What is Productivity?

Our article on the Benefits of Beacons mentions that the data from beacons can enhance productivity. However, what does this mean? ‘Productivity’ seems like a nebulous term that means nothing. Can beacons, and indeed IT in general, increase productivity? Has there been any evidence for this in the past? Will things such as IoT, 4IR and AI machine learning actually improve productivity?

A great place to start quantifying productivity is the France-based Organisation for Economic Co-operation and Development (OECD). They have lots of open data that shows recent productivity gains have been small for most countries. This is a puzzle.

Why hasn’t technology improved productivity significantly? There’s a great post at Focus Economics on 23 economic experts weigh in: Why is productivity growth so low? There’s also speech on Productivity puzzles (pdf) given by Andrew G Haldane, Chief Economist, Bank of England with lots of charts. The UK’s ‘Be the Business’ organisation tasked with driving better productivity also has a useful paper (pdf) on How good is your business really?

The key theme is that not many businesses have adopted earlier productivity improving tools such as cloud computing, customer relationship management (CRM) systems and enterprise resource planning (ERP). There are sectoral patterns of productivity improvement that tend to delineate ‘frontier’ and ‘laggard’ companies. There’s a very long tail of laggard companies that weights the numbers. There’s a fear of technology brought about by inertia and poor management.

Some countries such as Germany have slightly higher productivity but that’s considered to be due to better vocational education rather than technology.

There have been recent improvements in productivity but only for the top 5% frontier companies. These companies have embraced technology as part of improving operational efficiency, future planning, employee engagement, leadership and commercial excellence.

We anticipate IoT, 4IR and AI machine learning will improve productivity but again, only for frontier companies. The difference this time is that the newer technologies will have more far reaching consequences. The frontier companies will further extend their reach over the laggards. This might have existential consequences for many of the laggards.