Keys to improve resource productivity
Abrilliant McKinsey Quarterly article I read recently, ‘Are you ready for the resource revolution?’ talks about many of the same sort of productivity improvements that IFS is working with its customers to achieve.
The article, by Stefan Heck and Matt Rogers, is based on their new book, Resource Revolution: How to Capture the Biggest Business Opportunity in a Century.
It extrapolates out from trends we are already starting to see to a near future where the rate of annual productivity improvements is far higher than today.
It’s not just that new technology – such as IT and nanotechnology – will enable higher rates of productivity improvements. The article points out there are a number of resources whose consumption cannot be sustained to meet global demand that’s fuelled by the growing middle class in places such as China and India.
Annual productivity improvements in energy, for example, will have to rise from the 1.7 per cent recorded from 1990-2010 to 3.2 per cent from 2010-2030 to meet global demand.
Improvements in water productivity will need to rise from 2.5 per cent to 3.7 per cent. Even material productivity, which only increased at 0.8 per cent per annum from 1990-2010, will need to trend upwards to 1.3 per cent.
Opportunities abound to create these sort of above trend productivity improvements given current levels of resource inefficiency and waste. Cars, for example, are notoriously underused and inefficient. They spend 96 per cent of their time parked and 86 per cent of the fuel they use never reaches their wheels.
In our experience, there are two key technologies that almost all organisations can benefit from right now. Combine both of them and you will also lay the foundations for future productivity improvements and reduce the risk of being left behind by competitors.
One is the capability of modern enterprise software to capture, analyse and report on all aspects of an organisation’s operations – to run the whole business. The other is the ability of mobile computing devices to fill in the information gaps that exist in almost all organisations and which hamper them in achieving a global view of their operations and making use of the information they have to make decisions.
Real-time communications improve decision making around when assets need to be repaired or replaced, for example, or whether there are too many people on site.
Smartphones can be used to create incident reports, including photos, geospatial data and other information and automatically sent to a centralised enterprise system to coordinate a response.
In the oil & gas industry, for example, workers in remote locations regularly use rugged computing devices such as tablets to access centralised information stores and feed updated information back to head office so decisions can be made in real time.
The f lipside to all of this, however, is that organisations that are not working towards achieving a single view of their operations and exploiting mobility will be threatened by the inevitable trend towards resource productivity.
It’s not just that such organisations will lack the agility to be at the leading edge of the resource revolution and drive increased profits. They will also lack the agility to adapt to the increasing rate of change in the business environment.
If an entire industry moves over to localised 3D printing of spare parts, for example, what happens to companies that don’t have visibility into what spare parts they consume and where they are located?
Or if an industry rapidly moves to create a market that makes the spare capacity of idle equipment available for rent to third parties, what does this mean for organisations that do not have precise visibility of their equipment – including which units are employed and which ones are not at any given point in time?
Organisations that have fallen behind the pace of mobile device adoption will also find themselves with a workforce that is poorly equipped to adapt to rapid change. It’s not just the ability of mobile devices to exchange information with enterprise systems that is important. It will be increasingly vital for an organisation’s workforce to be able to use mobile devices on the job and adapt to the cultural change that goes along with that.
In the end, it really doesn’t matter whether your organisation intends to drive profits from increased resource productivity or just seeks to be agile enough to survive and prosper in the new business environment. Either way, maximising the potential of your enterprise software and getting the most out of mobile technology will put you on the right path.