The ‘productivity puzzle’ is a myth. Britain should learn from the best

There is broad consensus, across the political spectrum, that growing the British economy is a long-standing priority. Achieving this goal requires a consistent, long-term strategy — one that isn’t swayed by short-term pressures.
In my experience, success is 5 per cent strategy and 95 per cent execution. While defining the right strategy is crucial to avoid wasted effort, the real challenge lies in a relentless focus on implementation. The insight of the Chinese general Sun Tzu — that “strategy without tactics is the slowest route to victory, and tactics without strategy is the noise before the defeat” — is especially relevant to our economic situation.
A change in government brings a new opportunity to attract key investors and create the conditions for innovators to build great businesses in the UK. We need a business-friendly environment that attracts top companies and entrepreneurs. This requires competitive financial support; massive investment in science, technology and the environment; a productive, well-educated and healthy workforce; good infrastructure; close collaboration with Europe without trade friction; and a welcoming policy towards skilled immigrants. Otherwise, we risk falling behind.
So where does the money come from? We could reduce public sector spending, but many would argue that this has already been done to excess. However, “lean principles” teach us that only 5 per cent of what most organisations do add value for the customer, so there are enormous opportunities to eliminate some unnecessary non-value-adding activities and apply continuous improvement to the others. That would bring green dividends, too, because eliminating waste also eliminates CO2.
We could increase taxes, but unless we choose carefully, history teaches us that this may reduce the total tax received by the exchequer. We should also be careful with the tired old slogan that the “broadest shoulders should bear the biggest burden” — because they already do.
The best way to find the money is to attract massive inward investment by once again being a motorway to the world’s biggest, richest, closest free-trade market, and making Britain a friendly place to do business. That involves looking at all the key processes that turn an investment opportunity into one that can be executed.
We can learn from the automotive industry by implementing its processes for new product introduction, which the Japanese taught us years ago could be done ten times faster than under our traditional western approach. I know from work we did with the cabinet office more than a decade ago that our procurement processes could be improved from the worst in Europe to the best.
Teaching people to use creativity before capital — or, as I used to teach in our company university, “grey matter” before the “greenback” — can yield remarkable results if embraced by millions of our citizens.
One guiding principle I adopted in my company was to learn from the best and then innovate our own approach. The same principle applies to national economic strategy. We can take inspiration from models such as the US Council on Competitiveness, which united business leaders, academics and government in pursuit of growth, and from Singapore’s long-term planning success (derived from its single-minded focus on education and investment in science and industry). Meanwhile, China’s automotive sector now produces cars 30-50 per cent cheaper than western counterparts.
By studying these examples, and examining what has worked well in the UK in the past, we can build a strong growth strategy with cross-political consensus — and, crucially, stick to it.
At its core, business is about producing and selling, but the methods must continually evolve with global competition. Years ago, companies were rivals with companies, then nations with nations. Now, entire economic blocs are in competition. Yet some constants remain: consumers always seek the best value; capital moves swiftly to where it is treated best; and the global competition for talent continues to intensify.
To serve British consumers and attract global demand, we must significantly improve productivity. The idea that there is a “productivity puzzle” is a myth. The combination of lean management principles, empowered employees, and a management that understands and embraces technology, and leads and inspires AI deployment in the workplace, can dramatically accelerate productivity growth.
At our company university, I spent years teaching employees one key idea: “You don’t have thoughts; thoughts have you.” I questioned conventional assumptions, such as the idea that costs must rise indefinitely, showing that if we accepted this premise, our only path to success would involve other stakeholders losing. This mindset also applies to public sectors such as the NHS.
Consider a different approach to the NHS. Instead of viewing it solely as a £180 billion-a-year organisation responsible for caring for the nation’s health, why not reimagine it as a wealth-generating industry? By leveraging its world-class clinicians, pharmaceutical expertise and extensive data to serve global markets, the NHS could become a global leader in healthcare innovation. The additional wealth generated could be reinvested in improving national healthcare services.
Before dismissing this, think of the potential. A forward-thinking government, and a health secretary willing to embrace new approaches, could transform the NHS into a global player, driving innovation and revenue.
Ultimately, before we can spend the nation’s wealth, we must create it — and we haven’t been doing that fast enough. As global competition intensifies, this task will only get harder.
There are no silver bullets, just as Olympic athletes understand there are no shortcuts to gold. They know that success starts with an honest comparison to the world’s best, followed by unwavering focus, dedication and hard work — there is no way around it.