Education Case Study: OECD

A quick story about Productivity and the OECD

Close to a decade ago, the OECD released a handful of papers on the future of productivity. The goal of their research was to put put productivity – the ability of firms to create value – at the top of global policy-makers’ agendas.

HBR pulled out the punchline from these papers: there are two basic clusters of companies, and they grow at dramatically different rates. Frontier Firms, and Everybody Else.

Frontier Firms, as the papers describe, have been growing at several times the rate of the rest of the economy, but their growth rates have slowed in recent years. The papers are thin on simple conclusions, but if you read between the lines, the differences between Frontier Firms and everybody else are clustered around two key factors: their technology literacy and use of “knowledge-based capital” (KBC).

From the moment I heard that phrase, “knowledge-based capital,” I was hooked! So much more interesting than “knowledge management,” but points to the importance of intentionally growing, maintaining and spreading knowledge in a firm to create a sustained advantage.

  • Technology Literacy is the ability of an organization to understand, use, and manage technology to meet its goals. Think: skills and knowledge to operate, evaluate, and innovate various technological tools and systems. And not just the most deeply “technical” stuff. Even basic things like mouse skills, calendaring and email practices would fall into this bucket. More Tech Literacy: smarter tech investments, better adaptations to new technological trends, and a culture of continuous learning and innovation.

  • KBC is about what the organization knows, and how well it puts its unique knowledge to work. And it is best defined by the categories from this paper by C.A Corrado, C.R. Hulten and D. Sichel:

Computerized Information

  1. Software: Improved process efficiency, ability to spread process innovation more quickly, and improved vertical and horizontal integration.

  2. Databases: Better understanding of specific consumer needs and ability to tailor products and services.

Innovative Property

  1. Research & Development: New products, services and processes, and quality improvements to existing ones. New technologies.

  2. Copyright and Creative Assets: Artistic originals, designs and other creative assets for future licensing, reproduction or performance. Diffusion of inventions and innovative methods.

  3. New Designs: New designs leading to output in future periods. Product and service quality improvements, novel designs and enhanced processes.

Economic Competencies

  1. Brand-Building Advertisement: Improved consumer trust, enabling innovation, price premia, increased market share and communication of quality.

  2. Market Research: Better understanding of specific consumer needs and ability to tailor products and services.

  3. Worker Training: Improved production and skill levels

  4. Management Consulting: Externally acquired improvement in decision making and business processes.

  5. Internal Organizational Investment: Internal improvement in decision making and business processes.

When you look at those items, and you think about two exemplar workforces at either end of a spectrum between high and low technology literacy, it's obvious why the growth disparity is what it is. Firms that are better at this "stuff" have a massive advantage over those that are worse.

This is more than a tools problem. It's a problem rooted in a firm's approach to education. How does information flow from sources to recipients? How do employees gain new skills, and from where? How much time is dedicated to learning? How do leaders and teams unlock trapped sources of KBC? How are people rewarded for contributing to a company’s KBC?

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