Productivity: The next competitive edge

In brief

• Navigating disruption is a constant challenge for leaders. Cutting costs alone isn’t enough to weather economic storms – or thrive when storms clear.
• Organizations can drive profitable growth by focusing on productivity improvements now possible with advanced technology and generative AI.
• Cost and productivity reinvention combines technology, people and processes to reimagine work, balancing effectiveness and efficiency. 

Companies navigating through volatility and disruption often are laser-focused on cost. But cutting cost alone won't cut it. Organizations that seize this opportunity to go beyond cost – by prioritizing productivity – have an opportunity to emerge stronger and drive profitable growth.

At a time when artificial intelligence can increasingly enhance the ability to target and capture value and as managed services become even more important in a world laden with uncertainty and disruption, CXOs can now bring the power of productivity—balanced with the ability to reduce their absolute cost base—to bear on their business.

Unlocking capital by balancing now and next

Many companies compromise competitiveness by taking a defensive posture, focusing on cost alone. However, our analysis of companies with long-term profitable growth through uncertainty shows that they have the structural financial discipline and invest in talent and differentiated capabilities. Those that go beyond cost have an opportunity to gain a competitive edge by allocating financial and human capital where it will create the most value long-term. We call this approach Cost & Productivity Reinvention, an essential part of Total Enterprise Reinvention.

A moment made possible by technology

Technology and in particular generative AI are at the heart of cost and productivity reinvention. Generative AI is a powerful enabler, helping leaders make data-driven decisions to boost productivity by reinventing processes and empowering people.

Leaders have bold expectations of generative AI. Most anticipate profound shifts in how human and financial capabilities are deployed across organizations and society more broadly. Generative AI is an engine for enabling human productivity. It challenges established notions of what work needs to be done and how it gets done. While the world has only begun to understand generative AI’s disruptive potential, use cases that make the most of human and machine collaboration are emerging quickly across industries.

Think differently to act differently

Moving past the challenges of today and focusing on driving productivity begins with three critical mindset shifts:

01. From cost to cost and productivity

Executives can elevate the operational and strategic work that drives competitiveness with a productivity-led perspective. This requires dynamically reallocating financial and people capital to align with the enterprise’s strategic priorities – resetting the cost base to spend less time focused on transactional work and more time focused on work that creates value for customers, employees, society and other stakeholders. When companies target productivity, they can deliver 360^o value - financial and non-financial outcomes.

02. From reacting to reimagining

Completely reimagining work is now a reality more than ever. Advances in technology and generative AI have enabled executives more opportunities, authority and permission to reimagine work, focusing on what must be done, not what has always been done. They can take a hard look from “right to left”, working backward from desired outputs to necessary inputs, and re-engineering from there. By focusing on value levers, which are mostly overlooked during quick-fix cost transformation efforts, companies can fundamentally shift the mix of work.  

03. From optimizing to cultivating

Executives who want to reinvent their organization should ground their approach in cultivating their people. This isn’t about optimization. It’s about creating an environment where people have the ability, opportunity and motivation to succeed. This approach aligns capital more intensely to strategic priorities over the long term, balancing the focus on hitting quarterly commitments with achieving objectives over a 12-to-18-month horizon. Companies that unlock the growth combination of data, tech and people generate 2.8x greater productivity premium than those that only implement data and tech solutions but fail to put people at the center.

Realizing potential – and purpose

Cost and productivity reinvention is ultimately about helping companies deliver on their purpose. Companies can get closer to realizing it by investing in their differentiation, simplifying how they work and devoting more time to the people they service. Start with the following priority actions and key questions to balance cost and growth.

Today’s volatility can make executives feel like they’ve lost control. But they can get it back with cost and productivity reinvention. Instead of having to make tough tradeoffs that cut into their company’s competitiveness, executives can allocate financial and human capital to balance cost and growth.