[OPE] The productivity challenge and S/V

From: <glevy@pratt.edu>
Date: Fri Jul 09 2010 - 14:06:11 EDT

---------------------------- Original Message ----------------------------

Subject: The productivity challenge and S/V
"Jurriaan Bendien" <adsl675281@telfort.nl>
Wed, June 30, 2010 5:08 pm

(This futurism article from the McKinsey quarterly may be of
interest to
you; I have excerpted the relevant bits and left a lot
of the rhetorics out;
the link to the full article is at the end. I
am not so sure about the
statistical computations but the general
drift of the argument appears to me
to be quite valid, i.e. a real
problem with productivity growth looms, if a
real GDP growth rate of
2-3% per year is to be sustained in the Triad
countries in the
future. Well, we can imagine how that problem is likely to
tackled - JB).

The productivity imperative

Bisson, Elizabeth Stephenson, and S. Patrick Viguerie
Quarterly, June 2010 .

(...) We call the productivity
challenge an imperative because the need is
so compelling. But to
eke out even modest GDP increases, OECD nations must
achieve nothing
short of Herculean gains in productivity. In the 1970s, the
States could rely on a growing labor force to generate roughly 80
cents of every $1 gain in GDP. During the coming decade, assuming no
dramatic increase in hours worked, that ratio will roughly invert: labor

force gains will contribute less than 30 cents to each additional
dollar of
economic growth. To maintain a GDP growth rate of 2 to 3
percent a year,
productivity gains will have to make up the other 70

The challenge is even greater in Western Europe,
where no growth in the
workforce is expected. Here, in other words,
100 percent of GDP growth must
come from productivity gains. And in
Japan, the hurdle is higher still:
because of a shrinking labor
force, each worker will have to increase output
by 160 yen to
generate an additional 100 yen of growth.

To complicate things
further, we are seeing a growing talent mismatch. The
economies have built a workforce optimized for mid-20th-century
national industries, yet the jobs now being created are for 21st-century

global ones-we need knowledge workers, not factory workers. And
there just
aren't enough of the former. Anywhere. Companies across
the globe
consistently cite talent as their top constraint to

In the United States, for example, 85 percent of the
new jobs created in the
past decade required complex knowledge
skills: analyzing information,
problem solving, rendering judgment,
and thinking creatively. And with good
reason: by a number of
estimates, intellectual property, brand value,
process know-how, and
other manifestations of brain power generated more
than 70 percent
of all US market value created over the past three decades.

(...) Western economies can boost productivity not only through
but also by adjusting the work-life balance-keeping
flexible hours and
staying in the workforce longer, as 95-year-old
Sydney Prior of Britain has.
This push is bound to have a "no
pain, no gain" dynamic. Innovation, by
definition, is a
disruptive process. Think about the book-publishing
industry. Only
two years after the release of the Kindle, Amazon.com now
sells half
of its books electronically for the titles it offers customers in
both bound and digital formats. The Kindle is short-circuiting the
physical supply chain, and Apple's new iPad is sure to
accelerate that

Something similar is shaking up
the world of computing. It's considered the
poster child of
productivity-and for good reason. But probe further and it's
hard to find evidence of waste. Companies spend, on average, 5 to 10
percent of their total revenues on IT. Yet reliable estimates suggest
upward of 70 percent of server capacity goes unused-even more
at midsize and
small companies, since they can't achieve scale.
Advances in "cloud
computing" (sharing computer resources
remotely rather than storing software
or data on a local server or
PC) have vast potential to raise utilization
rates and
simultaneously help companies to increase their computing
while slashing IT costs by 20 percent or more. Little wonder tech
giants as divergent as Google, IBM, and India's Wipro Technologies are

investing furiously to win the battle for the cloud.

(...) The potential stakes are enormous. Companies that have higher
concentrations of knowledge workers (above 35 percent of the workforce)

create, on average, returns per employee three times higher than
those of
companies with fewer knowledge workers (20 percent or less
of the
workforce). Yet companies with more knowledge workers also
show more
variable returns: differences between competitors in the
same industry with
fewer knowledge workers.

Turning this
gap into a key source of competitive advantage requires much
than reverting to the well-worn "attract, deploy, develop, and
talent wheel found in HR manuals everywhere. Yes, the
road to success still
starts with capturing more of the right
talent. But to increase productivity
dramatically, companies will
then need to think aggressively about how to
increase the pace of
talent development, to deploy the best talent against
highest-value opportunities, and to improve the way such workers engage

with their peers. Our analysis suggests that at many large
nearly half of all interactions between knowledge
workers do not create the
intended value-because people have to hunt
for information, do not know
where to find what they need, or get
caught in the maws of inefficient
bureaucracies. (...)

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