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Productivity Is Soaring at Top Firms and Sluggish Everywhere Else

The IT revolution of the early 2000s saw a dynamite increase in business productivity. Some believe that the trend is ongoing, while others believe its effects quietly tapered off. It turns out both are true. Chiara Criscuolo writes for Harvard Business Review with her research that indicates productivity at the tops firms is still healthily increasing, while everyone else is taking a nosedive.

What Makes an Ace Pilot?

What Criscuolo refers to as businesses on the “global productivity frontier” grew at an average 3.5 percent per year in manufacturing between 2001 and 2009, which she says was double the speed of the average manufacturing firm during that period. Businesses on the frontier are distinguished by a drive to innovate that is fueled by an ability to combine technology, strategy, and human assets meaningfully. Criscuolo elaborates:

Seen from this perspective, the productivity problem isn’t a lack of global innovation. It’s a failure by many firms to adopt new technologies and best practices. Indeed, the main source of the productivity slowdown is not a slowing in the rate of innovation by the most globally advanced firms, but rather a slowing of the pace at which innovations spread throughout the economy: a breakdown of the diffusion machine.

Future growth will depend on harnessing the forces of knowledge diffusion which propelled productivity growth for much of the 20th century.

She cites four steps that must occur to achieve this diffusion:

  1. Global connections need to be extended and deepened.
  2. New firms need to be able to enter markets and experiment with new technologies and business models.
  3. Better “matchmaking” is needed across the economy to match top firms with resources.
  4. Investment in innovation should extend beyond technology.

The third point has to do with the fact that some of the highest-performing firms are not always able to achieve their optimal size due to economic considerations regarding the country of origin. More strategic globalization sounds like the solution. And pertaining to the final point, Criscuolo calls upon organizations to invest in further skills and managerial training in order to “bundle” as many innovation assets together as possible.

Educate the Workforce

Ultimately, it seems that becoming a high-performing organization demands an investment in developing people. The difference between mediocrity and tremendous success lies in the continuous education of the workforce, which begins with playing a fast game of catch-up with what the biggest players are doing.

You can read the original article here: https://hbr.org/2015/08/productivity-is-soaring-at-top-firms-and-sluggish-everywhere-else

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