How do the most productive companies differ from the average?

Researchers at Harvard University have found striking differences in the performance of the most and least productive companies in different sectors of the economy. The largest discrepancy occurs in the manufacturing and service sectors (particularly in IT and telecommunications).

Source: Harvard Business School (C) pixels.com

It is noteworthy that the disproportion in productivity tends to increase over time, as evidenced by the fact that, for example, in the same manufacturing sector, the difference between the most and least productive companies in 2019 exceeded that of 1989 by 25%. Productivity itself enables leading companies to increase their ambitions in a competitive market, which is ultimately reflected in their financial performance in the form of higher margins and strong sales growth.

Business owners and leaders looking to increase productivity have a lot to learn from the most efficient companies. As Harvard University studies show, most often, regardless of the field of their activity, leading companies have four similar features:

1. They make the most of digitalization

University research results show a strong correlation between productivity growth in sectors and the level of digitalization. At the same time, many companies often do not always manage to get the most out of investments in digitalization due to the untimely updating of the strategy and business model of the company, taking into account the benefits of this very digitalization. Leading companies set ambitious goals for optimizing and digitalizing business processes, instead of increasing them.

2. They invest in intangibles

Leading companies go beyond investing in technology and betting on additional intangible assets such as R&D, intellectual property and HR. According to Harvard University, the most productive companies invest in intangible assets 2.6 times compared to other companies.

3. They build a future-ready workforce

Productive companies invest heavily in providing the skilled talent needed to get the most out of technology adoption, or they buy talent from the market. Talents and technical leaders are needed to successfully transform both complex and simple corporate structures.

4. They take a systematic approach

Productive company owners and leaders tend to be systems thinkers looking for opportunities to access new markets or collaborate with stakeholders. Leaders of high-performing companies tend to be more immersed in a global value network, which gives them access to global markets, ideas, and talent.

In general, the productivity gap should be a good motivation for business leaders to raise their own ambitions.