If Digital Transformation promised productivity gains and there was plenty of digital transformation in Canada, why is productivity declining?

Failing Productivity? What About All That Digital Transformation?

The Canadian character lends itself to millennialist productivity flagellation (e.g., recent Globe & Mail-only: Canada’s declining productivity streak adds to inflation problem, The productivity problem in Canada’s economy is really a marketing and sales problem, Canada has a productivity problem. The solution is training, not factories, one expert says, Canada’s productivity lag could be helped by getting AI in to small business). The consensus of the opinionati: driven by sadly lacking performance (relative to other—OECD—national economies), Canada’s flagging productivity spells doom. The prediction may or may not prove out, but facts are often facts. Besides, it is abundantly evident that lacklustre Canadian productivity is harming our economic well-being and potential.

If Digital Transformation promised productivity gains and there was plenty of digital transformation in Canada, why is productivity declining?

     The dominant assessments and remedies are as banal as predictable. Business think tanks scream for lower taxes. Liberal Party apologists take a “What, me worry” sensibility. Business fingers government and organized labour. Innovators flog their latest new thing. Critically, for every position there is a substantial and valid counter-argument deniable by only sycophants and tribalists. Obviously there is no clear, let alone simple resolution. Yet the problem persists.

Government is not the productivity problem — entirely

     Generally, Government could do much more to be effective at whatever it does. Maybe it could start by conceding that Government is not Business and stop pretending to be a player on the ice. (It is, in fact, mainly the referee.) That said, Business could similarly stand to remember its narrow purpose and skill—and national/societal management is not it. For that, take a seat on the bench. Government should not be (like) Business. Moreover, from its glass house, Business would be wise to stop its monkeys throwing stones lest it aggravate an articulate rebuttal to the onslaught of lobbying/marketing to expose the shallowness of its version of the truth.

     To be clear: these productivity numbers are the measure of economic effectiveness… of the primary players in the economy. Ignoring impacts of other things such as population growth, supply/demand, etc., for simplicity: effectiveness and productivity gain are substantially a function of capital reinvestment. It should be evident why raw output growth in and of itself is not relevant to this discussion.

     It ought to be confessed that Businesses, particularly Canadian Business (more especially the large, publicly held kind), tends toward welfare, preferring public investment, private profit, and dispersal of private profits to shareholders (as dividends and the more insidious stock buyback). All the while wringing out the dregs of well-past-fully-amortized, unproductive capital by way of anemic reinvestment.

     That is NOT the fault of government, and arguments that fall back on a terrible tax regime as the reason why Canadian businesses don’t reinvest in themselves is contrived at best. (Ever notice that if allowed, business apologists ultimately devolve to less tax, more public largesse—and limited oversight?)

     To the specific productivity point—finally!—my question is how or why boards of directors and senior management of Canadian businesses are not being pilloried for malinvestment in “digital transformation?”

     For digital transformation, businesses and a few governments spent billions over the past 10–15-years on technology and (moreso) consulting from the major IT consulting firms. Ironically, the consulting firms revealed how and where digital transformation could enhance productivity. And it wasn’t where everyone was looking.

     The fundamental premise of any but especially digital transformation expenditure is (was) that the business will be more effective, efficient… productive, if you will. Were that not the reason, why would a capitalist invest at all? (If investment was in fear that “… newer, “digital” competitors will kill the business,” Schumpeter long ago suggested this sort of destruction and release of capital was good for the economy, investors, and probably even the richness of the soil.)

     Someone should challenge board members and senior executives who initiated and authorized enormous digital transformation expenditures to explain why their businesses are not more productive now than before the transformation (as would be revealed in contribution to rising national productivity levels, no?). To the new directors and executive of these same organizations (who would NOT have authorized those errant expenditures): What will you do to rectify this private malpractice and contribute to the public good?

     For those who may not pay attention to such things, these questions are directed toward large enterprise. While small and mid-size business may be a material part of the Canadian economy from an employment perspective, large enterprise moves the needle on numbers such as national productivity.

If the answer to these questions (after consulting with the consultants that supported digital transformations, of course) is that “phase 2” or some similar further expenditure is required to realize promised productivity gains, perhaps the 2nd most improper provers of how productivity really works—MBA-granting institutions—could answer as to why their graduates are either beguilers or gullible. Somebody should be asking these questions.

     Institute X is a transformation leadership consultancy and transformation/change leader coaching firm. One of its online presences is The Change Playbook. Be sure to check out the abundance of practical and pragmatic guidance. Subscribe to be notified of new, fresh content.



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