I noted several articles early this Saturday morning (while everyone else was asleep) in The Economist that drew me back to the critical need we have in business today – the need to increase productivity, and real soon.
The Economist, US print edition, July 27th to August 2nd.
Of course, this article was spun out of the Detroit bankruptcy. It seems in line with Meredith Whitneys’ book (Fate of the States), the article looks at the generally parlous situation facing America’s unfunded retirement and medical schemes. The article has some pretty unsettling data. Many, if not all, state estimates under estimate their exposure, often using calculations that assume too rosy a picture for how their funds will grow in the future. Some states, like Illinois, are in the hole by over 100% of their annual tax revenue.
In a nutshell there are huge unfunded (you and I don’t hear about them in the official record books for state government) costs that have been promised that have little chance of being paid for. Something (the article notes) has to give, in either the income side (more income, more interest) or the outcome side (less benefits). It turns out that the public sector never had it so good – in that the retirement benefits are, for the majority, tied to ending salary (which are sometimes inflated through cashing in of unpaid holiday or extra over time). In the private sector this has not been the case for years. Why the unfair imbalance?
Yet another thread, specific to Detroit, looks at how the unions at the large auto firms negotiated deals (in years past) for their members far in excess of productivity, and yet management agreed to the deals in order for peace in the short term. The poison was being taken – but it was slow impact poison. Some of the large auto firms went bust due (in part) to their burgeoning retirement and medical benefit promises made in the past.
So we have private sector leaders allowing decisions that are not properly accounted for short term; and we have public sector politicians getting elected by making promises on behalf of future generations that have no ability to pay. Where is the accounting of this behavior? Something seems to be amiss here. Rapid growth in the economy has hidden this creeping disease. If we can get past this mess, we need to change how we account for these “promises”. Or stop making them.
The very next leader, still with my first cup of coffee, was simply illuminating. This article explores the possibility that the impact on the global economy from the impressive growth of recent years in emerging economies (BRICS) will begin to lessen. China, India and other emerging economies have been “catching up” with the West for a number of years. This “catch up, so the article says, was due in part to the easier work BRICS had to achieve to get their economies going. But now that “low hanging fruit” has been taken, their growth has started to slow and will continue to slow, even though it will still outpace the West. Additionally, a “second 11” of countries might emerge with others trying to “catch up”, though they wont likely have the same impact as China or India due to size differences.
What got me thinking was this (and I did need the second cup of coffee for this part). Since the West is not showing any signs of getting out from under its lethargic near-2% growth curve any time soon, and given that the engines of recent global growth are showing signs of slowing, it must be that the next few years will be pretty difficult. There are other signs that global trade is not being looked at as a lever to increase growth; politicians see it more as a door to close in order to (mistakenly) protect local jobs, thus putting up local costs and damaging the same economy a few years later. So if I was a CEO of a large conglomerate, I face a major challenge.
My peers face the same challenge. There is a pie that is growing slowly. It will grow, overall, but slowly. If I am to succeed, I need to grab a larger chunk of that pie before the other guy. I can achieve this through open warfare (i.e. increased market share), or I can (also) focus on internal economics of my business. In other words, I am back to productivity again.
I need to figure out new ways to exploit the assets I have so that I can out perform my peers, with perhaps not too dissimilar assets. With a step-change in performance, I can free up energy to sharpen my land grabbing (i.e. market share) tools and skills. So we have to, collectively, figure out how to get out from under this creeping performance improvement effort. We need a step change. We need to alter the basic cost/benefit ratio. We need to use information differently. We need to use IT differently. A leader does not copy the other guy. A leader, tomorrow’s business that needs managing, needs something different.
So I came back to my main, personal theme – how to improve productivity of the firm – as much or faster than we have done in the past. How can “IT” help? This is what we look at in Gartner – what use of IT leads to the greatest business benefit. We might have to answer the mundane (“how do I make my ERP work properly?”) but the bigger questions are much more fun:
- Why bother with ERP?
- Why analyze yourself to death?
- Why ‘hide’ your IP from partners?
- What can you do with partners that you can’t do alone?
- Does having “IT” distinct from the business make sense?
- How should this specific organization become dominant in 3 years using IT?
- What organizational models create competitive advantage?
- What are the assets of 2015 that will be sought after by leaders?
Right, time for some breakfast I think. Maybe my very little leaders of tomorrow are awake and ready to play.