25 posts categorized "Public Sector"

June 24, 2014

Innovation in defense: Convergence and catching up

Env_glb_ho_1333_hiNations invest in defense technologies to protect their citizens and also to drive economic growth and prosperity. In Deloitte’s latest Global Defense Outlook, we found that 50 nations spend more than $1.7 trillion every year on defense, and national leaders expect to gain strategic benefits from their investments.

Gaining military advantages from innovation in defense technology is getting harder and more expensive. Changing global economic realities are leading toward catch-up and convergence, reducing the relative advantages of investment in high-tech defense systems. These trends are becoming more evident worldwide.

Catch-up is driven by macroeconomic realities. Higher-income nations among the Top 50 defense spenders (the United States and most of the Eurozone) have led defense innovation for more than 70 years and are responsible for most of today’s advanced weapons, including stealth, unmanned systems, precision strike, naval aviation, and cyber-related systems. These nations reduced defense investment by about 8 percent between 2008 and 2013, confronted by high debt, slow economic growth, and competing demands for deficit reduction and social services.

The lower-income nations among the Top 50 (China, Russia, India, Brazil, Saudi Arabia, Iran, Pakistan, and others) have traditionally spent less and followed the technology lead of the high-income nations. Because these nations are growing faster than the higher-income nations and hold lower levels of debt, they are increasing defense spending. Russia is undertaking the most expensive buildup of its defense since the breakup of the Soviet Union, increasing defense spending by 16 percent between 2013 and 2016. China’s defense spending has doubled over the past 10 years and will increase by 12 percent in 2014.

Convergence is happening because it is cheaper to copy than to create. Innovation can provide competitive advantages in warfare just as in commercial markets, but innovators face high costs and risks. In the United States, defense innovation is concentrated in 80 major defense acquisition programs (MDAPs), including the F35, expendable launch vehicle, and other high-technology systems. These systems are loaded with cost and risk. In fact, the U.S. General Accounting Office reported that the MDAPs have overrun budget estimates by $448B and are an average of 28 months behind schedule – solid evidence that gaining a technology edge in defense is a risky and expensive undertaking.

Copying defense technology is much cheaper. For example, the Chinese Navy boosted its power projection capability by purchasing a used Russian aircraft carrier for $20M and towed it home. This low-cost investment establishes carrier-based aviation in China, an early step toward what Chinese officials call “the century of the sea.”

Lower-income nations are catching up in defense spending as they exploit economic growth and favorable debt positions. The result over the decades ahead is likely to be technological convergence, with advanced defense technologies increasingly available to state and nonstate actors. To learn more, read the Deloitte Global Defense Outlook 2014: Adapt, collaborate, and invest. Please share your thoughts or questions by commenting below!


JackJack Midgley is a director in Deloitte’s strategy practice, advising leaders in the defense and intelligence communities. He leads development of Deloitte’s annual Global Defense Outlook. Follow him on Twitter @jackmidgley.

April 29, 2014

Cautiously optimistic: Innovation and Chinese FDI

Aisa Society Image for blogA few months ago, after Summer Davos, I wrote and spoke about China’s new commitment to innovation. Chinese Premier Li Keqiang in his opening address had talked of holding the banner of innovation high and the reforms his government were proposing to achieve that goal. I stated at the time that I was cautiously optimistic about the potential these reforms held.

Just recently, I again had the chance to discuss China and innovation, this time on a panel hosted by the Asia Society in New York City. With the session focused on China’s growing investment in U.S. high-tech companies, inevitably the question of innovation came up—and if these Chinese companies were looking to U.S. acquisitions to help build a culture of innovation at home. Innovation remains a challenge in China, with issues from lax enforcement of intellectual property laws to the difficulty of starting a business contributing factors. Moreover, questions have been raised about whether China’s educational system encourages the kind of creative thinking that generates innovation.

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January 21, 2014

Business must disrupt the status quo

Blog_joee_davos14_300x200It’s time for real change. It’s time for disruption.

In the last few years, the world has been lurching from financial crisis to financial crisis. As business leaders gathered last year at the World Economic Forum’s annual meeting, the U.S. government had just narrowly averted falling off the fiscal cliff. Less than a year later, the U.S. found itself in a similar situation, which resulted in the third-longest government shutdown in U.S. history.

Despite all of this, in the U.S., and globally, there have been positive signs of economic recovery and business growth. Momentum continues and that is why I’m optimistic for the upcoming year.

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January 17, 2014

Exploring innovative approaches to tackling humanitarian crises, at the World Economic Forum

Next week, global leaders representing every sector will congregate at the World Economic Forum in Davos, Switzerland, to debate the huge economic, social and political challenges facing the global community now and in the future.

As a Deloitte representative, I will be wearing many hats, but a key focus of my attention will be participating in discussions on how the private and humanitarian sectors can and should collaborate.  I will be attending a number of events to raise awareness of the challenges posed by the escalating cycle of humanitarian crises, resulting from climate change, natural disasters, conflict, and the expanding gap between rich and poor amongst others.

The increasing frequency and magnitude of these humanitarian crises is inflicting heavy social and financial costs for both local communities and business.  Enhancing resilience is clearly vital for all businesses in order to mitigate the potential financial costs of these catastrophic events. And the Deloitte network can offer our clients value through our disaster recovery, business resilience and crisis management capabilities. But how can we add value to the humanitarian sector and play our part in tackling the unmeasurable social costs of these crises?

