Building the Digital Government – Estonia’s Digital Transformation

Estonia has 1.3 million citizens and it has become the paradigm example of digital services in a mere 20 years. When it comes to digital transformation, it is an example that many countries look up to. Estonia’s digital services include aspects such as e-Tax and Digital ID.

Siim Sikkut has been the Government CIO of Estonia since 2017. He is a next-generation CIO, standing on the winning shoulders of many generations of predecessors, and he continues to take Estonia to the next level in digital services.

We began Estonia’s journey in creating digital services in late 1990s. The Internet was just becoming mainstream and Estonia’s government sought to improve the way it operated. Estonia is a small country with few natural resources or great wealth. We have long had a policy that kept taxes at a minimum, but, at the same time, people in Estonia desire a sense of financial security and wealth. We must be very efficient as a government and as a state, which is challenging with limited resources.

In the early initiatives, the focus was on the efficiency of the government. Estonia experimented with whether efficiency could be gained by using digital services. In 1998, we were standing on a burning platform.  Due to the Russian economic crisis in we experienced a short economic downturn and a subsequent fall in government revenues.

In those early initiatives, it helped that we had begun to make internet connections around the country. This made it possible to move front line services online, and automate the back-office work. This was the basis – and the big picture – of how we started to experiment with digital services. Since then, this has become a conscious strategy for the Estonian government.

Picture 1. Estonian location in world (Source e-Estonia).

Early success factors

Several factors affected Estonia’s early success in its digital initiatives. The knowledge base was already functional in the beginning and we had highly skilled individuals in our workforce who were able to initiate these digital development initiatives. Prior to this, we had had excellent education in computer science, so we were well placed to be able to build on such knowledge. We also had a critical mass of people who began to train the next generation.

Clear prioritisation by political leaders

The first factor in our success was clear prioritisation, by both our political and administrative leadership.  This allowed us to commit our limited resources. At the beginning, the top down configuration was run by the Prime Minister’s office – aka Government Office.

Listening to technology experts

Secondly, we were able to move quickly because we trusted the subject matter’s experts, such as engineers. Usually, government work is driven by lawyers, but that is not how we approached this development. For example, when it came to privacy and safety, we first listened to what the engineers and tech-experts suggested, and then tried things out – within legal bounds, of course. This kind of experimentation and risk taking became the spirit of the development, and helped to push the law into being more accepting and enabling of digitisation.

Building the core components early

Our third success factor might be very specific to Governments, but it was very beneficial to us that we built our digital service core components early. We had a shared platform for different agencies which they could use to digitalise their services.

“Why would we build the authentication service 12 times or whatever times it would be needed?”

All agencies need to authenticate their users anyway. Let’s solve that problem just once, and make it available for everybody; because we don’t have money or skilled people to constantly duplicate work. We decided, therefore, to use all our resources and share the solution. Estonia’s X-road (the basis for Finland’s Palveluväylä) was born in the same way.

“Everyone needed to integrate, so why not have a shared, common solution for it.”

Changing laws and practices

In digital transformation, we should be ready to change whatever the current practice or law is. This is the core factor in being able to experiment and change how we do things. It’s important to consider change management and how we get people on-board; and, most importantly, how we communicate.

“It’s never been about technology. It’s always about how we re-design, how we transform and how we operate as a Government.”

Government wide roadmaps

Estonia has already had a few generations of CIOs and CIO teams. Similarly, we have already had a few generations of roadmaps. How we do things has changed over time. Initially, we began from scratch when it came to computing and digitalisation and it really was from the top down.

The Government CIO office brought bright minds and business stakeholders together in to one room to decide how to move forward. This was a very inclusive approach, and it included everyone who had anything useful to say on the topic. This approach resulted in the top down roadmap.

Today, we are much more decentralised. The Government CIO’s job is to keep the whole of the Government picture and roadmap together. Ministries and departments have their own roadmaps because they can digitalise the entirety of their departments.

As an example, the Ministry of Health must have a digital health plan. Each domain needs its own tools and services to achieve the target on that domain. The digital health plan also needs to support health policy goals.

We have general directions at a government level and then individual sector specific roadmaps. To put the entire government on the same page requires putting all the bright minds together. We need to think who needs to be onboard in terms of implementation. My team’s role – and my role – is to ensure there is a common strategy and roadmap, and that delivery happens in line with these.

There is no secret sauce for how we build the roadmap up – we look at trends throughout the world.  We actively scan and talk to other governments and sectors about what they are doing and we try to build from our pilot studies and experiments – no special stuff there.

CIO Office priorities

We are constantly working on a combination of four things. Firstly, we control the majority of development funding when it comes to IT plans and projects. Other agencies need to apply for funds from our office. We can attach conditions to funds and make sure that what others are building makes sense and is aligned with the overall architectural framework. Secondly, we work on the strategy and roadmap to set the overall goals.

Thirdly, because we work in government, we have regulatory powers to force our priorities through rules, standards and regulations. This approach was used in an interoperable way when we built the principles, framework and legal requirements and made sure that they were implemented. We create a lot of the architectural framework up front and coordinate views and development in many areas.

The final and fourth area we work on is people skills. As Estonia is a small country, we need to work on relationships and good partnerships. We work a lot with different networks and formations to make sure that we all know each other and have positive and productive discussions in the network. The human element of collaboration is extremely important. We need to invest in our time and the outcomes that brings, to ensure the most positive results.

