New beginnings for the economyA massive growth source exists.

And it’s sustainable. But it’s not where you expect it to be.

Economic growth is not automatic, the economy requires a strong breeze to spin it’s wheels.

A sustainable breeze comes only in one flavour: productivity increase, usually delivered by new ways and technologies. Anything else is a mere puff.

The strongest and longest lasting kind happens when we move from one “age” to another. From Hunter gatherer to Agricultural, to Industrial, and lately, to the Information age.

Each age offered increased productivity - creating more with the same input - and economic growth ensued and new prosperity was created.

But the transition happens in two distinct and separate phases, and so does productivity:

1. Efficiency - “how we do things” 2. Effectiveness - “what things we do”

New technology is made for faster, better, more efficient. Only that.

Then Innovation changes how you use the technology.

That’s when you change what you do.

Effectiveness follows.

The industrial age shift example

1. The efficiency phase When the engines came to life we could replace the horse and muscle power, “how we did things” changed. But we still hauled coal out of the ground, albeit faster.

2. The effectiveness phase In 1913 Ford and his assembly line changed “what things his workers did”; no more waiting for orders, meetings, or looking for stuff. But the actual value creation process remained the same; the same tools and movements were used to add doors and wheels. Still, productivity increased 8.7 times in one year.

Effectiveness beats

Efficiency

IT has been a major source of productivity increase and hence annual GDP growth for about 30 years.

But so far productivity is all about efficiency. We still write reports, we still communicate in writing, only way faster. And software vendors still push efficiency as the holy grail despite the fact that your last software upgrade only added a dash of new eye candy.

The “how we do things”phase has been exhausted, no more economic growth will be had from IT propelled efficiency. Done, over, finished.

Half done, the rest forgotten

As always, the consumer leads the way:

The Internet, the new technology, delivered efficiency; suddenly we could communicate way faster, and how we do things changed.

Then Innovation happened and we did not have to travel to a shop to buy a book or a plane ticket. Now what things we do started to change.

Now’s the time for “work” to become effective:

We must identify what things we do that is non-value creation, then proceed to eliminate those so all time can be spent on real value creation.

That’s what Innovation is all about.

Change what things we do, eliminate the waste

What to eliminate

All value creation is a sequence of activities, especially if many work together, i.e. a flow or a process. Thus work consists of two parts:

1. Actual value creation 2. Making the flow move forward Meetings, report writing, managing, controlling, book keeping, emails and more are all about moving the flow forward. None of it value creation.

The “flow-work” must be automated so time and focus can be spent on value creation instead. That’s what Ford did in 1913!

All flows, just like water, require a framework to be useful. Bucket passing, pipeline, or riverbed.

Workflow pipelines exist, but only for linear and predictable workflows. Like assembly lines.

This while 60% of the world’s value creation happens in non-linear, unpredictable flows which are hard to model. So we still pass buckets while splashing valuable “water” all over the place.

The need is for a riverbed, a flow framework that has clear boundaries guiding the flow in the right direction, while still allowing full freedom within the boundaries.

For that, IT architecture has to start over again.

It has to model reality directly and not indirectly. Today IT models the old model of a manual flow framework. And modelling a model is never smart.

A new model is needed, not today’s model of a model

Quantified

More than 60% of the world value creation happens in unpredictable and Barely Repeatable Processes*. In that kind of work, BRP / knowledge work, we spend about 2/3rd of the time on moving the flow forward**. Automate the flow-work and we look at an increase in world-wide productivity of more than 120%.

* 63.4% of the world GDP happens in services, 30.7% in industrial production, 5.9% in agriculture. Assuming that 90% of services and 10% of production (research, development and more) is BRP.

** A multitude of research points to between 55 and 75%, including this recent report by McKinsey: http://www.mckinsey.com/insights/high_tech_telecoms_internet/the_social_economy

Acid test

When Ford installed the assembly line in 1913 freeing his worker’s flow-work towards value creation one should have expected an increase in productivity of 3x.

Not so, within a year productivity increased 7.8x*.

This unexpected result can only be explained by the removal of interruptions and other side effects.

Thus one might argue that today’s untapped GDP growth could be all the way up to 410%.

* Ford, the men and the machine. Robert Lacey, William Heinemann Ltd, London 1986, ISBN 0 434 40192 7Page 120: Highland Park beg 1914: 93 man minutes per car, one year earlier 728 => 7.827 times

The Information Age effectiveness phase yet to be applied:

120% - 410% world-wide GDP growth potential.

Economic growth expectations

Even with the conservative estimate of 120% this immense and hidden opportunity, all by itself, could deliver the same total world-wide GDP growth as we’ve had since 1983. In best case it might even match the world’s total economic growth since 1965, all by itself. It would certainly outpace all earlier IT fuelled GDP growth.

Why wait?