You’ve undoubtedly had those weeks, maybe even those months. Those periods of time where your company’s productivity seems to be stuck in mud deeper than what’s left after a thaw from a late-March snowstorm here in Chicagoland. Ready to dig out and get moving again? Global consulting firm McKinsey released new research in February outlining what some of the most productive firms have in common. Here are the four components they say need to be in your productivity playbook.
DIGITILIZATION
If you don’t feel like you’re at least partially running a tech firm, you may be falling behind. But implementing digital strategies without simultaneously revamping your business strategy and even your model will keep you from achieving all the productivity that modernization can provide. According to McKinsey, “Frontier firms set bold business goals enabled by technology. They reconfigure their organizations to digitize their operations and capture the benefits of technology, rather than augment existing ways of working.”
INTANGIBLES
McKinsey calls the most productive firms they studied “frontier firms” and found those organizations invest 2.6x more in intangibles like R&D and intellectual property. They caution results from these intangibles often manifest as a J-curve with small early advances that compound quickly to create, “outsized long-term value.” Taking the long view as opposed to fixating on quarterly numbers is one area, we entrepreneurs and family businesses can gain the upper hand on large competitors.
FUTURE-READY WORKFORCE
It isn’t enough to invest in technology to gain the productivity benefits. To be frontier firms, we must also invest in tech-savvy humans, including leaders who aren’t intimidated by technology. And once you find these often-elusive team members, the work really begins as we fight to retain them. Again, according to McKinsey, “Leaders are winning the talent war by recognizing the value of employee experience, investing in on-the-job training programs, and expanding policies that make it easier for parents and aging workers alike to stay in the labor force.”
SYSTEMS APPROACH
We’d rephrase this as, “Rising tides raise all boats.” McKinsey talks of the productivity benefits of global value chains which most organizations our size don’t have at the ready. But they also saw the value of collaborating creatively with stakeholders including suppliers and customers. That is where EFBC firms excel, including many business ventures we know that were born from Forum mates and like-minded EFBC members.
THE TITANIUM ECONOMY
So who are these frontier firms McKinsey identified? You might think they are the largest and most well-known in any given sector. But there is a group the researchers dubbed the “Titanium Economy” that are leading the way in productivity. These small, often privately held industrial technology companies that are among the fastest growing and most profitable enterprises in the country. They are often based in smaller cities, sometimes even in rural areas, and present across a variety of sectors.
In speaking of these firms, McKinsey concludes, “Recent data indicates that small and medium-size companies are less productive on average than large firms. But in some sectors where niche products or services can be offered at higher price points, small companies can be as productive as their bigger rivals. These data should give plenty of encouragement to business leaders looking to drive improvements in their business.”
That sounds like a winning playbook to us!