Operational ExcellenceProfitable Growth

Increasing Productivity and Efficiency – secret weapon?

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Owners might not think that increasing productivity and efficiency is a secret weapon. They might solely focus on the top line and think that its a luxury for later. Is it really a secret weapon? Well yes and no. Of course, owners know that productivity and efficiency makes sense – that’s not a secret. On the other hand, most owners don’t realise that it can help their business grow profitably and faster.

Opportunity – The flip side to economic uncertainty

The other concern for owners is economic uncertainty. Owner confidence in the UK economy is low according to the IoD Confidence Tracker Winter 2018 (see Business leaders’ confidence sinks to lowest point in 18 months). Yet owners remain positive about their own business. During uncertain times, there is a flip side of new opportunities. Tej Parikh, an economist, journalist and government adviser identified a number of business opportunities. Opportunities to drive profitable growth, innovate and compete globally.

Innovation – Necessity is the mother of invention

What has increasing productivity and efficiency got to do with profitable growth, innovation and competing globally? Owners can find that what seems to be a great sale is costing the businesses more than it’s making. Most businesses find that staff are the most significant cost, and so productivity and efficiency can turn things around. When owners start to look at increasing productivity and efficiency, it forces innovation. The old English proverb “Necessity is the mother of invention” can be applied to business. Owners that need to make their business more efficient, will drive the need to innovate and find better ways of working.

Productivity – Turning opportunity into growth

Owners that innovate to achieve productivity and efficiency can make money instead of losing it. Now there’s a thought! Innovation separates them from other players, they attract more customers and start to grow their business. Because they’re making money instead of losing it, then can attract talent. With more talent, they can innovate and achieve greater productivity and efficiency. Attract more customers, make more profit, attract more talent and… you guessed it – grow.

Competitive – Increasing the income flow

Economists know that increasing productivity and efficiency is a leading measure to increasing GDP. Apparently there’s a five year lag between increasing productivity and increasing GDP. Therefore, increasing productivity and efficiency helps us become more globally competitive, and that’s good for the whole country. As Tej describes the opportunity, he talks about increasing the size of the pie. If the pie’s bigger, there’s more to go around. So what’s the problem?

Gaining Control – it’s all about what you measure

Stephen Covey in “4 Disciplines of Execution” talks about lead and lag measurements. Take dieting, the lead measurement is calories. If you burn more calories than you consume, you’ll lose weight. Weight is the lag measurement. Measuring weight doesn’t control the outcome. Owners are told that growth is what needs to be measured. Then it becomes growth at any cost, even if it hurts the business. Rather like a crash diet, it doesn’t usually turn out well. Increasing productivity and efficiency is a lead measurement, just like counting calories. If you measure increasing productivity and efficiency, then you’ll get a better outcome. Productivity is a leading measure for increasing GDP. Increasing productivity and efficiency is a lead measure of business growth, and helps create a sustainable business that avoids being damaged by short-term decisions.

Why the secret?

Big successful businesses know the score, they know that increasing productivity and efficiency helps them be successful. They probably don’t talk about it much. Big businesses talk about their profit, turnover and growth – that’s the headline news. They might be more reluctant to tell you the secret of their success – after all it gives them a competitive advantage.

Scaling a business so that it is efficient and profitable is important for success. Ensuring that systems are in sync with your unique value proposition and direction are important for competitive advantage. Designing your systems to scale to achieve profitability and be competitive is easier with expert help and a fresh pair of eyes. If this has resonated with you, then why not contact me at rhounsell@kr5consulting.com to arrange a call.


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