9 minute read 10 Nov 2022
tightrope-walker-concept

How can the public sector capitalize on megatrends?

Authors
Martin Eduard Debusmann

Government & Public Sector Consulting Partner | Switzerland

Senior Expert for global transformation, leads the Swiss Government & Public Sector Consulting business. Designs strategic visions, organizational transformations, innovation, digital acceleration.

Moritz Oberli

Managing Partner Consulting and Industry Leader Infrastructure, Ernst & Young AG | Switzerland

I’m a discoverer, networker and a numbers person. I love to work, interact with global teams while having strong local roots in Switzerland. I’m husband to a wonderful wife and father of two kids.

Jennifer Abderhalden

Director, Business Consulting | Switzerland

A curious person with broad experience in the public sector. Interested in politics, government, traveling and reading crime novels. Loves running, skiing and walking the dog.

9 minute read 10 Nov 2022

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Innovations, advances and technology are changing economic, social and the political paradigms faster than ever, reaching into governments and administrations around the world. We explore how Switzerland can respond.

In brief

  • What can the public sector do to address the effects of demographic change?
  • How can the government support climate initiatives?
  • How can Switzerland tackle supply chain issues?
  • What challenges do innovation and technology pose for the public sector?
  • Do we need to rethink how responsibilities are divided between the government, cantons and municipalities?

The only constant in life is change – this ancient wisdom of the Greek philosopher Heraclitus dating back over 2500 years is more relevant today than ever before. We live in an age in which megatrends such as digitalization and globalization are rapidly changing the world around us. Technological advancements and innovations are daily occurrences. At the same time, economic power is continuously shifting with new emerging economies putting pressure on established economies. Industrial societies are aging, climate change is becoming more urgent and new political values are growing in popularity.

Megatrends – challenges and opportunities

On the one hand, it can be a challenge just to survive in this age of rapid change – megatrends also have many negative sides. Climate change is a threat multiplier for crops, habitats and biodiversity and increasing technologization generates ever growing volumes of personal data, leaving it open to misuse. But megatrends are also opportunities. New industries emerge, for example, from the transition to a green economy, which creates jobs and helps secure long-term prosperity.

To harness these megatrends, the public sector must establish optimal conditions for its citizens and create a fertile environment. This is the only way it can fully leverage the opportunities of megatrends for the benefit of its citizens, for example, with economic incentives or political initiatives. The government must, where necessary, intervene and mitigate the risks of megatrends on society, the climate, the economy, technologies and innovations, as well as politics by imposing regulations.

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Addressing social change with integration and automation

Demographic structures have a major impact on governments and their citizens, from shifts in economic power and supply constraints through to changing social standards. While industrial nations will often have low birth rates and declining mortality rates, developing countries tend to have younger, growing populations. In Switzerland, the percentage of older people is increasing as a result of a low birth rate and high life expectancy. The percentage of the total population in employment is declining, leading to higher social expenditure for pensions, health and care and thus a heavier financial burden for the employed. In addition, continued population growth in other countries results in more migration to Switzerland.

In future, a smaller workforce will have to support a larger number of people over 65 years of age.

Public administrations need to seek out ways to skillfully integrate migrants in the job market as a measure to - at least partially - address the shortage of labor. Another approach lies in the increasing automation of the job market. Artificial intelligence and robots are becoming more sophisticated. Sectors that are more heavily impacted by the aging population, such as care, hope to increasingly benefit from this.

Circular economy reduces waste and dependencies

Continued global population growth and increasing prosperity are also drivers of emissions and climate change. To cover the growing energy requirements, RES capacities need to be increased and their efficiency improved, especially given the current geopolitical situation. The energy crisis is compounding the problem. The Swiss Federal Office of Energy’s Energy Strategy 2050 is aimed at reducing consumption on the one hand and increasing the share of renewable energy on the other. Government measures aimed at promoting renewable energies add a competitive dimension. 

Renewables such as hydropower, but also solar energy, wood, biomass, wind energy, geothermal energy and ambient heat are making up an increasingly large share of Switzerland’s energy supply.

Wind and solar energy are the most important renewable energy sources of the future. Rare earth elements are required to manufacture batteries, solar panels and wind turbines. To avoid over-reliance on these rare resources, we must abandon the predominant, linear economy and embrace a circular economy. A circular economy is good for the climate too: large volumes of emissions can be saved if raw materials and goods are recycled and reused as input for production instead of being thrown away. 

The public sector plays a decisive role in greening the private economy. It needs to design a regulatory environment that supports the efforts of the private economy and, ideally, spurs it on as a kind of catalyst. Specifically, this means the public sector must, for example, provide finance and infrastructure to implement a circular economy. Environmentally friendly business practices should also be rewarded. Incentives will need to be created for this and embedded across all administrative levels.

