Competitive productivity
By Chris Baumann and Iggy Pintado
The shortcoming of the traditional understanding of productivity is that it overlooks the nature of competitiveness. The key question in a competitive market environment is to what degree any activity not only leads to productivity, but also its direct impact on competitiveness.
Productivity occurs at two levels. At the micro-level, labor productivity is about the ratio of output produced per unit of labor used. At the macro-level, multifactor productivity is about the ratio of output produced per combined input of labor and capital. What is not yet well understood is that the two levels are intertwined and productivity is linked to competitiveness.Productivity is a hot topic in Western markets. Aging populations coupled with low birthrates and growing social costs only allow one way to maintain current lifestyle levels: an increase in productivity. Problematically, Western productivity levels are dropping, and the current understanding of productivity results in falling behind dynamic East Asia.
Paradigm shift to ‘competitive productivity’
Competitive productivity (CP) is in essence both an attitude and a behavior directed at beating the competition through pragmatism. Just as productivity itself, it is a factor score of both macro- and micro-level determinants.
In order to showcase our paradigm, we compare the Western to the East Asian approach to demonstrate the differences in CP:
― Benchmarking: CP benchmarks performance against industry leaders to aspire the same or higher market position (sales, profitability, customer experience, quality, brand equity).
Apple introduced the iPhone 4S in 2011, a faster version of the previous iPhone 4, but its performance was behind Samsung’s new Galaxy line. Apple’s speed to market and level of innovation fell behind its main competitor. CP for Apple means to benchmark with Samsung’s superior performance.
― Culture: CP is also a culture that focuses on performance and competitiveness. Baumann and Hamin (2011) established an association between culture, competitiveness and performance with an antithesis of a nation’s culture that permits or supports non-performance.
When school leavers receive government support and entitlements without attempts to find jobs, then a culture of non-performance is nurtured. Such a culture makes it attractive to search for free money rather than work options, but no real value is created. CP, as found in East Asian societies, is a culture with less-generous welfare systems, but instead nurtures performance orientation.
― Education and development: CP is about performance orientation instilled in the education system, and then “lived” in firms and society. The Korean approach to education achieves world-class results in international student competitions such as PISA, whereas Western countries have fallen behind.
Top achievers Korea, China and Singapore with their Confucian approach to education understand the role of education beyond the transfer of knowledge and skills, but to also pass on values such as discipline, respect and performance orientation.
Their “no pain no gain” spirit nurtures competitiveness and results in peak performance in education, and subsequently in business, entertainment, medicine, science and sports. Western education increasingly loses focus on passing on values such as competitiveness and aspiration.
― Environment and infrastructure: CP is creating and upgrading a country’s (or firm’s) infrastructure. East Asian nations have world-class airports and transportation systems. In contrast, infrastructure projects in Western countries are often neglected, under-funded and progress slowly.
Western countries often engage in bureaucratic processes that are time-consuming, but generate limited CP. East Asian nations are pragmatic with their “can do” spirit. The non-tangible business environment in China, Hong Kong, Korea and Singapore rewards performance with low tax rates, whereas Western societies have tax systems that flatten out society, discouraging peak performance.
― Performance (outcomes): CP generates high-quality products, services and experiences. High-tech products such as computers, smartphones and consumer electronics are predominantly made in East Asia, whereas the West is losing its competitive edge. Siemens and Nokia were once market leaders in mobile phones; Samsung and LG are now market leaders.
CP is about speed to market (such as Samsung with fast product innovation) and product quality and design (such as Hyundai/Kia offering top design and quality). Asian service brands Asiana or Singapore Airlines provide CP with their award-winning services drawing passengers to their brands, expanding their networks and generating profits.
U.S. and Asian airlines may spend equal time to generate the same amount of travel, but what matters is a service orientation focused on retaining customers for repeat business. What really matters to the customer is the actual service experience and service quality that drive customer loyalty and repeat purchase and ultimately, brand advocacy that is CP.
― Values: CP is a “can do” spirit and positive service attitude. Confucian dynamism nurtures hard work in education, workforce and society through a balanced system of reward and punishment to promote harmony. This is achieved through placing a high value on education and performance, reflected in government policies promoting educational achievement.
In China and Korea, Confucianism puts educators at the top of the social hierarchy: performance, achievement and knowledge are valued and prioritized in society. In Korea, this has allowed the development of a knowledge society and an “educational powerhouse.”
Educators are treated as “investments,” whereas in Western societies respect and income for scholars are low. Korea pays its teachers well, especially over the lifespan of their career, and entry into high school teaching is fiercely competitive.
The current business environment demands a direct link between productivity and the quest for competitive advantage. Marketers (also politicians, educators) need to gain a working understanding of this new paradigm to position their organizations to retain, if not increase their customers’ loyalty, increase their brand value and ultimately remain relevant in their chosen markets.
Dr. Chris Baumann is a senior lecturer at Macquarie University in Sydney, Australia. His research includes customer loyalty, competitiveness in education and society, ethnic marketing, and East Asia (China and Korea). He is a visiting professor at Seoul National University in South Korea and at Aarhus University in Denmark. Iggy Pintado, founder and CEO of ConnectGen, author of “Connection Generation” and co-host of podcast “The Social Business” with Annalisa Holmes. The above piece is an abridged version of their original article published in the Marketing Magazine (www.marketingmag.com.au).