Articles   •   October, 2016

Recently at a series of talks held jointly with Deloitte, I pursued Robert Gordon’s – an economist at Northwestern University – line of thinking that global economic stagnation isn’t going away for a while. A long while. That the recovery so yearned for by global economies isn’t going to manifest itself on the world stage anytime soon. I got little push back, perhaps out of respect for the speaker. Perhaps they were overly depressed at the prospect of losing their jobs and meagre pay rise on the horizon. What I did not go on to say during these talks is the biggest, most important thing corporations and national economies must do to address weak/flat growth.

The big “P” word is thrown around so much it qualifies for word abuse. In the coming years, it could well be the holy grail of corporations and the hottest offering on the menu of consultants, after being dormant for decades. Let’s admit it, it’s not the most sexy of initiatives compared to recent developments in the digital space. This recent article by Bloomberg argued that higher productivity is necessary to solving the global problems of weak growth.

The article identifies four characteristics of highly productive organisations (termed “global frontier firms”):

1. They have a higher ratio of capital per worker – think more robots or machines
2. They tend to be larger in terms of sales – size matters
3. They file more patents – think innovation and investment in R&D
4. They are more likely to be part of a multinational group – present across geographies

What’s interesting in the article is it also explores why highly productive firms aren’t pushing productivity “zombies” out of the market. And what’s preventing these non-frontier productive firms from using new processes and inventions to become “frontier”. The two factors identified in the article are:

1. Regulation – while it’s difficult for governments to force innovation, it’s possible that government policies are preventing new inventions and ide as from spreading. As the article puts it “regulation could be helping lower-productivity-growth companies to maintain market share.” I’m thinking SPAD vs Uber
2. Complexity – corporations haven’t figured out how to use today’s innovations to drive productivity. I’m thinking baby-boomers blinded by Capt Kirk’s dashboard.

Along the same line of thinking, Steve Forbes, Editor-in-Chief for Forbes Asia recently commented that the biggest, most immediate obstacle to a vigorous recovery in global economies is the disastrous monetary policies of major central banks – policies of QE and zero interest rates that not only massively distorted global credit markets, but discouraged governments to pursue structural reforms. But that’s a topic for another day.

Stars Shooting Past Laggards Hold Clue to Productivity Mystery – Bloomberg

Evant & Co is big on the “P” word. It isn’t exactly frontier today, but has plans to seriously  give it a shot.

About the Author(s):

Andrew Lee is the Managing Director of Evant & Co., a management consulting firm with offices in Kuala Lumpur and Jakarta. Our purpose is to help our people and our clients to realise their aspirations while improving lives through business. We advise leaders on strategy, human capital, digital, and outsourcing.