Fueling the next 20 percent productivity

Business needs to raise productivity more than ever. Thanks to innovations in digitization and analytics, four new methodologies can yield the productivity breakthroughs organizations need.

Business is now in the midst of the most significant disruption in decades. This epochal transformation has been driven largely by technological changes—big data and advanced analytics, additive manufacturing, the Internet of Things, robotics, and artificial intelligence—collectively described as the fourth industrial revolution. Arriving at dizzying speed (see sidebar “Lewis Carroll on the pace of change”), its consequences are already evident across sectors: competition is intensifying not just within industries but also between them. Think of Apple assembling an autonomous-vehicle business or Tesla moving into power supply. And then there are the aggressive, agile start-ups, with business models that ignore conventional constraints.

Together, these pressures are both intensifying the long-standing imperative to raise productivity (see sidebar “What is productivity?”) and leaving much less room for error. Yet they also involve novel tools and methods—for example, vastly increased connectivity and the Internet of Things—with a huge potential for realizing new levels of productivity across the entire value chain.

In 2016, about 17.6 billion devices were connected to the Internet. By 2025, that figure will probably jump to about 80 billion, at a rate of 152,000 a minute.

The difficulty, of course, is to take advantage of these technological breakthroughs in ways that lead to comparable performance breakthroughs. This has never been easy to do. In 1987—more than 30 years after businesses started using mainframes—Nobel Prize–winning economist Robert Solow famously noted, “You can see the computer age everywhere but in the productivity statistics.”

Businesses—indeed, societies—cannot afford another 30-year wait for significantly better productivity. They need gains on the order of 20 percent or more, and they need them much sooner. But the problem now, as a generation ago, is that organizations too often overinvest in technology while underinvesting in the human capabilities needed to make it useful.