Productivity boosters – are they on your doorstep?
A friend of mine is almost finished his Executive MBA and
had a rare moment of downtime so he could catch up on certain things he’d been
learning to live without (such as oxygen and sleep).
Somehow he managed to find time to catch up with some mates
and was bringing us up to speed with what he’d been doing.
I was asking a lot of questions about his course, the
highlight of which was a trip to China to meet Chinese entrepreneurs and CEOs.
Having never been to China, I was fascinated to find out
what it was really like; particularly from an economic perspective.
You see, my perceptions of China are confusing. You hear statements like the Chinese economy growing
at 7.5% a quarter (which is apparently only 0.1% above average) and try to
reconcile this with the fact that its GDP is roughly six times the size of
Australia’s.
The economies of scale are absolutely amazing. Statistics like the equivalent of two thirds
of Australia’s population living in one city (such
as Shanghai) are difficult for my mind to wrap itself around.
So it was interesting that my friend’s main takeaway of
China was that, while much of what you hear on one hand is that it’s
economically booming and ready to become the world’s new dominant super power,
there’s more to the story than meets the eye.
In his opinion, the reality is that China is a drastically segmented
country. The gulf between the economic
and business elite compared to those at the other end of the spectrum is vast.
Interestingly, a recent
report released by international think tank McKinsey seems to back up my
friend’s assertions.
According to McKinsey, even the business end of China still
has yet to take full advantage of that one major technological behemoth – the
internet.
McKinsey’s research says that only 20-25% of Chinese
businesses are connected to the internet, compared with 75% in America. Additionally, only one fifth of Chinese firms
use cloud-based storage, and Chinese businesses spend only 2% of revenue on IT
(half the global average).
This is in stark contrast to how personal and leisure-based
internet use is being embraced by the country.
A previous
McKinsey report says: “People in the 60 largest cities in China spend
around 70 percent of their leisure time on the Internet, according to a survey
we conducted in 2009.”
The takeout is that while China has been embracing the internet
on a personal level, its businesses are yet to take advantage of it and are
missing a productivity trick. However,
this could all be changing.
McKinsey says a ‘great
wave of disruption has begun’ as internet access begins to spread
throughout the country. The report says,
“The
internet could contribute up to 22% of China's GDP growth through 2025.”
The argument goes: “greater
digitisation provides an opportunity to boost their labour productivity,
collaborate in new ways, and expand their reach via e-commerce.”
So while China may be growing fast now, the potential for
even greater growth is on its doorstep.
According to my friend, a key takeaway for him was how China
is always looking to reinvent itself.
Even though many businesses may be tempted to rest on their laurels
after growing by 7-8% in one quarter, as soon as you’re not innovating you’re
standing still.
The questions businesses should be asking themselves are
obvious. Even if my business is doing
well, what is something new I can apply to make it do even better?
And if something we take for granted like the internet can make a country as big as China 20% more productive, what obvious boosts are sitting on your company’s doorstep?
And if something we take for granted like the internet can make a country as big as China 20% more productive, what obvious boosts are sitting on your company’s doorstep?
Comments
But how is China going to roll out the Internet? Geez, 900 million Chinese live on less than $5 a day (http://povertydata.worldbank.org/poverty/country/CHN), and the last thing they are thinking of is buying an iPad!