“Productivity isn’t everything, but in the long run it is almost everything”, Nobel Prize-winning economist Paul Krugman once said. He was talking about countries at the time, but the same can be said for businesses.
Despite the UK witnessing levels of productivity growth in the last two quarters not seen since before the recession, we are still a long way from seeing a sustained recovery in our performance - and that’s a real problem.
Productivity is the most fundamental driver of economic growth. Before the 2008 financial crisis, average annual productivity growth was a little above 2 per cent. Had that trend continued, we’d currently be looking at figures 20 per cent higher.
Yet productivity isn’t much better today than it was before the crisis happened. It’s one of the UK economy’s most persistent weaknesses, having displayed the lowest economic growth in the G20, and it’s a problem for our businesses too.
There’s plenty of debate on the reasons for the current output woes, but one of the most common explanations is the lack of investment, particularly in technology.
Take the banks for example, an industry hamstrung by outdated IT infrastructures who are now losing business to more nimble and agile fintech start-ups. At Avanade it’s an area we have looked at in depth and is just one of multiple industries that has suffered by a severe neglect of updating their systems.
Most companies exist for the primary purpose of turning a profit. Maximising sales and minimising costs. Simply speaking, an increase in output means having more product, or time, to sell. Take the analogy of a spade versus a digger. Both tools require a single person to wield, yet without possessing superhuman qualities, the productivity output of either operator per hour is substantially different.
Yet 10 years of stagnant productivity combined with continually rising costs have put a squeeze on businesses, meaning far too little has been invested in technology. At present, capital spending is only 5 per cent above pre-crisis levels, compared with increases of 5-10 times that in the decades following the 1980’s recession and 1990’s slowdown.
We’re entering an exciting age. The fourth industrial revolution.
The first two industrial revolutions – the shift from hand to machine manufacturing, followed by the introduction of electricity – marked huge economic productivity increases across the nation. The third – the Digital Revolution as it’s more commonly known – had a much smaller impact. Progress, despite being impressive, was far less transformative than the introduction of the factory line or cars for example.
Yet with the fourth industrial revolution, described as a range of technologies fusing the physical, digital, and biological worlds, we’re likely to see a significant productivity increase. Emerging breakthroughs in technology such as quantum computing, artificial intelligence and machine learning differ from previous technological advancements, particularly in the ways they promise to augment our workforces.
Augmenting the workforce with new technologies will free up time for the workforce to focus on getting more done, and it’s already happening today.
Take an example of a major utility we work with at Avanade. To maintain high voltage overhead power lines across the country they operate in, they actually charter a helicopter with an HD video camera to fly along the cables, recording hours of footage which was previously manually reviewed in full by highly skilled operators to spot anomalies.
As it turns out, machines are pretty good at spotting anomalies too. Using machine learning, we’ve helped them get systems in place that can analyse hours of footage in much less time, providing short snippets of video that can be reviewed by operators, cutting through the noise and allowing them to focus on the important information.
A task previously labour intensive is streamlined, all enabled by technology and helping us to work smarter not harder.
That is ultimately the promise of the fourth industrial revolution. Technology will enable us to focus on the information that is important to us, cutting out the unnecessary and freeing up time to get more done.
How much time does the average office worker spend sifting through emails, updating their calendar and coordinating multiple projects at the same time? Augmenting these tasks will allow more time for creative discussion and strengthening professional relationships.
Combined with smarter working and improvements in collaboration tools will help us break through the productivity plateau we’ve been stuck on for the last decade. The technology is at our fingertips the question is now how we use can utilise it in the smartest possible way.
The helicopter example is more extreme, but single point percentage productivity increases can be found in much simpler, better uses of technology. Only through constantly innovating can we begin to stretch the capabilities of existing technology and to break the barriers that have seemed impenetrable.
An example closer to home for most of us is Office 365 – something pretty much every FTSE100 company has deployed, with very few using it properly.
We’re all familiar with having to trawl through emails to find the latest version of a document, usually with a –v7 or –v8 tacked on to the end. Centrally stored and authored documents is something the software excels in, yet few take advantage of. There are many more examples of tools within the Office 365 suite that few businesses are using fully, despite all paying the same amount for them.
We therefore need to be smarter in how we use technology to free up our time often spent doing menial and administrative tasks. The digital workforce is only gaining momentum by the day and you cannot help but feel that we are on the precipice of creating something ground-breaking with the technology at our disposal.
The fourth industrial revolution is on our doorstep, and has the potential to fuel the biggest productivity increase we’ve seen in decades, even centuries. New technologies including Artificial Intelligence and Machine Learning are rapidly evolving and being deployed, yet there are also real productivity wins to be had today, through a better use of the tools we already have.
Mark Corley, Chief Technology Officer at Avanade
Image Credit: MNBB Studio / Shutterstock