If we want to get British productivity back on track and boost the economy, we need to educate firms as to how the internet can unchain them.
Cracking the UK’s productivity puzzle is key to future prosperity, as Chancellor George Osborne said in his Budget this month. Britain may have faster economic growth and higher employment than other major economies, but productivity has stagnated since the global financial crisis.
While we may raise our eyebrows at the French workers disappearing for their long summer holidays, the truth is that they could afford to take a couple of months off and still produce more than their UK counterparts. According to the Government’s own figures, productivity per hour in France was 27 per cent higher than in the UK in 2013. Germany and America are even further ahead. The Treasury estimates that matching US productivity would increase GDP by the equivalent of another £21,000 for every UK household.
We could certainly use the help. A report by the credit rating agency Moody's said UK growth was "robust and broad based", but predicted muted growth across the rest of the world.
The picture is not all gloomy, though. Thanks to investment in technology, workers in the UK’s car, aircraft and train manufacturing sectors produce 50 per cent more now than in 2009 . At Google, we see many dynamic start-ups using technology to reduce costs, open up new markets, work more flexibly and improve customer service.
They understand, for example, that small businesses no longer need to be local businesses. They can and do use digital marketing to sell their products and services across Europe and even further afield. They recognise that large premises are no longer required when they can use technology to work more flexibly, across locations. And they realise how it can help them get closer to their customers.
Look at the success of Berwick Shellfish Company, a family business established in 1969 which was based on selling its quality seafood locally. But after harnessing online marketing and distribution tools, they now export across Europe and as far away as Hong Kong. Their new online store, which complements their wholesale business by allowing individual customers to have fresh dinner ingredients delivered to their homes, has quadrupled its business in just six months.
And it does not matter how established the business is; you can always find fresh ways of working more productively. The medical journal BMJ may be 170 years old, but by embracing new cloud-based technologies, it saved itself 126,500 hours of productivity annually and over £100,000 in licensing fees and hardware costs.
When Kano, a start-up offering build-it-yourself computers, wanted to determine how they could better serve their customers, they asked 13,000 of them through a web-based survey assembled in 45 minutes. Within 12 hours, they had received over 1000 responses without paying expensive polling companies.
There are thousands of these success stories in the UK. The problem is that these gains are not being seen across the economy as a whole. Many businesses have invested in IT, but don’t fully exploit its potential to foster collaboration and creativity, or use the data they gain to find new opportunities. They remain stuck in their patterned ways of working.
Even less than 30 per cent of British businesses have an effective online presence. Too few use secure cloud-based computer storage, video conferencing or shared documents that allow employees to work collaboratively across locations.
As a country and as a leading global economy, the UK cannot afford businesses to be left behind. It is not that businesses don’t realise the importance of the digital economy; they do. But many lack the necessary skills to make technology work well for them, or fail to understand its full potential for transforming and growing their business.
Removing barriers to improving productivity requires a collective national effort. It is why Google launched its Digital Garage initiative in Leeds to help small businesses make the most of the digital economy. We have already trained over 1,500 businesses in the last three months, and are today expanding into Birmingham to help accelerate growth in the Midlands.
The rewards of getting this right for the UK are huge. Research from Lloyds & Accenture found small businesses could unlock an additional £19 billion in revenue by mastering the tools of digital productivity. It is why the Chancellor was absolutely right to put the Digital Transformation Plan at the heart of his strategy to transform productivity.
Investment in IT infrastructure and skills, as the Chancellor promised, is essential. But without a change of culture, it will not deliver the results the economy needs. It is time for businesses, big and small, to embrace the power that technology can give them -- and for society to help them along the way.