Budgeting

Our funding mechanism is based on evaluating the costs and benefits of the proposed IT projects. In the middle of the 2000s, when we had our first roadmaps and platforms implemented, there was a desire to digitise everything, potentially taking things too far without assessing the benefits for each case. So, investments could have been more optimal.

My predecessor, the previous government CIO, was very keen to implement in the requirements of business cases, because our office provided the funding. We only go in if there is a cost benefit or value to a development, new system or re-design. We started doing this for all initiatives thus government is getting more value-for-money in digital investments.

Our projects do not only bring benefits in government but also for our end users. As an example, we now have state digital signatures which are built on top of digital ID. They not only allow for the optimisation of government bureaucracy by reducing the need for signatures on paper, but they also benefit the whole economy. Now all b-2-b and b-2-c transactions can be handled digitally in an end to end way. The fact that companies can sign contracts digitally with their partners or employees without meeting and without paper makes them more productive and efficient.

Everybody has benefited and become more efficient, not just the government. These examples, on a national scale, illustrate just why you should re-design your processes – they are where the greatest gains in both cost effectiveness and efficiency can be made.

“It is not about the digitalisation and technology only – it’s about how you do it.”

How others have benefitted.

Other governments have come to us to observe our experience, our solutions and the benefits obtained by Estonian companies and experts. Because change management is always difficult, not all our visitors try to replicate what we have done. The more we have built on our digital government, the more the expertise of Estonian companies in this area has grown. Mostly, we do not build in-house in the public sector, we always find the expertise in the market.

Our focus on efficiency has also affected Estonian individuals, their lives and companies. People don’t have to wait around in offices, but can get things done by themselves with self-service.

One of the largest strategic challenges we still face, is that our Estonian businesses are not as digital as you might think. Even if the government is now digital and the country has the expertise, only a few sectors and companies have used this opportunity in the wider economy. Businesses could transform how they manufacture goods and provide services, but it has not happened beyond the use of e-mail or financial accounting.

Businesses have so far lacked motivation and the sense of the burning platform to initiate the transformation. Estonian labour costs have been relatively cheap per quality, so there hasn’t yet been a need to automate manufacturing; although this is now beginning to change rapidly. Even if Estonia has plenty of expertise in digital transformation, it comes down to having the business case for change and having the will to implement that change. As a government, we try to stimulate the direction that business takes (e.g. with funding measures) and raise awareness of the topic.

Artificial intelligence

One of the main themes on our government roadmap is the move towards using artificial intelligence. We are trying to catch up on using artificial intelligence and data science in the public sector. This includes using machine learning and existing narrow artificial intelligence applications for better decision making and the automation of services as well.

We are moving forward with the first set of trials with this technology. There are some low-hanging fruits such as image recognition. In a policy agency, we have a few people who are looking at speeding cameras and identifying numbers on plates. That is a readily available algorithm out there in the market, so we don’t need to invent or use resources in creating it.

There are many low-hanging fruits that we will start with and with all the examples we will build up an appetite for change among the agencies. We need to demonstrate to agencies what can be done, what the benefits of products in the market are, and begin using them. It’s not rocket science, but concrete practical IT projects with immediate beneficial outcomes.

Moving to invisible services

We operate on a 3-year roadmap horizon and we have a 2020 strategy which is based on the founding of the European Union’s 7 years framework. We are now starting to look at what the directions should be for 2021 and beyond.

One thing to consider is automation with artificial intelligence. This is clearly a direction for us to take and the design of our digital services needs to take the transactional frontline services to the next level.

Our goal is to have invisible services, which means that we can get rid of as many unnecessarily interactions as we can. For example, if there is a new company in Estonia, all the reporting and all the red paper activities can be done online. Currently there are many individual transactions that have different webpages and different user experiences. We are now trying to look at it all holistically, which raises the question: do we need these at all? Why not have integration in company financial data; that way, all the reporting can be done automatically!

This is what we are building up in invisible services – machines exchanging data and ‘talking’ to each other. You, as an entrepreneur, would not need accountants to submit data and reports online. We can get rid of all that with automisation!

We will provide invisible services for citizens, too. For example, when your child is born, why do you need to go to 5 different websites to apply for things – let’s integrate that into one website, and automate the entire process. In the first example, the government knows that the baby was born, because the hospital has already made an entry in the population registry. So, why do we wait for you to apply for basic things when we can initiate the interaction by sending an e-mail welcoming the baby, asking its name, asking what kindergarten you would like to send baby to and what account we should send the money to?

We ask you things we need to know to better serve you. These are the kind of things that we would like to bring in, creating a holistic life service and not just single silos and discrete transactions.

Key Findings of Estonia’s Digital Journey for Business Leaders

Be bold

Leaders need to be bold and not be afraid if things don’t work out at the first attempt. Try things out, try different things to see if they work. If things do work, then progress from there.

Try things out

Instead of thinking and designing, start building things and innovate faster. Fail faster – like in start-up scene. You do not have to have a perfect solution or design to build a few lines of code and go live with it. Iterate and build faster. Nowadays there seems to be more talking than doing, especially among the governments of the world, including ours. We are not free from that, but we have had a few very good examples of this start-up approach in our government – take e-Residency as an example.

Invest in new services

We need to have people looking at trends and thinking about where they lead and how things can be done differently. This does not come from people who are engaged with other duties. We need special resources and talents to enable that to happen – and that is something worth investing in – because they will be the change makers.

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