Strengthen Switzerland as an innovation leader

While economic growth in western nations has been stagnating at low levels for years, countries such as India, China or Nigeria attained persistently high growth rates in recent years before being halted by the pandemic. This has led to a realignment of global economic and business activities, which is transforming growth countries from centers of labor and production to consumer-driven economies. Capital flows are being redirected as these economies transform into exporters of capital, talent and innovation. In addition, protectionist tendencies are reemerging in the form of new customs duties or regional free trade zones along with a clear trend toward regionalization of the economy and economic blocs. The war in Ukraine is amplifying these shifts. 

According to a calculation by the Bertelsmann Foundation, the Swiss benefit more on average from access to the EU single market than citizens of EU countries.

To preserve Switzerland’s economic output, the Confederation must secure energy supply in the short and long term and encourage businesses to establish resilient and crisis-proof cross-sector supply chains. The Confederation can also make supply even more secure by changing its procurement structures, for example, by placing a greater focus on the supplier’s risk management. Since Switzerland does currently not participate in the Horizon Europe research program, Swiss research institutes have no access to research funds and networks. This could weaken Switzerland’s attractiveness and innovative strength in the future.

Prosperity through technological innovation

The development of new technologies is central to innovation. While technology previously played a largely passive supportive role in the execution of tasks, it will shift to playing an active and direct part in how we work. Many of these breakthrough technologies, such as artificial intelligence, augmented and virtual reality and new-generation robots and drones, already exist but have not yet found their place in our day-to-day lives. The transition will require massive investment in the necessary infrastructure, such as 5G, high-precision sensors, batteries and quantum computers. 

Countries that win the upper hand in technology gain significant economic advantages and political power.

Although Switzerland ranks at the top of the global innovation index, there is still a degree of aversion toward the use of new technologies in many parts of the public sector. This can lead to delays in creating the required structures. The internal administrative structures that promote digitalization and technologization are frequently fragmented, making them less efficient and effective than they could be.

In order for Switzerland to remain an innovation leader, it must consolidate and coordinate its technology, science and industrial policies and foster public-private partnerships. It must promote the development of digital skills in the wider population and use public-sector data for social, scientific and commercial advantages. To do this, however, it will need to win the trust of the Swiss people that personal data are used for our democratic legal process and to the personal advantage of the person concerned.

Agile and fast response to changes in political behavior

According to the democracy index of the Economic Intelligence Unit, the level of the world’s population living in a democracy is falling. The effects of this are profound, not only for the citizens of the affected countries but also on the international system. In autocracies, there is a higher likelihood of armed conflicts and associated disruptions to international trade and flows of refugees. The renaissance of nationalistic tendencies is also a problem. They destabilize international security and make it difficult to cooperate internationally; nationalistic governments prioritize their own interests. However, many global challenges such as climate change and the COVID-19 pandemic require large-scale global cooperation. Switzerland could thus be increasingly called upon in the future to build bridges.

Democracy index

only 6.4%

of the world’s population lives in a full democracy.

There is now a certain degree of mistrust in the government in Switzerland due what some believe to be the inadequate implementation of approved referendums as well as the growing politicization of many citizens during the pandemic. The public sector needs to acknowledge and factor these uncertainties into internal administrative processes. Responses to changes in the political landscape can be swiftly and flexibly managed by developing alternatives. A modified organizational structure, for example, one that incorporates agile elements, can stave off disruptions caused by external factors and megatrends. The division of responsibility between the different administrative levels should not be overlooked either. Historically, federalism and the principle of subsidiarity have been key factors in Switzerland’s success story. However, the division of duties can also be a driver of inefficiency, by slowing the digitalization of the administration or making it onerous.

Summary

The public sector can keep up with the increasingly rapid pace of change by acknowledging the challenges of megatrends and capitalizing on their opportunities. Social change can be tackled head on through automation and by skillfully integrating immigrants in the labor market. In terms of climate change, we not only need to reduce emissions, but also promote the use of renewable resources and use them more efficiently, and transition to a circular economy, all of which will require funding, infrastructure and incentives. At the same time, Switzerland must safeguard its status as an innovation leader, which will call for investments in infrastructure and technology and removing barriers within internal administrative structures. The more agile and flexible these are, the better and swifter the public sector can respond to changes in the political landscape.

Acknowledgments

We would like to thank Lara Saxer, Philip Stettler and Sebastian Torkisz for their valuable contributions to this article.

About this article

Authors
Martin Eduard Debusmann

Government & Public Sector Consulting Partner | Switzerland

Senior Expert for global transformation, leads the Swiss Government & Public Sector Consulting business. Designs strategic visions, organizational transformations, innovation, digital acceleration.

Moritz Oberli

Managing Partner Consulting and Industry Leader Infrastructure, Ernst & Young AG | Switzerland

I’m a discoverer, networker and a numbers person. I love to work, interact with global teams while having strong local roots in Switzerland. I’m husband to a wonderful wife and father of two kids.

Jennifer Abderhalden

Director, Business Consulting | Switzerland

A curious person with broad experience in the public sector. Interested in politics, government, traveling and reading crime novels. Loves running, skiing and walking the dog.