Chapter 9 – Productivity and Profitability

The pressure for ever-increasing profits is intense and unrelenting today. And accommodating Wall Street, coping with local competitors and thriving in the global economy make bottom-line efficiency an absolute day-to-day business essential.

But most companies have been squeezing costs and doubling down on productivity-enhancing tools, services, practices and processes for years now. So how can they wring any more excess out of their organizations – even if they’re zealously efficient?

That’s a very good question – and the right one to ask, at least from our perspective.

The answer is both simple and complex.

Simple because even though we’ve been continuously modernizing and streamlining to make things more efficient, the average business is still using old techniques and hasn’t yet married its previous gains to all the new opportunities currently available for profitable productivity.

Complex because generating constant productivity growth is hard, and finding the right technology to help isn’t always easy.

Our view is that we need to combine the old methods with a new digital model that includes real-time tracking of work. This would provide us with immediate knowledge of who’s doing what on a team or in an organization, and where each project actually stands. If we could simply understand the specific things each person is responsible for delivering – and get the information on demand – imagine how far ahead we’d be and how many good – and fast – decisions we could make.

We don’t need a lot of technology bells and whistles – or reams and screens of exotic information – to advance productivity further. Email chatter isn’t necessary; nor is social dialogue or meeting minutes. Just the state of the deliverables. There’s no better way to improve productivity than knowing where it lives and who’s performing – and where it’s lacking and who’s slacking – inside a company.

In the end, if we can successfully combine old and new efficiency approaches, we’ll re-define productivity for the 21st century. And from here on out, the new equation for bottom-line improvement should be: Productivity Growth Equals More Profit With Less Effort.

Throughout history – especially modern industrial society – we’ve seen inefficiency square off against an intense need for more profits with less effort. In almost every case, a cutting-edge collaborative tool or sweeping community process helped boost efficiencies and spread knowledge, while increasing profits and reducing risk.

Let’s look at the shipping industry in late 17th century England to see how this worked. Back then, ships and their cargo were insured using the combined expertise of individuals who would regularly congregate at coffee bars on Exchange Alley in London. The terms of each deal would revolve around the collective effort of those in attendance; and they would base each insurance agreement on a variety of factors, including: the shipping routes, the weather, the captains, the commodities being transported, and the ships themselves. Those that chose to become guarantors would sign under the stated terms and become the underwriters.

This loosely structured process was filled with inefficiencies and fraught with risk. And with no market maker for insurance, the captain was apt to pay exorbitant rates.

Edward Lloyd, who ran one of these coffee houses in London, clearly grasped the problems with shipping insurance. To remedy things, he began accumulating and publishing shipping data. The posted information started attracting the best and brightest minds in the shipping business. Soon, a group formed Lloyds of London and became a brokerage that guaranteed the investments of their underwriters. Their careful indexing of risk brought rates down and pushed profits up.

This marked the beginning of the end for the inefficiencies that plagued shipping insurance. It also triggered a massive expansion in shipping, because unfettered access to data enhanced visibility and transparency, and this, in turn, reduced insurance risk.

Now let’s fast forward approximately 300 years, to the fledgling financial markets in America. Industry was thriving, and investing in railroads, oil and manufacturing was a rich man’s endeavor. Less than 5 percent of Americans were invested in company stocks, and to buy equities was a time-consuming and expensive effort.

Over the course of the 20th century, groups of brokers, analysts and experts formed firms and began advising investors based on their know-how and observations. The firms basically operated in staccato interactions with their clients. There was no continuous data flow, and no real-time monitoring of the markets.

The advent of mutual funds brought more ongoing research and more investors to the financial markets. But significant inefficiencies still remained.

The rise of electronic stock exchanges has begun erasing those inefficiencies. Interactive online tools are putting real-time data, analysis and control in the hands of an ever-broader swath of investors. And, at all times, investors can see the specific performance of every component of their stocks – right down to the minute-by-minute moves of each share. This new technology, combined with Wall Street’s advice, expertise and recommendations, empowers investors, puts them on equal footing with brokers, and allows them to make better portfolio decisions more expeditiously.

The result is greater market efficiencies, increased market participation and trading volume, cheaper trades, and a more profitable Wall Street.

Work efficiency will surge in companies around the world when real-time tracking of deliverables – the equivalent of Edward Lloyd’s publication of aggregated shipping insurance data and the rise of electronic stock exchanges that provide investors with access to an abundance of on-demand financial data – is finally embraced.

Looking to the future, we’ll be able to stimulate even more efficiency and productivity if we develop and deploy technology that tracks deliverables in real-time both inside and outside a company. Imagine, for example, if we had visibility into all the tasks that a company’s vendors and service providers were responsible for. And what if we could eventually extend that real-time deliverable tracking all the way down the supply chain to vendors and service providers who are several steps removed from the company itself.

Each new ripple of technology that allows us to instantly see who owns the work, who is doing the work, and how well the work is actually being done, will reinforce accountability. And accountability is a powerful driver when it comes to productivity and profitability.

The bottom line is that the next big surge of work productivity in the 21st century will depend on a simple digital metric that measures, monitors and manages ownership of critical tasks in real-time.