by Andrew White | March 31, 2017 | Comments Off on Raising Productivity is Our Number One Task
I was reading the U.K. government Spring Budget 2017 report (HM Treasury, HC1025, March 2017) and one sentence stood out for me by a mile: “Raising productivity growth sustainably remains the central long-term economic challenge facing the U.K.” Of course this comment could and does apply to any of the G7 countries and in fact to most if not all advanced economies.
In the notes of the budget report there is reference to a quarterly bulletin published by the Office for National Statistics. This “international comparison of U.K. productivity (ICP)” is interesting reading. The data suggests that as a result of the financial crisis the U.K. suffered a drop in productivity that has hit the country harder than many other of the G7. Of course other data tells us that productivity has been in the doldrums for most advanced economies for the last 20 years, so his news is just heaping more oil on to the fire. So at a macro level we have big challenges.
If we look instead at a micro level and look at how firms perform, we again see some interesting and perhaps conflicting data. There is data that reports industry and/or corporate profitability, that seems to ebb and flow over time perhaps in unison to an economic cycle, but overall tend to grow rather well. But at the individual level of the firm, we see some dire news. Many surveys and productivity studies suggests thing like the following:
- Less than half of IT investments (of which data and analytics are central to) have any form of real cost/benefit analysis, and so
- More than half of such investments are based on ‘strategy’ or some non-financial or faith-based approach
Yet year after year we all continue to invest in IT. Do we know what we are getting for our money?
Looking at this from another dimension we can also ask to what degree are IT innovations actually the cause or trigger for subsequent productivity growth? This is another interesting line of analysis. I have written about this before:
- Different forms and types of innovation, each with a unique ability to drive or enable subsequent productivity improvement
- Issues with how such improvements are defined, measured and reported
- Innovations that have little impact on productivity (such as email and smartphones versus smartphones as a platform)
Overall the goal is clear: we need to drive the right kind of innovation to drive improved productivity. This is the only way to improve our standard of living. Yet we face policy challenges, political conflict, and population constraints. The goal is clear- our next steps less so. And it would appear that neither government, regulator, and dare I say many CXO’s seem to know what to do next…. On that happy point, I’d like to wish you a quiet and relaxing weekend.
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