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Is Government Becoming More Commercial Than The Private Sector?

August 21, 2015

Commercial reform is a big issue right now – especially within Government. While the pace of change varies, public sector agencies around the world are embarking on a journey towards massive change. In some cases, they appear to be leaving their private sector suppliers far behind.

As I have reported in previous blogs, a growing number of large corporations are introducing ‘commercial academies’ or embarking on initiatives to embed ‘contracting excellence’. The drivers for these are varied, though ultimately it is about revenues and profit. However, specific concerns vary from the need to tackle demanding and fast-changing market conditions (oil and gas, pharmaceuticals), improving performance and competitiveness (telecoms) or instituting faster, better decision-making across the business (IT and outsourcing).

But these efforts often pale into insignificance when compared to the scale of activity going on within some governments. For them, commercial reform is top of their priorities and, because it has not been a major factor in the past, they come at it with new perspectives. Their efforts are being driven by the core challenge of maintaining a competitive economy relative to other countries, which means achieving effective service delivery at affordable cost. Essentially, globalization has reinforced the importance of commercial thinking – as recent events in Greece have demonstrated.

Governments have the disadvantage of a workforce that may be somewhat resistant to commercial principles; they feel that ‘public service’ demands a different ethos. So they have to persuade existing staff that their commitment to social well-being actually depends upon a new approach and that being commercially-minded is not the same as ‘making profit’. In consequence, there is massive commitment to skills analysis and development, to multiple forms of training, to re-thinking contracting models and supplier selection and management. There is also major interest in research and benchmarking, a wish to understand what ‘excellence’ looks like and to set ambitious goals for the future.

Transition takes time, but my observations tell me that right now, Government is leading the way in some aspects of commercial thinking and investment. Certainly there are aspects of their work from which the private sector could learn; it is time to stop assuming that, when it comes to commercial and contracting excellence, the private sector always knows best.

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