Productivity has now become a global race, an international competition among regions and nations for the single reason that it is the source of the wealth, the key to improvements in living standards. Those who can make things cheaper, faster and better—win!
For a long time, everyone thought that automation brought productivity improvements through reductions in labor. But the results simply did not emerge. Head counts were not reduced sufficiently to keep pace with the additional costs of automation equipment—the original investment, plus operator training, maintenance and upgrades. And wage inflation all but nullified productivity results.
In past decades, automation investments were typically calculated to break-even in several years, by which time the hardware and software were often outdated. In the meantime, things like operator training and procedural changes took several years to implement, and the time delays caused performance delays. Adaptation to changing times simply did not occur fast enough. As a result, in the ‘70s and ‘80s, after the start of widespread automation in the United States, productivity inched up slowly, perhaps 1 percent to 2 percent annually—too slowly to be significant.
In the late ‘90s, productivity growth rates started to move ahead, and productivity has improved steadily—as much as 3 percent to 5 percent—since the start of the new century. And it comes not from manufacturing automation, but from inexpensive and effective information technology—the ability to operate in real time.
Today, real-time applications are becoming widespread. Web Services allow integration and delivery of real-time information to all parts of the enterprise. Low-cost, effective applications are available that allow cooperating suppliers and users to monitor, analyze, optimize and adjust business processes in real-time.
Real-time enterprise applications are cutting through several layers of previous inefficiency, allowing all segments of a business to interact in ways that were previously unthinkable. The goal of the real-time enterprise is to act on events as they happen. It is all the old concepts of customer-driven marketing, online process automation, just-in-time delivery and tactical business adaptation rolled into one. It’s about monitoring the business as it happens, and making quick, effective, agile decisions.
At the operations level, the primary benefits of real-time capabilities are improved customer service, reduced inventory, risk reduction and lower processing costs. At the executive level, the clear benefits are faster exploitation of emerging opportunities, less damage when things go wrong and increased agility when dealing with change. At the leadership level, real-time operations allow faster implementation of plans that must adapt to meet new opportunities and threats.
The drive for real-time operations and services is reshaping business today. The resulting productivity boost is generating startling results. Indeed, this is perhaps the key factor behind the so-called “jobless recovery.” It’s not jobs being eliminated by automation, or jobs going offshore. It’s just that many jobs have simply disappeared, eliminated by productivity improvements.
Business Week estimates that 1 percent productivity improvement can eliminate up to 1.3 million jobs. With productivity growing at an annual rate of 3 percent to 5 percent, the reason for the jobs shortfall becomes clear.
The best results have come from completely re-thinking the business and organization in the light of real-time capabilities. Productivity comes from automating routine decisions, while giving workers the information (and the authority) needed to make on-the-spot decisions, in real time. The most successful are those who combine understanding of overall objectives with the ability to implement information-technology solutions.
The challenge is to use real-time operations and services as a means to generate a spirit of change and innovation throughout the organization. It’s no use going only partly through the process, using new systems to automate functions in the home base, while chasing cost-reductions through offshore production.