How Digital Transformation Might Save the World Economy

Digital Transformation for Business Productivity

For decades now, productivity growth rates have been declining, and have continued to vex economies the world over.

Despite all the technological innovations we’ve been seeing, the actual ratio of economic inputs to economic outputs has remained a lot lower than you’d expect. We’re putting in the labor, the money, and the raw materials, but we’re not getting the kind of economic impact you’d think we would.

Productivity Isn’t Falling, but Its Growth Rates Certainly Are

To be clear, productivity is still growing—it’s just not growing nearly as fast as it could, and if these trends continue for much longer, the future of a lot of businesses are going to be in serious trouble.

So… Is there a way out of this? According to a recent report by the McKinsey Global Institute, the answer might be yes—though it may not come in the way you’d expect.

Before we can understand what McKinsey is saying and why it may be true, though, we’re first going to have to take a look at the history of productivity as a whole.

Productivity is a fickle thing. It rises and falls with the tides of history—soaring up with economic bubbles, plummeting when those bubbles burst or when nations run into other kinds of trouble.

Productivity Rates Throughout the Past Century Have Shifted Greatly

Up through the mid 20th century, productivity rates in Western countries were on something of a roller coaster ride. There’s not really much of an overarching theme—the fates of countries went up and down, and productivity was just along for the ride.

But things changed when we got to the 60’s. For the past 50 or 60 years, productivity growth rates for businesses in the West and around the world have been on the decline.

What’s more, it’s actually gotten worse in recent years. Even in America, growth rates have been low since the Great Recession, and that’s scary for a lot of reasons.

If businesses are going to keep on the up-and-up, they need productivity to grow pretty continuously. The consumer economy is basically built around the idea of continuous economic growth, and as economist Paul Krugman once said;

“Productivity is not everything, but in the end, it’s almost everything.”

What Does this Means for Us?

Are we all doomed to suffer extreme economic hardships soon? Well, not exactly. Even though advancements in technology since the 60’s haven’t been providing businesses the kind of productivity growth we thought they would have, McKinsey suggests that the latest wave of digitization might prove to be their salvation.

How might this work? Well, the thing is, even though we’ve been seeing advancements in technology that might seriously help out a lot of businesses all around the world, many corporations have been slow to adopt the latest wave of tech innovations.

McKinsey’s Solution

According to McKinsey, digital transformation may just be the answer we’ve been looking for. It stands to shake up just about every area of business, spring-boarding adopters forward into the next economy.

Nitro blogger Amy Martin has outlined just a couple of the ways this might work.

In the world of human resources, for instance, employees can now share documents about hiring and onboarding strategies with new team members instantaneously, while also using e-signatures to fill our new hire paperwork and payroll forms.

In the world of finance, digital transformation means standardized document formats, allowing for easier filing and overall streamlining at every step of the road. You can also use e-signatures for invoice processing and audit signoffs, as well as online forms and document productivity software to drastically increase turnaround.

In the world of marketing, simple annotation and version control capability will revolutionize collaboration, while document productivity tools will allow for instantaneously updated presentations and collateral.

These are just a few examples of how digital transformation can work, but the list goes on and on.

Implementation of Digital Transformation for Those Unaccustomed is Key

This kind of economic transformation isn’t going to be easy. While digital natives like millennials, Gen Z, and whatever generations come after them are accustomed to these kinds of new tools, we can’t just wait around until our businesses’ current employees all retire.

Instead, digital transformation is going to take upskilling our current workforce in an entirely new way. Computers changed the face of practically every industry. Today, we need digitization to do the same.

This isn’t just wishful, techno-optimist thinking, either—it’s actually working. According to Forbes, AT&T was able to cut its product development lifecycle by 40% accelerated time to revenue, just by embracing new technologies and upskilling their current workforce.

Imagine what that would look like on a global scale. Imagine that kind of growth, not just to a small handful of leading companies, but for every company out there that hasn’t already seen the writing on the wall.

It’s not going to be simple. For a lot of businesses, it’s going to take completely rethinking the way they go about doing business. But still, this kind of radical restructuring is what we’re going to need if we want our economies are to have a tangible future. The way we’ve been doing things so far clearly hasn’t been working, and growth is predicated on constant change.

Digital transformation might just be the kind of change we need to turn our businesses around, and bring back the kind of progress we know our economy is capable of. We have the technology—it’s now just a question of will.

Author

Siddhant Chaudhary

Sid is our Insight and Communications lead. He likes to consider himself as a chaos manager. When not found at his desk, Sid is usually away working remotely or outside longboarding in the parking lot.