However, if we adopt a broader interpretation – that reframes productivity as achieving the best possible outcomes with the available resources – the important link between startups and productivity becomes clear. Indeed, startups play a crucial role in business dynamism. They drive innovation, attract investment and can disrupt longstanding business practices and models. Just look at AI. There are estimated to be over 10,000 AI startups worldwide, all looking to innovate and provide truly new products and services that traditional incumbent companies often cannot.

In short, startups often trigger changes which, while not visible initially, tend to contribute disproportionately to economy-wide productivity growth over time. In fact, despite the broader slowdown in productivity since the recession of 2008, new businesses or “entrants” have played an increasingly important role in productivity. And there’s evidence that they will continue to be an important source of future productivity gains through innovation and disruption.

The need for strategic productivity

Quite understandably, most startups don’t worry much about their own productivity. When just out of the gate, they’re focused on growing and surviving any headwinds that can slow top line growth. Put simply, the focus is on getting revenue in and making sure bills are paid.

For those that survive in adolescence, the rapid early growth phase will unavoidably slow as they establish themselves in their industry and their business model stabilises. At this point, productivity – using our broader definition – becomes essential. It’s here that businesses need a plan to sustain their growth in the long-run and manage their resources strategically. They come up against new challenges including navigating more complex internal dynamics: people, finance, and operations. For example, they need to assemble the right team and create a strong culture, ensure reliable access to finance for long-term investment, and present and market their company effectively with financiers, all while continuing to innovate and adapt to technological changes.

The importance of internal collaboration

To navigate these scaling challenges, internal collaboration and strong relationships with trusted partners in supply chains or other platforms is critical. Without the advice, encouragement and experience of a broader ecosystem, firms risk plateauing at a suboptimal size, unable to fully benefit from scaling their business model.

While internal collaboration is an obvious goal, it’s not an easy thing to achieve. But there might be an advantage for scaling companies. In contrast to established corporates, they are built from the ground up, and they can ensure that every new hire is aligned on the vision.

But as the organisation grows, it becomes more challenging to ensure that all levels and functions drive towards the same goals and play their part in using resources in the best possible way to create value and growth.

In this way, productivity must be underpinned by culture – an often abstract but incredibly important concept. The culture needs to reflect a shared narrative on what productivity means and how it is measured, and a widespread commitment to pursue it. The culture needs to encourage everyone to share not only knowledge and learnings but challenges and barriers, too. Inclusive management is key here: when leaders of different functions are committed and aligned, they can effectively communicate the vision effectively to their teams.

The rapid pace of technological change and innovation means that startups need to constantly reassess the outcomes they want to achieve and determine the journey on how to get there. This way they stay focused on realising the potential and don’t stagnate. An effective culture ensures that everyone is not only aware of what changes but has the opportunity to contribute to it too.

Broadening the ecosystem

One of the best ways to make productivity gains is through shared knowledge and collaboration. Beyond the confines of the company itself, there is a wealth of resources and knowledge to be gained by sharing goals, methods and challenges with peers, even those in entirely different sectors – in other words, developing an ecosystem of support and experience.

For example, the choice of a technology application or software package is a common challenge. The pace of change is often so fast that any commitment could be obsolete in a few months’ time. Different providers may offer their best answer, making firms unsure of where or how to invest. There is often a fear of missing out, which can lead to a poorly considered decision - the result of which is that the investment doesn’t pay off. Conversely, there is the risk of crippling indecision driven by risk aversion and ensuring that every investment is worthwhile.

By sharing knowledge and experiences of what’s worked and what hasn’t, businesses can gain the confidence to take the leap and invest in new technologies that can improve their productivity.

Optimising productivity is a challenge that has many obstacles along the way, but we are far better placed to tackle them if we do it together

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