Government agencies serious about cutting costs and improving their effectiveness must start drawing on the glut of data they collect on the programs and services they provide to harness the "Wisdom of Crowds."

The ideas embodied in James Surowiecki's book The Wisdom of Crowds have huge implications for public policy, according to a new report from Deloitte which calls on governments to cater to the 'customer experience' to not only significantly reduce costs but also improve effectiveness.

The report, titled One Size Fits Few: Using Customer Insight to Transform Government, shows public managers can adopt customer management practices to enhance decision-making capabilities, ability to execute on major program and policy initiatives and service delivery while cutting costs.

"In Australia and many other countries, e-government efforts have often fallen short of transforming government service delivery the way many of the original architects intended," managing director global public sector, Deloitte Touche Tohmatsu, Greg Pellegrino says.

"A more customer-focused approach actually reduces costs and improves the level of service they offer to their clients simply by adapting some of the reforms pioneered by leading commercial companies."

Deloitte government services consulting partner Simon Cook says the global research demonstrates that leading businesses have trained people to expect high-quality, personalized services, and these are standards which citizens are now applying to government.

"At the same time, governments around the world are confronting significant short- and long-term fiscal pressures from managing rising healthcare costs to rebuilding public infrastructure," he says.

The report cites approvingly Surowiecki's thesis that a large group of independent people working in a decentralized manner is better at solving complex problems than a single expert, no matter how brilliant.

"In countless ways, government agencies can take decentralized, local knowledge and use it collectively to solve public policy problems or improve services," the report says.

"The public sector has always collected a glut of data about the programs and services they provide but has seldom attempted to extract the wisdom of the crowds contained therein."

Deloitte says while immense volumes of data are collected and stored on shelves gathering dust or in a disparate array of databases that cannot talk to one another, few are ever tapped in a way that managers can use to inform decisions. The question facing governments today is how to systematize and apply "collective intelligence" to improve governance. The report says data mining can help governments pull all of the pieces of the puzzle together to uncover problems that might otherwise not make it onto a manager's radar screen.