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Expert Advice for Medium and Midsize Businesses

What Separates High- and Low-Productivity Businesses?

Guest Author

By Toni Boger, Content Strategist, Content4Demand

Productivity growth has slowed across the globe over the past decade. But some industries are finding ways to go against the trend.

Oil and gas extraction, media and communications, and agriculture industries have seen their productivity gains grow more than 20 percent since 2006. That’s more than triple the value per worker in lower-productivity industries, such as education, health care, and retail.

These three industries have improved their productivity while the gap between high- and low-productivity industries keeps growing. A study by the Organization for Economic Cooperation and Development (OECD) found that the most productive companies—called “frontier” firms—can be up to five times more productive than peers in their industries.

How have these industries increased their productivity while others are struggling, and what can you learn from them?

Technology Investments Are Key

One big reason for this productivity growth is the willingness to invest in new technology. That same OECD study found that organizations within high-productivity industries have invested heavily in software. In fact, they’ve spent more than five times as much per worker than organizations with slowing or negative productivity growth.

Businesses have historically been slow to invest in new technologies. Many would rather take a “wait-and-see” approach to consider how others fare with the technology before deciding. Business leaders usually don’t want to replace systems that still work. And if you’re a midsize business, you often have a smaller budget available to make new investments.

But traditional strategies that once worked—boosting existing system performance, incremental updates, and bolting on limited new functionality—are quickly becoming inadequate. They won’t help you keep pace with competitors that use new technology to improve productivity, transform operations, and create new business models.

The Cloud and Midsize Businesses

The cloud is a major technology that businesses are considering for their productivity and overall growth. A recent Capterra survey about the budget priorities of more than 700 small and midsize businesses found that cloud software is the second most prevalent technology these businesses are budgeting for now.

This shouldn’t be a surprise. Midsize businesses can work in the cloud without making major capital investments or intensive on-premises implementations, which is a substantial change from traditional technology requirements.

Midsize businesses need cloud capabilities not only for productivity improvements, but to remain competitive against larger companies. Richard Pastore, Senior Director and IT Research Advisor at the Hackett Group, estimates that cloud computing will be mainstream in more than 90 percent of large global companies within the next three years.

Companies of all sizes are moving to the cloud. Midsize businesses that don’t begin adopting cloud-based applications and infrastructure are at risk of becoming obsolete.

But if you can find a way to use the cloud throughout your business, you can stop it from getting caught in the productivity gap.

Takeaways for Midsize Businesses

The move to the cloud is happening. If you haven’t started implementing cloud capabilities into your processes, assess where the cloud would be most useful in improving your productivity, and then begin testing it out.

For example, where can the cloud help increase process automation in your business? Could any cloud capabilities help you develop new products or services? Answering these kinds of questions will help you find the best opportunities to take advantage of new technology and become a high-productivity business.

 

Learn more about becoming a high-productivity business from the report Oracle recently developed in collaboration with MIT Technology Review, “Don’t get left behind: The business risk and cost of technology obsolescence.”

 

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