There is a widening gap between the top 25% of companies driving real productivity improvements and those struggling to see gains. In fact, according to the latest research from Accenture Strategy, the gap between high- and low-productivity companies has doubled over the past eight years—and quadrupled over the past four.

The theory presented by Accenture is that the best performing companies in terms of productivity are not just using the technology and knowledge within their organization to eliminate costs – looking at all productivity efforts through the lens of costs – but rather are thinking about how technology and knowledge can be used to drive revenue growth. This thinking, the research argues, becomes even more critical with the adoption of generative AI, which can have a multiplier effect.

Accenture notes:

The past decade has seen major technological advances that promise to increase productivity, the ultimate driver of competitiveness and growth. But despite significant investments in technology, many companies have yet to see the productivity payoff as global productivity growth has remained flat. Even more worrying is the fact that 40% of large global companies have experienced negative productivity growth annually.

In the past, productivity initiatives have focused largely on input—cutting costs and increasing efficiency. And our analysis shows that many CEOs continue to have this cost management orientation. The reality is that productivity is fundamentally about the relationship between input (the effort required) and output (the value created). Now, the impact of generative AI and other technologies is forcing companies to redefine productivity, essentially requiring new ways of working.

The research aims to provide a blueprint for companies struggling with their productivity, particularly as they begin to make costly generative AI investments. Accenture surveyed senior executives from 2,000 large companies across multiple industries and countries, but also analyzed more than 63,000 earnings calls from 1,000 companies using AI tools to understand how leaders communicate with investors about productivity. It also analyzed the profit and loss of nearly 1,400 Forbes Global 2000 companies to understand the factors behind productivity growth over the years.

Consider the gap

As mentioned above, Accenture found that the gap between companies with high and low productivity growth has accelerated in recent years. This is said to be because companies with high productivity growth don’t just cut costs; instead, they grow revenues faster than their expenses and invest strategically in key areas – maintaining a healthier output/input ratio. For example, these companies:

• Achieve cost efficiency (revenue/cost) ratios that are 4.5% higher than their peers
• They increase revenue by 1.3% for every 1% increase in total costs
• Increase revenue per employee by 7% annually while total costs per employee increase by 6%
• Invest more in developing complementary skills across the organization and demonstrate a stronger strategic commitment to data and AI adoption

However, the key point to note is that leaders of companies that are not seeing the same productivity gains as others are focusing too closely on cost management or the bottom line while forgetting to invest in revenue growth. The research states:

For example, when we analyzed 63,000 earnings calls of G2000 companies from 2015 and 2023, we found that of those that mentioned productivity, nearly half focused on cost management, while only 20% of such calls did discussed growth.

On the other hand, CEOs of companies with high productivity growth are increasingly linking productivity discussions to the focus areas of revenue growth, innovation, and technology (see Figure 2). These productivity leaders see productivity as much more than cost. For them, productivity reflects how well the company uses all its resources—capital, labor, technology, and knowledge—to improve efficiency, speed, quality, and innovation.

The traditional focus on cost optimization must give way to cost and productivity reinvention. That’s what high productivity companies do. This new approach allows productivity leaders to not only achieve cost efficiencies (despite higher investment per employee) and revenue growth, but also sustain and extend their advantage over typical companies.

A new productivity equation

Accenture’s basic thesis from its findings is that companies that continue to target productivity gains through a zero-based approach that focuses on cost reduction in operational expenses will lose out in the future. By focusing primarily on cost, he argues, companies are bypassing the opportunity to increase production quality through knowledge-intensive process improvements, especially those within the innovation and differentiation qualities needed for competitiveness and growth.

This is because, Accenture argues, the notion of simply focusing on input reduction (the required effort) overlooks the “knowledge productivity” that is central to the “hyper-competitive, technology-driven economy”. This is where generative AI comes in, which Accenture claims can act as a multiplier for a knowledge-based economy.

The research paper argues that companies should consider a new equation that focuses on reducing input costs (unit cost reduction), multiplied by an “effectiveness factor” (actions taken to increase output per unit of input, by changing the way work is done), multiplied again with the effect of generative AI (a combination of time savings and product quality improvements by reinventing work by adopting generative AI). See the image below for Accenture’s new productivity equation:

Regarding the potential impact of adopting this thinking, Accenture notes:

Applying this new approach to productivity and performance pays real dividends.

Based on historical productivity trends at the company level and based on evidence of the potential impact of generative AI, our analysis indicates that adopting a holistic approach to productivity that encompasses actions across all three dimensions could increase average company productivity growth by up to at 16% annually (see Figure 4). This growth rate is similar to that of the top 10% of G2000 companies.

Our modeling shows that for a company with average productivity performance, this could translate into a 2.8x increase in its EBIT over a 10-year period.

My appreciation

I think this approach is worth considering for two main reasons. First, a more optimistic view of the impact of generative AI on knowledge workers is needed. Accenture argues that knowledge within an organization is valuable and can be enhanced through the use of generative AI tools, rather than replaced by them. This is a more sensible approach than assuming that AI can be used to replace your valuable knowledge workers – giving them new tools to change the way they approach work to drive growth, rather than eliminating them to save costs.

Second, I have previously argued that while the global AI arms race is often viewed through the lens of developing AI to succeed, it often ignores the alternative path to success: organizations or nations that adopt new tools quickly and efficiently for growth. For example, we saw during the dot com boom that nations like the UK developed new service models and increased revenues by rapidly adopting new web-based infrastructure rather than focusing on its development – this is an option now available as generative AI advances. Simply viewing generative AI as a cost-cutting tool is a mindset that will lead to rapidly diminishing returns. We also need to think about how it can lead to growth.