Digital government often addresses how, where, and by whom digital transformation is brought into the complex institutional framed practices of governments and governance of society. However, digital transformation also points at critical demands to address the basic underlying institutional design of governments. The ongoing digital transformation of public welfare institutions opens for a gradual redesign of public institutions. It is important to address core values, such as inclusion, diversity, and literacy, to ensure a reflected transformation and re-design of public institutions. The purpose of this paper is to show how new forms of digital public services may have to be matched with institutional re-design to sustain public values and legitimate governments. We build on Ostrom’s eight design principles for institutional governance of common-pool resources and propose four principles for analyzing potential needs for re-design of institutions. Through a re-analysis of two case studies on automation in Swedish public organizations, we illustrate and discuss the institutional design. Hereby, we identify critical points for further analysis of emerging demands for institutional re-design. The analysis indicates that we must see beyond the organizational changes of digital government reforms and programs. We need to stretch into the institutional and foundational models of the public sector and how to provide equal and resilient welfare in a digital and changing world. We conclude by suggesting an agenda for research on institutional re-design in the digital era.