But let’s focus on a few words from the Premier that were not in the report, “Contestability is about testing the market to see whether someone in the market can do the same job at a lower cost.”
These few words can highlight some of the essentials for undertaking a contestability strategy successfully. Any organisation thinking about exploiting value here must:
- Know the Job – You must understand, describe and design ‘the job’ accurately – This is not just about completing as full a list of deliverables, tasks and activities as possible, it is about understanding the dynamics between the elements of the business or operation that is being ‘contested’ and how these dynamics will change under a new operating model. Contestability often means new models of operation that are driven by different objectives, meaning different emphasis is placed on different aspects of service delivery.
- Know the Future – have a view on how the future will unfold – This may sound unreasonable, but it is unwise to take any significant step without having completed a significant analysis of what may unfold in the short medium and longer term. What are the current market drivers? Which way are consumers heading? What trends have been seen in the related industries? Will our business model stand up against any of these changes?
- Govern the Job – Internal leadership and transparency of performance – Costello alludes to this with his recommendations that dedicated leadership need be given to the governing of performance of the new providers to ensure that the ‘same job’ is being completed effectively at the same price. Government must retain the capability and capacity to do this job. It cannot be done on top off existing roles.
- Manage the Job – Internal capability to support the new entity to be successful – Along with governance there is a need to understand the places within government structures the new entity needs to support them to do business with the rest of the government. Any fire will go out if it is starved of oxygen, it’s the same with effective businesses. If stymied or halted efficiency will dwindle quickly like a pile up on a freeway.
- Ensure innovation is a part of the new solution – Given that the function being put up for contest has normally already been run by an organisation of some sort for many years and has usually matured to a point where only incremental improvement can be achieved, being truly contestable means that new models or new elements of models must be a part of the solution. Without the sense of new, its just the old with some corner cutting somewhere.
- Incentivise further Innovation – Any ‘winner’ of a contestable exercise should be incentivised to continue to innovate to create greater value. Once the winner is ‘in the chair’ and has access to the experience of operating the business in real time, opportunities for improvement and innovation become clearer and more tangible. It is in the best interests of the Government to exploit this value.
Same job, lower cost….four simple words that hide a more complex consideration to realise the intent of contestability.