Driving profitable growth: China’s productivity challenge

Transformation agenda

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The top performing companies in our survey have adopted a transformational approach to productivity improvement — building expertise and capability across a wide range of competency areas.

In simple terms, top performing companies have typically gone beyond incremental changes and moved on to develop and execute on a clear transformation agenda designed to achieve lasting improvements across the business, straddling traditional organizational silos.

The common link is that successful companies have developed systematic and comprehensive approaches to productivity improvement that build upon and reinforce each other.

Five operational practices to get right

1. Long-range strategic planning
To become and stay successful, companies need to understand what capabilities they need to build to create competitive advantage in their sector, and then to define the priorities and actions needed to translate their strategy into measurable change on the ground.

2. Standardization of operating processes
In a competitive operating environment, end-to-end standardization of operating processes enable companies to execute faster, with higher quality and at lower cost than their rivals. It is particularly important to support rapid and sustainable growth, a key feature of the China market.

3. Internal controls
A strong internal control framework safeguards against unexpected financial losses that may harm a company’s reputation with customers and investors. In this area, heavily regulated and globalized industries such as financial services are being required to make big improvements.

Others, especially those in the industrial sector, still have relatively undeveloped risk management capability.

Risk strategies need to be tailored because different industries have very different risk profiles. Banks, for instance, need to pay more attention to credit and market risk, whereas manufacturing companies are particularly exposed to operational risk arising from inadequate systems and processes.

4. Workforce planning
As companies evolve to meet the changing nature of demand in China, so too must their human resources. Organizations must ensure that the number and profiles of people they recruit and develop match both current and future business needs. In view of this, it is surprising that the concept of workforce planning is not yet well developed in China.

5. Technology infrastructure
IT investments closely aligned with sound operational practices can be a powerful driver of productivity, with benefits as wide ranging as cost reduction, faster product development, and superior business intelligence to better inform decision making.

IT infrastructure is at the same time supporting Chinese manufacturing in moving up the value chain. IT-intensive product design tools like computer-aided design packages make it easier to design customized parts and lower setup times make multiple production runs less costly.

Finally, cloud computing is becoming mainstream, whether it be in the form of private cloud environments or public cloud-based infrastructure services. The biggest challenge continues to be getting the governance, operational, and service model design whilst ensuring data security and regulatory compliance.