People-focused knowledge management

Different Kinds of Productivity (Wiig & Jooste 2003)
We must distinguish between different kinds of productivity. Eco-
nomic theory refers to macroproductivity on national and global
levels, microproductivity on business and institutional levels, and
nanoproductivity on suborganizational levels such as the department
or the productivity of an individual job or person (Thor 1988). We
also distinguish between performance (or material) productivity and
economic (or financial) productivity (Moore & Ross 1978). Both per-
formance productivity and economic productivity are important for
managing and analyzing enterprise success, but they can differ
markedly, particularly in competitive situations. For example, if a
company can now produce a specific type of machine with half 
the inputs needed earlier, performance microproductivity and 
performance nanoproductivity double. However, if competitors also
improve their microproductivity and nanoproductivity performances
to the same extent and everyone lowers their price to half of what it
was, the economic microproductivity will not change. It may even be
reduced. Every company will achieve progress, but the revenues for
each unit of labor and resource utilization will remain the same as
before. As a result, customers will benefit, but from a financial point
of view, the company will not.
If the inputs and output quantity remain the same and the output
quality, or the number of features or options increases, value creation
and performance nanoproductivity will increase. If the enterprise can
command a higher price for its outputs, the economic microproduc-
tivity will also rise. However, if competitors also raise quality and
increase features and options, prices may remain stable, or drop, even
though the value of what is being delivered to the customers has
increased (assuming that they want and benefit from the improved
quality, extra features, and options). So, while all participants are
“more productive” from a performance point of view, the economic
impacts will be far harder to measure or may not have changed at
all. Better knowledge at the point-of-action — the workplace —
makes it possible to deliver more with less or to provide higher
quality outputs without increased efforts. Since competitors also
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The Effective Enterprise
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strive to improve, the need to innovate faster than the competition is
vitally important to maintain leadership.
Improvements in workplace operations and enterprise products
and services through innovation and improved knowledge, under-
standing, and other intellectual capital (IC) assets normally lead to
progress and performance productivity gains. But these gains may
not provide increases in economic productivity if competitive or other
mechanisms prevent organizations from realizing the economic ben-
efits. Improving performance productivity without being able to
realize economic gains is often the price of remaining competitive.
Improved application of personal or organizational knowledge
does improve performance productivity. However, that may not
translate into financial productivity! This explains why many
attempts to link the success of KM initiatives to so-called hard
numbers (typically, greater profits) do not take into account that
people are thinking better, acting more effectively, and being more
productive, just so the organization can remain competitive.
An additional, and unpleasant, aspect of progress and improved
performance productivity is that frequently fewer people are required
to provide the products and services demanded by the market. Better
production machinery, infrastructure, systems, procedures, and so on
may lead to layoffs and other kinds of staff reduction. Progress 
can therefore result in negative societal effects such as increased
unemployment.