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Posted by on Jul 10, 2015

Have We Experienced the End of Economic Growth?

Have We Experienced the End of Economic Growth?

 

We’re currently living in very interesting economic times in our world. Although we see evidence that our economy (in the U.S.) has been steadily improving over the past several years (e.g., lower unemployment, a higher stock market, higher corporate profits, etc.), there is a sense by many employees that something still isn’t right. Our research and experience indicate that many employees are still feeling squeezed.  Many feel they are being asked to do increasingly more with increasingly less.  They are still being asked to work longer hours, take on more assignments, and to do so with fewer resources. Many people are feeling stressed, tired, and overwhelmed. They hear about record corporate profits, but don’t personally feel or see the benefits of these profits in their daily lives or in their paycheck.  In fact, they still hear talk of cost-cutting, hiring freezes, travel restrictions, and even layoffs.  Many people will confide only to their close friends and family their high degree of frustration and resentment.  They go to work every day, put on a smile, and simply try to keep their “heads down” out of concern of becoming the next cost-cutting statistic. Many try to soothe their discontent by saying to themselves, “I guess I’m just lucky to have a job.” But one also gets the sense that many employees are lying in wait—waiting for the opportunity to “jump-ship” the moment things truly improve. But will this day ever actually arrive?

Of course, there are explanations offered for why employees may not be seeing tangible benefits of corporate profits and the economic recovery.  For example, one explanation is that many senior leaders are still feeling a high degree of uncertainty about the global economy, causing them to hold back on spending or making significant new investments. As Santoli (2015) writes,

“Economic growth has been slow, staccato and fragile as an over-indebted world struggles to lift demand for goods as developed nations age. Ultra-cheap debt-financing rates have boosted financial markets and fattened corporate profit margins, yet absolute revenue growth has been tepid, sapping executive confidence in the growth outlook and leaving them hesitant to expand.”

The concern we have with this explanation is the fact that ambiguity and uncertainly aren’t going anywhere, anytime soon. In fact, uncertainty is only going to INCREASE and ambiguity is already the “new norm.” Organizations waiting (or hoping) that the world’s economy will somehow soon reveal signs of certainty may be waiting for a very long time and, in the meantime, the world may pass them by.  This brings to mind that classic Peter Drucker (1985) quote:

“The best way to predict your future is to create it.”

At the same time, however, there are those who suggest an even a more dire prediction for the future and believe that there is a bigger issue at play when viewing the U.S. economy at a macro level. For example, there are some economists who believe that productivity growth (in the United States), which had grown at more than 2% per year for decades, may have peaked in the 1970’s, and may never return to those levels again. As Northwestern University economist Robert Gordon (2014) writes,

“The United States achieved a 2.0 percent average annual growth rate of real GDP per capita between 1891 and 2007. [My prediction is] that growth in the 25 to 40 years after 2007 will be much slower, particularly for the great majority of the population. Future growth will be 1.3 percent per annum for labor productivity in the total economy, 0.9 percent for output per capita, 0.4 percent for real income per capita of the bottom 99 percent of the income distribution, and 0.2 percent for the real disposable income of that group.”

If true, this would have a significant negative impact on our economic future. Said another way, we can expect the standard of living for our children and grandchildren to be lower, perhaps significantly lower, than our own.

Of course as one might imagine, there is a lively debate over Gordon’s analysis as well as why growth may have slowed in recent years. Gordon suggests four economic “headwinds” that have put a drag on growth and productivity such as (1) an overall reduction in hours worked per capita (retiring boomers and others exiting the workforce), (2) stagnant educational attainment (graduation completion rates), (3) increasing economic inequality in income growth among the population, and (4) an increasing ratio of debt to GDP at all levels of government. Gordon also suggests that the innovations developed from the 1870’s to the 1970’s were more impactful than those developed since that period to the present. In other words, the innovations prior to the 1970’s (e.g., railroads, electricity, the telephone, indoor toilets and running water, the automobile, the washing machine, the airplane, air conditioning, etc.) had significantly greater positive impact on economic growth and prosperity than the innovations after that period (e.g., micro-computers, bar code scanning, the internet, email, digital music and video, smartphones, iPads, big data, robotics, etc.). Gordon’s recommendations, of course, include not only addressing the four headwinds, but to find ways to “match” or exceed the great innovations of the period between the 1870’s and the 1970’s including those of Thomas Edison, Alexander Graham Bell, Henry Ford, and the Wright Brothers. But he is skeptical. Again, all fodder for a great debate and beyond the scope of this article (see Robert Gordon’s position here.)

So, could it be, as Robert Gordon suggests, that the best years of American economic growth are behind us? Is the expectation that our children and grandchildren will be better off than we are, a lost cause?

Here is our perspective.

