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May 16th, 2018
Artificial Intelligence
Florian Frey Partner and Managing Director, The Boston Consulting Group, Zurich
Benjamin Desalm Principal, The Boston Consulting Group, Cologne

Power up: how AI can transform Germany’s government

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For many reasons, #AI has yet to fully take-off in #Germany's public and private sectors – but this is starting to change. Find out how...

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To embrace #AI, the German government needs to first harmonise its digital databases and consolidate its IT systems

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Although significant questions still remain, AI offers an unprecedented opportunity to transform outcomes and restructure government

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30-second summary

  • Germany's slow take-up of AI - in both the government and private sector - does not diminish the potential impact of this new technology. 
  • While there is much to learn from the examples of countries like Estonia and Singapore, the German government can still seize the opportunity - but there's no time to waste.
  • The path ahead will not be straightforward but Germany should not seek to be immune from AI: the prize of transformed outcomes and improved government lies in wait.

The quiet university town of Tübingen, located a short drive from Stuttgart, is hardly accustomed to making headlines. But the spotlight descended a few months ago when Amazon chose it as the site of a new research centre dedicated to studying artificial intelligence (AI). This was just one element of what has become known as “Cyber Valley”, a new tech hub for collaboration between academia and business.

It's good news of course.

From driverless cars to more accurate cancer diagnoses, home hubs like Amazon Echo (“Alexa”) to the increasing prevalence of autonomous drones, AI is already reshaping the world around us - and we've only just begun to tap into its deep reservoir of potential. Greater research and better understanding of this technology - like what is happening in Tübingen - will no doubt unlock yet more advances to leave us dazzled and dazed.

But what about government? Has AI penetrated Germany's corridors of power? Actually, no, not yet. So, why is this? And what can be done to make up for lost time?

Back to basics

This might seem slightly surprising but Germany's public and private sectors have not been at the forefront of the AI revolution. Although ours is a country which enjoys something of a positive reputation for its engineering - “German efficiency” continues to resonate across borders - we have yet to grasp the enormous opportunity presented by AI.

Partly this is down to geography. Today's digital world is organised around two centres of gravity - the US west coast and the east coast of China - which are home to nine of the top ten global tech companies. Although this may be starting to change - a new German-French AI centre is in the works - it's clear that there is some way still to go.

But before we can set our compass for greater adoption of AI, it's helpful to remind ourselves what this technology actually is. Oxford Reference describes it as “the theory and development of computer systems able to perform tasks normally requiring human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages”. Think data analytics and a self-learning algorithm.

The key element of AI is “inductive learning.” In contrast to traditional, rule-based approaches, not all variations of a task to be automated have to be defined ex ante; instead, the algorithm learns in a similar way to humans by trial and error, on the basis of sample and/or training data, but still lack the ability to prescient and abstract.

Strong opinions abound. On one side you have luminaries such as Stephen Hawking and Elon Musk who have warned darkly against its powers. And on the other there are those who believe in its power to do good, such as Mark Zuckerberg and Sundar Pichai.

Whatever your perspective, though, it is clear that in time, AI will leave no corner of the economy or society untouched. It's here to stay, and all of us - governments included - had better adjust. And that's what makes Germany's slow pivot towards this technology so frustrating.

Why the slow embrace of AI?

Germany's sluggish pace is rooted in a myriad of different factors. Firstly, innovation in AI and machine learning comes to a large extent from technology firms outside of Germany, such as US giants Google and Facebook, and Alibaba and Tencent of China. Although Amazon's investment in Tübingen inspires hope for the future, there is clearly more to do in order to attract developers and innovators to our borders.

Secondly, Germany lags behind in digitalisation in government and infrastructure - a core prerequisite for AI applications. For example, in its 2017 Digital Progress Report, the European Commission placed the country only an overall 11th out of the 28 EU member states, saying: “With only 19% of the population being e-Government users, Germany ranks 23rd amongst the member states. Yet there is still no coherent and nation-wide offer of e-Government services.”

And thirdly, open data is yet to take off in Germany, and without huge amounts of high quality data, AI has nothing to learn from. German policymakers don't need to look too far for inspiration - the UK's use of open data is already leading to a variety of different applications.

Germany's lack of progress has not gone unnoticed. The country's citizens and industry - like their counterparts all over the world - enjoy a 24/7 digital connection with the world around them and are always aware when advances are happening elsewhere. This means that while the broader public may not know about AI's potential, it is aware of the gap between other countries and Germany. This creates frustration and dismay - with all the negative connotations for government.

By contrast, countries that offer a strong digital government service, such as Estonia and Singapore enjoy strong support - and therefore trust and legitimacy - from their populace. Estonia's state portal, a one-stop shop for hundreds of e-services offered by public sector organisations, and Singapore's Smart Nation initiative are just two examples of what governments can achieve. Both clearly demonstrate how citizens can benefit from better digital public services.

Time to play catch up

While there is much to learn from the example of Estonia, Singapore, and others, when it comes to organisation and public management, the German government needs to first do its IT homework by harmonising its digital databases and consolidating IT (as they plan to do over the next few years) before moving  swiftly on to undertaking some pilot projects. The coming change will be fundamental - all the more reason not to wait.

Without these pre-requisite steps, Germany risks missing out on all the potential rewards that AI has to offer. For example, government silos will be broken down as AI can work across departmental and policy borders. Public services also stand to benefit: data collection can be centralised through new technologies such as smart sensors, which help plan more effective waste collection routes, for example.

And decision-making will be strengthened. Policymakers will not only benefit from increased citizen-government interaction - which will be able to occur from anywhere with access to the system - but AI can also power smart support tools that provide officials with tailored information and advanced analytics. With analysis and efficiency optimisation being machine-led, more resources for personalised individual services will be available - a development absolutely necessary given the demographics in public services in Germany today.

It's important to stress, however, that while these potential benefits are immense, significant questions still adorn the policymaking horizon. Transparency of AI-led decision-making, data protection issues and AI bias on input data, all spring to mind.

But while it is right to be cautious, AI nonetheless offers an unprecedented opportunity to transform outcomes and restructure government for the better. Germany is not and should not be immune from this revolution.

Let's get down to work.



Written by:

Florian Frey Partner and Managing Director, The Boston Consulting Group, Zurich
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Benjamin Desalm Principal, The Boston Consulting Group, Cologne
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