Are you in a Productivity trap?

In UK productivity on March 21, 2011 by Tim Aikens

Most of us can remember a scene similar to this:  the good guy is being chased by a bunch of very bad guys.  He turns down a dark alley hoping to escape their attention.  He runs to the end of the alley.  High walls, no ladder, no way out and here come the bad guys.  How does he escape?  Well, he either does something quite remarkable or he is captured!

There are large parts of the business world already in a similar sort of trap.  Take a  food manufacturing for example.  Commodity prices have been rising dramatically of the last year or so.  The supermarkets that sell their products want to keep prices down.  The food manufacturers have done all they can to improve and raise productivity in the factory.  However there is little they can do when raw commodity prices rise by 25% or 50% or even higher.  They feel very stuck.  In many cases you will have seen the size of the product fall in order to keep the price constant. Cadbury’s milk chocolate, Maltesers and Tropicana to name but three (and probably Mars Bars too!).  This is understandable but no solution. Over time we could end up paying something for nothing!

What to do?  Indiana Jones was always getting trapped and of course he always escaped just in time.  But his means of escape usually involved something out of the ordinary that required a major leap in thinking and action.

Productivity growth, like evolution is usually incremental.  It nevertheless delivers great results for a great many organisations.  But sometimes you get trapped and have to make a quantum leap to get out.  You have to do something very different, which may even mean destroying all or part of where you are today.  It actually happens all the time.  For example, moving manufacturing to China, outsourcing, call centres in India are just a few cases over the last 15 years where there has been a major shift in thinking to deliver reduced cost (but not always better productivity).

I am no expert in food manufacturing, but if the western world wants to keep prices down then something very different will have to happen. As demand for meat and dairy products rises in the east so will competition and therefore prices for these products grow.  Intensive farming as we know may have run its path and got into the cul de sac.  Now is the time to really be thinking differently (and maybe they are, but it’s just too secret at the moment!).

Something similar may be happening in your organisation.  Are you really thinking about extreme alternatives?  The need applies just as much to the public sector as anywhere.  I read that George Osborne is thinking of merging National Insurance and Income tax at the next UK budget.  Well about time.  A major leap in thinking and not that hard to implement.  But it does mean dumping a lot that has been held dear to government over the years.

In the current economic situation, there is no more important time to think very differently and be prepared to change even the most sacred of cows!  What has your organisation done?


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