We believe the answer is no. But we also believe there are changes--significant changes—that need to be made. We need to build new capabilities both within our organizations and within ourselves. We recently wrote an article called, “A Proclamation for Innovation.” In this article, we indicated that our world needs innovation now more than ever and that we need everyone involved in the process. But not innovation defined only as the ability to develop a few new products or services every year.  But rather, innovation defined as a mindset; a way of viewing the world and our work—the way innovators do.  This means not only developing the skills to continuously generate new ideas for new products, but a mindset that affects how we make decisions, set priorities, allocate resources, address problems, build our organizations, and how we LEAD people.  Above all else, innovators seek to create—and it is this creating mindset that everyone needs to develop in our world today.

We also recently wrote an article called, “The Yin and Yang of Innovation: Building People and Organizational Capabilities,” which highlights the importance of also building organizational capabilities to support innovation. Although people need to develop innovation skills and mindset, they cannot sustain these abilities over time without effective support from the organization (e.g., leadership, infrastructure, talent management, and culture). Currently, our organizations are essentially designed to control rather than create. It should not, therefore, be a surprise that when conditions appear to be unclear, ambiguous, and uncertain (i.e., “uncontrollable”), organizations, and the leaders within them, hesitate

There is a venue for addressing these issues

At The Walt Disney World Resort, there is a three and a half day Everyday Innovation Summit, which by itself, cannot promise to address all of the “headwinds” described by Gordon, or guarantee a 2% economic growth rate, it can help organizations take the first steps toward building the capabilities needed to move in the right direction. 

For example, at the Summit, participants learn the skills, process, and mindset innovators use to generate new ideas—the “people” innovation capabilities. Participants learn that innovators do not spring into action (i.e., react) only when market conditions finally appear to become well-defined or unambiguous, but rather create regardless of their current circumstances. In other words, innovators seek to create independent of the current state. Although participants will learn to acknowledge and assess their current circumstances, they will then learn to reframe these in the context of the desired outcomes. They will also learn the way innovators connect to a diversity of ideas, opinions, and perspectives in order to bring their desired outcomes to life (see the article, “The ARC Model: Outcome-Centered Design”).  

Participants at the Summit will also develop a high-level action plan (called a “Canvas”) that focuses on building the “organizational” capabilities to support innovation. The four organizational “pillars” they will address in this plan include building (1) Infrastructure (e.g., processes, systems, and tools), (2) Talent Management processes (e.g., performance management, hiring, rewards and recognition), (3) Leadership, and (4) Culture. Participants also apply their learning through collaborative activities throughout Walt Disney World’s EPCOT Theme Park.

Another important aspect of the Everyday Innovation Summit is implied in the title “Everyday.”

Many years ago, Helen Keller wrote,

“The world is moved along not only by the mighty shoves of its heroes, but also by the aggregate of the tiny pushes of each honest worker.”

This quote speaks to the idea that our world moves forward by the contributions of everyone. At the Everyday Innovation Summit, participants will develop plans for getting everyone on their team involved in the innovation process.  This is based on the fact that new ideas can come from anyone, anywhere, at any moment.  Although we expect that there will be a continued development of cool and significant technology-based innovations to fuel productivity and economic growth, we cannot limit ourselves to a few select group of innovators to do all of our innovating (e.g., R&D, I.T.), nor should we value one type of innovation over another (e.g., technology-based products). Who knows, the next productivity jump for an organization (or our world) could come from a learning professional who creates a new method to accelerate learning rates by 200% percent. Or from a marketing employee who creates a new way to predict future customer buying patterns. Or from a front-line supervisor who creates a new way to power employee engagement. Or from a production employee who creates a new tool to identify and prevent product defects. Or from a high school English teacher who develops a creative solution to address one of the “headwinds” described by Robert Gordon—high school dropout rates. In fact, it seems to us that the headwinds suggested by Gordon are, themselves, incredible innovation opportunities. The bottom-line is that our world now demands that everyone participate in the process—the possibilities are endless.  The Everyday Innovation Summit builds on these principles and helps participants return to their organization to put in place those skills, processes, tools, and support needed to build and leverage the innovative power and potential of everyone on their team.

We hope you will join us at the next Everyday Innovation Summit in September (you can register and learn more about the benefits and outcomes of the Summit here). Together with other professionals, you will collaborate, share, learn new methods and tools, and build a plan for realizing unlimited potential, opportunities and results greater than you imagined possible. We hope to see you there!

Sources:

  • Drucker, P., “Innovation and Entrepreneurship.” Harper and Row Publishers, 1985.
  • Gordon, Robert J., “The Demise of U. S. Economic Growth: Restatement, Rebuttal, and Reflections,” NBER Paper, January 20th, 2014.
  • Santoli, Michael, “Five years into recovery, Dow companies squeeze workers as investors thrive,” Yahoo Finance News, January 29th, 2014.

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