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Digital transformation and the productivity problem

Digital transformation and the productivity problem

One of the biggest challenges facing Western economies and their leading businesses is how to tackle failing productivity levels

The jolt of the recession of 2008 led to a sharp decline in enterprise productivity from which it has never really recovered.

The latest figures from the Bureau of Labor Statistics show that productivity in the US economy increased by a very slight 0.2% during 2016, which represented the smallest annual gain since 2011 (https://www.bls.gov/lpc/).

Over in Europe, many countries are in the same boat. The UK’s Office of National Statistics recorded growth of just 0.4% in productivity levels in the third quarter of 2016 (https://www.theguardian.com/business/2017/jan/06/weak-uk-productivity-living-standards-pay-rises-financial-crisis). The manufacturing sector in particular is struggling, with a rise of just 0.8%, which is way down on the 4.3% growth in the ten years that led up to 2008.

Economists disagree on the reasons behind this failure to bounce back, and one of the most intriguing questions is what – if any – impact the use of technology in the workplace is having on productivity?

In the era of digital transformation, organizations have invested billions in deploying collaboration and productivity tools. But a new study from industry analyst firm PAC and Fujitsu (Trend Study – Mastering Productivity) found that just 6% of organizations claimed to be making the most effective use of them. The large majority admits that while tools have been implemented, they have either not being integrated or are not being widely used across the business.

The study also found that technology is only part of the picture when it comes to improving productivity, and that a more fundamental problem exists in that many organisations simply don’t know how productive they are. Just 14% of the 500+ senior business and IT stakeholders that participated stated that they have a clear understanding of employee productivity levels across the business and have an ongoing programme of technology-enabled productivity in place. For the majority, their view of productivity is partial at best, and in the case of 15%, they do not track productivity at all.

Without an understanding of current productivity levels, it is impossible to know where best to apply technology to drive improvement, or to measure and quantify any gains that are made.

Technology alone cannot be the answer to the productivity problem, and it is encouraging to see from the study that most executives (86%) acknowledge that in order to reap full business value from their digital transformation efforts, they need to change their ways of working. This is a daunting prospect, particularly for large, established organisations that need to unpick and transform processes and structures that have been built up over decades.

But change is not impossible. This month, toy manufacturer Lego was named as the world’s most powerful brand (http://www.telegraph.co.uk/business/2017/02/01/google-replaces-apple-worlds-valuable-brand-lego-crowned-planets/), which capped a remarkable recovery for a business that was teetering on the brink of bankruptcy just a decade ago.

The Danish company’s reinvention has been underpinned by a complete re-wiring of the business. It brought the manufacturing, design and marketing people together under the same roof, gained clearer insight into what customers wanted through the creation of new interactive digital platforms, and overhauled its manufacturing supply chain to dramatically reduce time to market for new product launches.

Not all organisations have the appetite or the budget to support this kind of multi-year transformation programme. But by focusing on pinpointing where productivity challenges need addressing in the business, identifying the benefits that can be achieved through adopting new ways of working, and developing a business case with measurable outcomes, a more iterative approach can deliver shorter-term value.

Examples of organisations that have taken this more iterative approach to mastering productivity, as well as a discussion of the key takeaways from the research are available on this webinar:

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