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The huge gains of incremental improvements
Mon 23 April 2018 - 7:00 amSmall Business | Strategy
It’s a sobering exercise to consider where Australia ranks when it comes to global productivity levels. When the OECD compares countries by GDP generated per hour worked, Australia scrapes in at just 14th in the world. We’re lagging the likes of Ireland, Germany, France and the United States.
So, what’s the reason for this lacklustre performance? Why is a country with a stable government, a growing population and a love of technology not higher up the rankings?
The issue is of particular concern for Australia’s small and mid-sized firms that form the backbone of the national economy. If they are not as efficient and productive as possible, the flow-on effect for the country as a whole is significant.
The question then becomes clear. How can the owners and managers of Australian SMEs ensure they are getting the most from their teams? What approach can they take to lift themselves (and the entire country) further up the OECD rankings?
The powerful theory of marginal gains
Any business person looking to achieve a boost to productivity should consider a theory put forward by renowned British cycling coach Sir David Brailsford. Back in 2002 , Brailsford suggested he could increase the competitive advantage of his team by breaking down every element that went into winning a race on a bike and then improving each by 1 percent.
Following this theory, the British team scrutinised everything from the food eaten by each member to the aerodynamics of the bikes. Small adjustments were made in each area and put to the test. The strategy worked and led to the British cycling team being recognised as the best in the world.
Putting it to work in business
Looking at this theory, there are unquestionably some interesting strategic lessons that can be applied in a business context. By investing some time and energy, it is possible to break down the critical components needed for success in just about any business. Each of these components can then be examined and improved.
However, while many SMEs already understand the steps they need to be taking to succeed, they don’t know how to measure the potential increase in marginal gain. They don’t have a way to measure their ‘1 percent improvements’.
Unfortunately, although most organisations have processes and workflows in place to ensure activities are carried out accurately and consistently, more often than not they are muddled through on paper or are reliant on the use of manual spreadsheets.
Few businesses facing the challenges of growth and scaling up will take the time to codify their workflows in a way that really allows for measurement and the kind of marginal improvement needed to tackle the productivity gap. Also, unless the business is a large enterprise, finding a custom-coded piece of software that supports this has been an expensive and complicated task.
The key to ensuring and measuring success, when applying the theory of marginal gains into the corporate environment, requires three actions:
- Define and map processes – Try to encapsulate them in a set of simple, flexible workflows that will allow for comprehensive reporting.
- Gather data – Use the data from the team working on each workflow to assess and gauge performance. Then, improve the workflow where problems are identified and remove any bottlenecks where they exist.
- Repeat and improve continuously – This is not a one-off task but something that should constantly be undertaken to deliver the best results.
Following this process of measurement and continuous improvement will deliver those marginal gains for business owners. However, it will be dependent on them finding and adopting a suitable platform to manage their workflows without incurring the multi-million-dollar spend required for enterprise business management tools.
When Brailsford was extolling the virtues of his theory, he said people should “forget about perfection, focus on progression, and compound the improvement”. This sentiment is just as relevant in the business world as it is inside a velodrome. A 1 percent improvement might not be instantly noticeable, but it could make a big difference in the long run, especially if the results are cumulative and progressive.
Consider how taking this approach could boost the productivity of your business. By making small changes to processes over time, the result can be a significant boost, and the best time to start is now.
About the author
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