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January 13, 2014

Deloitte collaborates with humanitarian sector to better prepare for crises

Gx_cr_humanitarian_program_noexpThe increasing frequency, scale and complexity of humanitarian crises are inescapable. According to a new report by the United Nations Office for the Coordination of Humanitarian Affairs (UN OCHA), inter-agency appeals typically target 60-70 million people each year, compared with 30-40 million 10 years ago. This increase can be attributed to a convergence of multiple global trends including climate change, population growth, urbanization, and food and water insecurity.

The Deloitte network has traditionally contributed cash donations during humanitarian crises, as recently demonstrated by the generous response of colleagues around the world when Typhoon Haiyan struck the Philippines. In the immediate aftermath of a crisis, cash donations are incredibly important so that responders can provide for the needs of affected people and communities.

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October 08, 2013

Companies must play a role in driving social progress

BgI recently attended the Ethos Conference in Sao Paolo, Latin America's largest conference on sustainability and social responsibility. Hosted by Instituto Ethos, a Brazilian not-for-profit with over 1,300 member companies, the event was full of fascinating insights into the rise of sustainable business in Latin America. However, the key reason for my visit was to attend the launch of the 2013 Social Progress Index in Brazil.

The Index is the first initiative of the Social Progress Imperative (SPI), a not-for-profit with whom Deloitte has established a strategic alliance. The mission of SPI is to advance global human wellbeing, by combining national social performance and capacity indicators with solutions-oriented outreach to sector leaders, and grassroots champions, who together can effect large-scale change. The 2013 Index ranks 50 countries across the globe by their level of ‘social progress’. The methodology, designed by Michael E. Porter of Harvard Business School and Scott Stern at MIT, is a response to a growing recognition that GDP alone is not an adequate measure of a country’s wellbeing. The Index is an attempt to address this by creating a measure that focuses solely on societal and environmental indicators. 

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September 19, 2013

Holding the banner high: Innovation, value chains, and competitiveness in a new era of global growth

Gary with Mayor of TianjinThe World Economic Forum’s (WEF) Annual Meeting of the New Champions (AMNC, or Summer Davos) in Dalian, China, last week centered on the theme of innovation. With China’s growth no longer in the double digits, innovation and the energy it can bring to the world economy is looming large. Indeed, Chinese Premier Li Keqiang was emphatic in his remarks at the event’s opening plenary: “Innovation is the running theme and spirit of the policies adopted by the Chinese government, and it is the banner that we will always hold high.”

But innovation in a vacuum is meaningless, and Premier Li recognizes this. “We live in a global village” said Li. “No country can live in isolation of others like Robinson Crusoe.” Nowhere is this more true than when it comes to global value chains (GVC). Value chains are now the ties that bind countries together and bring public and private innovation to the world.

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April 25, 2012

Mind the gap: Countries should take action on uncollected revenues

Paper_money_trail_200x263We’ve all seen the headlines: Canadian government reports unprecedented deficit; U.S. elected officials clash over debt ceiling; Greece teeters on the edge of default. They all point to the monumental fiscal struggle most countries are engaging in these days. But, what if there was a way to put billions of dollars back into government coffers—money that is technically their due? That’s exactly what could happen if countries step up their efforts to address the tax gap.

Simply put, the tax gap is the difference between the tax collected and the theoretical tax liability if every taxpayer complied with the letter and spirit of the law. Take the United Kingdom. It’s been estimated that in 2010 the tax gap was US$56 billion. In Sweden in 2010 it was estimated at US$20 billion. And in the United States in 2006, it was estimated at US$385 billion. (Sources: HMRC (UK), Swedish Tax Agency, Internal Revenue Service (US))

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March 08, 2012

Big ideas, little price tag

Laura_blogSometimes it’s the little things that make life better. Like the DVD envelop buried beneath my pile of mail—a reminder that for a low monthly cost I can enjoy unlimited movies with no late fees. Or the way my MP3 player untethered my favorite tunes from a growing avalanche of CDs and forever changed the way I think about buying, sharing, and listening to music. Or how a free phone app lets me quickly pay my parking meter without a frantic search for spare change.

As a modern consumer, I’ve grown to expect new technologies and services that help me get things done in new and different ways. It's a simple progression: technology advances, prices drop, and over time performance generally improves.

But one major sector of the economy has struggled to embrace the type of innovation that will achieve more for less—government. In an era of increasing commoditization, consumers want quality and convenience, all for a small price tag. Governments have certainly leveraged technology to improve the performance of cumbersome processes in the past 10 years but often at a high cost.

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February 10, 2012

Public sector, disrupted

Dollar bill arrowThe global public sector is under massive financial pressure. But that’s only one of its challenges. Citizens—the public sector’s customers—are also demanding better value for their taxes. And that includes dealing with government in new ways. With every sector of the modern economy and society changing in response to new technologies and social practices, citizens can’t help but wonder why so many government offerings remain shackled by the practices of yesterday.

These conditions indicate that the time is right to bring the principles and practices of disruptive innovation to the public sector. As a recently retired U.S. government senior executive, I am, of course, quite familiar with government’s ability to avoid change until it in fact becomes unavoidable. This persistent late adoption of new and more efficient technologies and processes costs government money, efficiencies, and, perhaps, most importantly, credibility. That’s why public sector executives everywhere need to become familiar with the concepts behind disruptive innovation and consider where in their organization they can plant the seeds of change.

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