but not the other way round.

The Observer, 18 July 2004