Increasing productivity -- California style
by Brad Liebmann, Managing Director, Xbridge Ltd
Business Money, July/August 2004
Sometime during this decade the GDP of California will pass that of the United Kingdom. And it will do so with only 35 million people: just under 60 percent of the UK's population. California's Silicon Valley is world renown for its advances in technology. But technology is only a catalyst for the real driver of productivity - advances in business processes. Such advances in business processes, aided by technology, have made California-based businesses the most productive in the world. They can make your organisation more efficient as well.
Innovation is fuelled by a culture that continuously introduces new ideas. California brings in new ideas via immigration. Over one-quarter of the population was born in a foreign country (versus only 1 in 35 in the UK). Many of the remainder "immigrated" to California from less prosperous US states - much like ambitious younger people in the UK move to London.
Lessons:
- Do you actively recruit individuals from a broad range of professional and social backgrounds?
- Do you selectively outsource to bring in best-in-class ideas and/or technologies? >/li>
| California | United Kingdom | |
| Gross domestic product (GDP) | $1.48 trillion | $1.66 trillion |
| Average annual growth in GDP (1998-2002) | 7.9% | 3.7% |
| Per capita income in 2003 | $39,7251 | $27,700 |
| Number of small businesses per 1000 inhabitants | 32.5 | 20.0 |
| Bank debt outstanding to small businesses per small business | $68,3001 | $49,300 |
| Lenders offering government guaranteed loans | 283 (SBA) | 21 (SFLG) |
| New lending per annum per small business guaranteed by government | $2,549 (SBA) | $290 (SFLG) |
| Venture capital as % of GDP | 0.4%1 | 0.1% |
| % of labour force involved in a company < 42 months old | 10.5%1 | 5.4% |
| % of born in a foreign country | 26.2% | 2.8% |
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1Figure is for United States as a whole. Actual figure for California is likely to be higher.
Note: Small business is defined as one that has less than $15 million turnover and at least one employee.
Productivity increases are not let by technology alone, but by a work force that embraces new technologies and integrates them into continuously improving business processes. The most productive businesses constantly innovate, continuously experimenting to find the processes and technologies that work most efficiently together.
Lessons:
- How do you reward bright new ideas within your organisation?
- How often does your team's business processes improve?
The California economy is structured to help transform new ideas from bright entrepreneurs into reality. Loans and venture capital for start-ups are more plentiful than anywhere else in the world. The average California small business has almost 40% more in bank loans outstanding - and eight times the amount of government backed loans -- than in the UK.
Lessons:
- What does your organisation do to promote an entrepreneurial culture?
- How does your organisation back promising new schemes?
The same technologies and business processes that make California-based companies the most productive in the world are available in the UK. Hire ambitious, multi-talented people from a variety of backgrounds. Encourage and reward constant, incremental improvements in business processes. Explore bringing in from the outside know-how or technology you may lack in-house. Simply put: promote a culture that continuously embraces change and applies technology.