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?