New Ideas. Driving Productivity in the Services Sector

The world wide web, once the domain of product driven commerce, saw service industries ‘pivot’ as a matter of survival. Financial planners met their clients online; gym owners and yoga instructors zoomed in classes; and business travel ground to a halt.

Service industries as the next driver of productivity growth

It is perhaps obvious that services have lagged traditional industries such as manufacturing, retail, mining and agriculture in productivity where technology, mechanisation and capital investment have driven gains.

After all, most services are delivered in person and it is difficult to automate. Now that services industries – defined by The Economist ‘as products that you can’t drop on your foot’ – make up 80 per cent of the Australian economy (and employ 90% of Australians), productivity growth in services represents a major opportunity for Unitive clients.

These gains are likely to be technology driven, with savvy businesses likely to take up the challenge of greater digital integration into their businesses.

Unitive Managing Director Joe Ringer says there is a world of opportunity out there for service businesses who see the opportunity.

“While most traditional service businesses were forced by Covid into digital service provision through online meeting apps, setting up online stores, and so on, that is really only the tip of the iceberg,” he says.

“The next step is better use of data driven decision making through the use of artificial intelligence.”

The Productivity Commission Inquiry suggests that service productivity gains could be found less in inventing new technologies, but making more and better use of existing tech.

Decarbonisation and productivity

The interim report also sites decarbonisation as an incubator of new ideas with local innovation, strategic corporate partnerships and significant new investments required to take the stress off the planet.

The focus on decarbonisation comes to the core of productivity – producing more with less. As of now, while there is scientific consensus that climate change has had a significant impact on the environment, reliable measures of that impact on economic activity have only just started to emerge in the past few years.

“The interim report puts decarbonisation firmly on the agenda and it will take leadership, flexible thinking and strong partnerships to meet the challenges of carbon reduction,” says Ringer, whose focus on developing business ecosystems places him among a new breed of business consultants who are trying to get more from less without expanding their environmental footprint.

“As a Certified Carbon Neutral company and with a developing impact arm of the company, Unitive welcome’s decarbonisation as one of the policy focuses of the report.”

Productivity and innovation  

While innovation in mining, manufacturing and agriculture has been focused on R&D investment to create new products that reduce labour costs and enhance production processes, innovation in the services sector is likely to focus on how business is done.

The report states that services innovation is likely to be driven by, “a combination of strategic understanding, creativity, drive, risk appetite, emotional intelligence and adaptability.”

Service innovation will have more immediate effects on how consumers access services.

In fact, there is already a long and growing list of examples including telehealth, ride sharing apps, streaming services and online banking. While most of these innovations have been disruptive to traditional bricks and mortar businesses, over time they have resulted in greater choice, convenience and cheaper services for consumers.

Mr. Ringer says that while Australian companies demonstrated a high degree of flexibility in Covid to keep jobs and income streams, there was a wide gap in the success of product distributions.

“Businesses really need to keep that momentum going now to embrace new ways of doing business in ways that are more sustainable for their profit bottom line, their people and the planet. For example, many businesses are great at collecting data – but using that data to drive productivity decisions is another matter,” he says.

“There are also the challenges of a skilled labour shortage in all sorts of industries and the signs are not encouraging. This challenge will require greater adaptation and flexibility when it comes to non-routine cognitive work – we need workforces that can skill and reskill really fast.”

“There are definitely some significant headwinds, but the powerful combination of your workers, the untapped uses of the existing technology in your business, a little bit of out-of-the-box thinking and maybe some strategic alliances can really boost your bottom line,” Mr Ringer said.

To find out more about how Unitive can assist you to boost productivity, visit our consulting arm.