Productivity

Productivity of U.K. Companies has stayed stubbornly flat over the last decade.  This means that, overall, businesses are failing to invest effectively.  This is a surprising fact in light of the promises of the technology industry and change profession over the years: ERP, lean, six sigma, lean six sigma, offshoring, nearshoring, the internet, smartphones, cognitive computing and now robotics. 
 
There are many possible explanations. 
 
Certainly in recent years low interest rates and an aversion to insolvencies has allowed inefficient companies to subsist, never investing, never releasing capital and labour for new enterprise.  
 
Many of the investment tools and techniques have been focussed on incremental cost cuts but the savings have been passed to customers, not increasing the perceived value of the good or service. 
 
A cynical yet plausible view is that the cost of investment has outweighed the benefits.  Large companies have employed increasing numbers of IT staff and change professionals, working on a large portfolio of change projects that never quite deliver the expected benefits, as well as maintaining and patching an increasingly complex set of legacy systems.  How many UK companies can hand on heart say that their ability to deliver IT investments is a source of genuine competitive advantage?
 
At IBM where I work, researchers have created astonishing new capabilities in artificial intelligence or cognitive computing, that have profound implications for the world of work.  Repetitive, simple processes can of course be digitalised. More than that, though, activities requiring expertise that are vulnerable to human fallibilities and cognitive biases can be more effectively carried out by computers. Since Watson beat the best humans in the game show Jeopardy, we have demonstrated the technology's advantages over humans in work such as analysing medical scans for early signs of problems, or aircraft engine monitoring, with no lapses in concentration nor preconceived opinions on what good looks like.  Any doubters should watch YouTube clips of Tesla self driving cars avoiding accidents in a way that many of us humans could not.  A future where disengaging the self driving is as irresponsible as texting while driving?
 
Meanwhile cloud computing promises to eliminate much of the work currently done by staff in IT functions, provisioning of environments, managing configurations, promoting development code into production systems. Automation is finally being applied to the IT function itself.  
 
The combination of changing consumer preferences, the spread of smartphones and advances in technology offers the potential for fundamental Digital Transformation of many services.  We are already seeing the decline of many service sectors.  In the USA, 500,000 department store jobs have been lost since their peak in 2001, and newspaper publishing has lost 270,000 jobs.  
 
Personally I expect this trend to accelerate and spread throughout the service sector, and I hope that the effect will be benign, with labour released from low value adding jobs and redeployed in new and better ways, so that we finally achieve the growth and productivity improvements that are currently stalled.  
 
Whilst this is an interesting debate, in the meantime how do companies respond and manage their own Digital Transformation?  Fortunately there is no magic or secret recipe for success. I offer ten principles that in my opinion should always be considered regardless of the technology:
 
Turkeys should never be eligible for the vote on Christmas food arrangements.
All processes that can be digitalised will be, and their value will tend to zero.
Walk in the shoes of your customers.  If they could see how work is done inside your organisation what would they think?
Consider end to end processes and how a customer's data passes through it to achieve the outcome desired by the customer.
Pay relentless attention to behavioural change.
Decision making is key. Important change work should be done close to the board, and the board must make decisions and unblock blockages.
Detailed mapping of existing processes is pointless.
Be wary of software that claims to be a silver bullet.  They are just tools to be used by skilled practitioners in designing new customer experiences.
Usually, the best value is obtained by hiring the smallest number of highly skilled people, and allowing them to experiment and fail fast.  The worst value is obtained through a large team of cheap people, and by management imposing top down deadlines to control the spend.
There is always a tendency to get carried away by new techniques and terminology.  Don't be bamboozled.  Agile is fantastic, but sometimes becomes a euphemism for uncontrolled and undocumented.
 
Done well, Digital Transformation starts small and builds momentum, and before long the case for change becomes unstoppable.  As ever, the main problem will be human: resistance to change and a large organisation's ability to organise itself to transform.