This is the final article in a four-part series that explains productivity and why it matters to investors.
In the earlier articles in this series, we looked at productivity—what it is, why it is important, and some of the factors that can help us to improve productivity. In this article, we will explore some additional factors that can influence productivity and our ability to access the benefits that improved productivity can generate.
Research and development
The more research and development that is undertaken, the more invention and innovation we can achieve and the more technology can be improved. This should enhance productivity as new products, methods, and resources are brought into use that can affect production costs, and quality.
A BlackBerry Bold, left, and a Blackberry Tour, made by Research In Motion Inc.
For example, RIM developed a new technology which is still a world leader and creates jobs, income, and opportunity in Canada. Yet global pressures are intense and continually challenge RIM to invest in new technology and create better products, at the same time as it is challenged to compete in price and reliability.
One can recall the incredible success of Nortel—a company that is now a shadow of its former self. Success today does not mean success tomorrow. No company, no matter how successful, can rest on its laurels in a highly competitive global economy.
Investor Insight
An investor should keep an eye on the company’s plans for spending on R&D. This will apply more to some companies than others. But, for some companies, R&D spending will be critical to enable the company to remain competitive and profitable. A company such as RIM faces constant challenges and needs to continually find ways to innovate and respond to client needs and interests. Once again, annual reports, company reports, analysts’ reports, and minutes can provide insight into a company’s R&D plans.
Technology transfer/implementation
Developing technology is one thing. Putting it to effective use is another matter. The more effectively that technology is applied within business, the more we can improve productivity. For example, if Canadian gold producers can developed new, better, more innovative and less costly ways to extract gold and bring it to market, our gold producers may be able to achieve productivity improvements and more efficient use of resources.
Investor Insight
Some companies are better at seeking out and integrating new technology than others. In assessing a company for possible investment, does it have a reputation as an industry leader? Does it appear to be at the forefront in terms of production techniques? What do analysts and journal articles have to say regarding the company—a technology leader? A technology laggard?
Production synergy
The extent to which the various production activities of a company support and assist one another has an impact on the productivity of the company. The same should hold true for the production activities of an industry—or nation as a whole.
George Cope, CEO, BCE Inc.
For example, BCE, a major corporate force in Canada, became a group of companies involved in a wide range of diverse activities. In more recent times, BCE sold off companies that weren’t related to its core interests and business. BCE worked to re-establish its “corporate synergy” to be more productive—as well as more profitable.
|
Investor Education: Productivity explained by Gary Rabbior |
The more that different parts of a company can work to complement and support one another, the easier it can be to be more efficient—and improve productivity.
Investor Insight
