How we can fix the world’s recurring productivity problem once and for all

By Raimund Klein, Founder and CEO of INCIT

What has happened to corporate memory? How is it that from both a macro- and microeconomic perspective, we continue to repeat the same mistakes, especially when it comes to productivity?

The productivity crisis isn’t new – ever since the global financial crisis in 2007, economists have observed suppressed productivity levels in many markets and geographies.

Then, in 2015, the Future of Productivity report, published by the Organisation for Economic Co-operation and Development (OECD), made it clear that the problem was a global one.

The report concluded that technologies to address declining labour productivity exist, but people either don’t know that they exist, or they don’t know how to enable these technologies for their specific purpose.

Unfortunately, not a lot has changed since then.

Why should we care?

Productivity is closely tied to the living standards of a nation – it in fact helps lift living standards and drives economic prosperity.

Productivity growth is necessary to keep poverty-reduction plans on track. It is also needed to help keep the inflation rate down, so salaries can rise without impacting the cost position of products.

As a recent Deloitte article put it: “Productivity growth allows the economy to maintain stable prices even in the face of higher wages so long as the productivity gains offset higher unit labour costs.”

Why is manufacturing important when addressing the productivity crisis?

Manufacturing and production sectors comprise 16% of global GDP. Manufacturing plays a key role in driving the development of a nation’s GDP and is essential in creating “value-add” for economies around the world.

For instance, manufacturing represents around 20% of Singapore’s GDP and strong performance in this sector helped fuel the nation’s economic growth in Q4 2021, even with the economic effects of the pandemic.

While the productivity crisis should ideally be addressed across all sectors and industries, there are many potential benefits to raising productivity in manufacturing.

One of the most critical is the environmental impact – global production sectors account for an estimated one-fifth of the world’s carbon emissions, which means raising productivity and efficiency while decarbonising could reduce the sector’s carbon footprint significantly.

Industry 4.0 is one way to do this. However, even today the enablement of Industry 4.0 technologies driving productivity remains low. The question is: what can we do about it?

How to address productivity in manufacturing

The world needs a system to be put in place, to help prevent us from repeating mistakes, and instead allow us to learn from the past in an ongoing evolution – driving productivity in manufacturing. Let’s call it the corporate memory of a manufacturing company and its digital transformation evolvement.

Such a corporate memory or digital framework needs to:

  • Consider the productivity maturity of a company
  • Account for Industry X.0 with their digital maturity
  • Be fit for companies of all sizes and domains
  • Prioritise next steps in the transformation process
  • Be able to recalibrate as technologies, processes and organizations are continually evolving
  • Facilitate aspirations and alignment for the management team
  • Consider the strategic focus of the company, as this influences the transformation direction
  • Be pragmatic, and not theoretical

The result must define how mature your manufacturing facility is in its Industry 4.0 transformation, and provide priorities so you can guide and enhance the transformation process without harming current strategic focuses.

Such insights will help businesses – and on a broader scale, associations and governments – continuously improve and advance on their Industry 4.0 journeys, to boost productivity and efficiency, and make the manufacturing sector more sustainable.

Enhancing productivity to benefit all

The key to making an impact with digitisation frameworks is data. And by “data”, we mean a massive amount of data, on a global scale, aggregated and accumulated in a single, holistic digital framework. (National data will only show you where you stand and won’t challenge your transformation principles.)

Digitisation frameworks help provide structure so we can better assess where we stand currently and create a strategy to get us where we want and need to be.

With sufficient data volume, manufacturing companies and the broader industry at large can drive sustainable change and continuous improvement – and raise productivity at the company, sector and national levels, to fuel global productivity.

And, with any luck, keep us from repeating our mistakes.

Learn more about our tools and frameworks, or start a conversation with us to find out how we help catalyse Industry 4.0 on micro- and macroeconomic levels.