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Mind the Gap: Why Digitisation is Key to Increasing Productivity (Part 2)

- August 29, 2017 10:18 am

In my last blog, I lamented the UK’s productivity gap and explored the reasons why we have fallen behind our peers in generating wealth, despite being in an era of explosive digital transformation and technology innovation.

I expanded on why we need to adjust our focus from saving effort via process improvement to new value creation, on doing things that could not be done before and creating whole new business models. So, where are we on that journey?

The journey so far

Internet of Things (IoT) solutions are now proven in the field, their cost is very much reduced from early deployments and the new potential applications are appearing all the time. We now need to transition from dispersed pilot implementations to more ambitious deployments integrated to open platforms.

We are already starting to see now how businesses are looking at the data they are now able to collect through digital technology, and deciding what to do with this potential asset. Should they use it to drive their own marketing? Share it with their supply chain on an open platform? Or use it to drive their decision making, for example to inform new product development or partnership strategy?

Equally the connectivity and potential collaboration that digital brings can open up new supply chains, new markets and create different ways of working. Businesses are increasingly offering new services enabled through IoT and digital platforms. Although there are many new opportunities, a lingering challenge is identifying how to monetise them and hence turn them into tangible value for the business, as well as wealth for the company and staff.

A digital future

Going forward, success will require a shift in approach. Because there isn’t an easy way to tread new paths, those who really win this race will be the ones who embrace the new digital business models rather than trying to drive more efficiency from what they do already.

So whether you belong to a huge blue-chip company, a third-sector organisation, a small family business or a high-tech start-up, here are the 3 reasons you need a digital strategy to boost your productivity:

  1. Change is inevitable. If your business hasn’t changed, it either soon will, or it soon won’t exist. Therein lies the need for urgent action. Those challenged by start-ups (e.g. retail and financial services) have digitised because they have had to in order to survive, while other sectors have been slow to change. The sooner organisations embrace the radical change digital can bring, the sooner they will protect their current and future positions and realise the benefits. Digital doesn’t replace strategy or business acumen, but it is now integral to it.
  2. Relying on cheap labour won’t make us all richer. For years, relatively low wages in the UK removed the impetus to drive productivity improvements. Far less stringent labour regulations than much of Europe previously made investing in automation technology an expensive option. With the introduction of the national living wage in 2016 and the potential end of free movement of labour, the supply of cheap labour may dry up. We need to keep our labour flexibility, as the re-allocation of labour will be key to the transformation required, but transition away from a low wage economy. Skills, as always, will be key and we should aim for a high-wage / high skill economy driven by technology adoption.
  3. There’s no such thing as digital skills. What we class as ‘digital’ skills today, will be commonplace tomorrow, where digital natives (millennials, Generation Z and their offspring) will be in the majority. Digitisation will impact jobs – high skill jobs and low skill jobs, yet technology has always created more jobs than it’s destroyed in the long term. We need to get on with up/re-skilling our existing workforces and scoping our education and training to meet our needs, for example around cyber-security.

Personally, I can’t believe we will have another decade of flat productivity while there are so many amazing opportunities. At Cisco we are helping to drive digital adoption through our Country Digital Acceleration (CDA) programme. However, everyone can take action – and it is needed. Productivity growth won’t happen without it. So here’s what you can do:

Take a look at Bethebusiness.com a new online resource that allows businesses to assess themselves via a benchmarking and measurement tool, and a collaboration hub that shares best practice from across the UK. Launched in July 2017 by the Productivity Leadership Group (PLG), of which Cisco is a proud member, it’s free to use.

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