Putting productivity into perspective

I read yet another column in the Globe and Mail that states that productivity improvement is the key to the future.  This productivity improvement was also the key for lower wage earners and the sustainability of a middle class.  That may be true depending on where the productivity improvement comes from.  If there is an increase in productivity from existing companies it could result in an increase in revenue and profits from sales to new customers.  It could also result in no new revenue and increased profits from reducing the need for people.  The former could help or sustain the middle class and low income earner while the latter will further erode them.

If we get productivity improvements from new companies that hire people then that is definitely a potential lifeline for middle and low income earners.  But first we have to start these new companies.  In that regard new enterprise creation is by far more important than productivity improvements.

The benefit that new enterprises have over existing ones is the absence of legacy infrastructure and corporate culture.  There is an opportunity to build in cost structures that enable them to compete on a global basis.  They can utilize technology and business model innovation with specific cost structure targets in mind based on the need to compete.  But there is also a need to have products or services that the world wants.

We need to lever Canada’s natural advantages and one of them is natural resources.  But we need to innovate around these to make more from value added production and the creation of new technologies and services.  There are other sectors besides resources where we can start to build enterprises around existing strengths and experiences.  This need was discussed in an earlier post.

The point I am making here is that a knee jerk comment that we need more productivity has no merit on its own.  But we do need to wake up and start looking for opportunities where we can build competitive new enterprises that have the appropriate cost structure built in.  That is the key to a sustainable future for Canada all of its people.

Published by Vince Bulbrook

Vince has spent over twenty five years working with entrepreneurs providing financial and strategic advice. Much of this advice has centered on business model design and product development. Issues such as determining how to invest product development resources, pricing options, features, distribution and client requests all come in to play. For much of the past fifteen years Vince has operated a business providing CFO and strategy services to small businesses. In this period he spent three years in the product development group of a software company that had a $26-million development budget. Along with overseeing the development of a product he also worked with senior management and the other product teams to determine how to manage the product portfolio. He has advised clients in software, entertainment, digital media, publishing, retail and distribution on product pricing, feature selection, distribution strategy. Prior to founding the advisory business Vince worked with Price Waterhouse and Ernst and Young. Vince graduated from the Ivey School of Business with an HBA and is a Chartered Accountant.

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