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Productivity gains shoot
up in spite of downturn
Productivity
gains mean that corporations and executives will find it easier to justify
spending money on tools and technologies that improve productivity of their
workers and companies that can design and implement innovative solutions
will find a good market, writes Mohan Babu
In February,
this year, the US Labour Department released new productivity numbers for
the final three months of 2001 and the figures were startling. In spite of
the economic downturn during the year, productivity gains didn’t wane. The
3.5 percent annual growth rate for the period is well above 2.6 percent
average rate for the late nineties. The US Labour Department tracks non-farm
business output-per-worker, which translates to productivity per employee.
Even Alan Greenspan, the all-powerful chairman of the American Federal
Reserve acknowledged the significance of productivity gains brought about by
technology. At this point in time, with the economy bottoming out, planners
and corporate strategists are looking back and trying to find the key to the
gains in productivity that we experienced.
The impact of
technologies (including the use of software systems) on the economy was far
reaching. Factory and office automation has helped streamline the repetitive
work of employees so much so that fewer people are needed to do the same
job, and they can do it in a more efficient manner. For instance, FedEx has
equipped trucks with state-of-the-art messaging systems and hand-helds that
help managers route trucks in a more efficient manner. The use of technology
has helped the company streamline its operations: a route that would have
required two trucks earlier now requires only one truck. In many cases, for
instance the computerisation of banks and railway reservations, the same
number of people are able to do a variety of tasks, leading to a better
level of customer service and satisfaction. In a classic example of eating
one’s own cooking, software engineers are benefiting from the use of tools
of productivity, including the use of RAD (rapid application development)
tools. I could go on with examples but you must have got the idea by now.
While looking
back and analysing the gains experienced in the past decade, some business
leaders are becoming sceptical about the ability of technologies to continue
to grow at the same rate as in the past. Even ‘Moore’s Law’ that talks about
computer power doubling each year is starting to hit a glass ceiling. Unless
we experience new disruptive technologies in the horizon, with the current
rate of growth, it will be hard for technology alone to continue to propel
the growth in economy. The question that then remains is, Can the momentum
of the past gains push us toward higher productivity moving forward? It is
hard to say. The Yankee Group, a consulting firm that has done extensive
studies on the ‘new economy’ companies, points to Amazon.com, Dell and
Microsoft as the most successful Internet pioneers. However, even
traditional companies like Southwest Airlines have been able to use new
technology to their advantage. This in turn had a ripple effect on the
people working for these companies who also benefited from a culture of
technical innovation. Margaret Popper, who covers the markets for Business
Week, in a recent article, said: “The tech sector will consolidate in 2001
and 2002, but the technologies that sparked new efficiencies over the past
half-decade will continue to work their magic for some years yet or so most
experts believe.”
Most of the
research in productivity gains and growth is being done in the US but I’m
sure that a similar rate of growth is sustainable even in India where we
don’t have the level of automation and computerisation as in the west. Small
businesses and most government bodies are not wired up and record keeping is
still manual. However, the change is evident in larger companies and some
government departments that are already reaping benefits of higher
productivity. For instance, computerisation of railways has lead to a more
streamlined reservation process. Passengers can walk down to any small
station and book tickets from any location to another for their choice of
dates. They can also verify their travel details over the phone! Similarly,
accounting and office automation packages are ubiquitous. With the
privatisation of telecom industry, even communication is becoming really
cheap and teleconferencing and videoconferencing technologies will alleviate
the need to travel halfway across the country or globe to meet with clients
or project-mates, thus increasing the productive hours spent not travelling.
What do the
gains in productivity mean to Indian entrepreneurs? I think the renewed
interest in productivity gains mean that corporations and executives will
find it easier to justify spending money on tools and technologies that
improve productivity of their workers. There are still a number of business
problems that need automating and companies that can design and implement
innovative solutions will find a good market. Efficiency from the Web,
especially in business-to-business dealings are yet to be fully realised.
Companies are continuing the thrust towards the use of B2B platforms, and
technologies that enable them to globally source materials and buy the
products. Even though B2B players may not experience the euphoric growth as
seen in the past, they will continue to find interest from global players.
As the economy continues to stabilise and eventually take off, companies
will start to explore what the Net and other new technologies can do for
them.
Indian
players, especially those in the field of system automation should carve out
a niche for themselves during this downturn. They should be working to
design and develop innovative products geared towards optimising the
output-per-worker in different segments of the business-arena. This will
prepare them for an upswing, positioning them to gain from the future
growth.
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