dahl07

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The Knowledge Economy: Peace and Prosperity through Productivity A Keynote Presentation for The World Future Society presented by Tor Dahl Assisted by Loretta Hazlett 31 July. 2007 Minneapolis Hilton Minneapolis, Minnesota, U.S.A.

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WorldFuture 2007: Fostering Hope and Vision for the 21st Century History says, “Don’t hope On this side of the grave.” But then, once in a lifetime, The longed-for tidal wave Of justice can rise up And hope and history rhyme. – Seamus Heaney

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Poverty Disease Hunger War The Scourges of Mankind

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Today We Will 1. Describe a framework that will make it possible to defeat the scourges of mankind: a. Poverty; b. Starvation; c. Disease; and d. War and Conflict. 2. Describe how the resources that will accomplish this will be found. 3. Define the kind of leadership that will accomplish this noble quest.

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1.Indians are more productive outside of India than in India? 2. Cubans are more productive outside of Cuba than in Cuba? 3. Russians have the highest per capita income of any ethnic group in the U.S., but very low per capita income in Russia? 4. Mexicans are 5 times more productive in the U.S. than in Mexico?

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Free Safe Justly Treated This principle holds true not only for nations, but for any organization or institution that seeks to unleash its potential to achieve improvement and growth . The Framework for Prosperity

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http://www.heritage.org/research/features/index/downloads/Index2007_EconFreedomMAP.jpg

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Here we illustrate the annual growth rate of per capita GDP by change in economic freedom grade. Not only do countries with more economic freedom have a higher per capita GDP, they also generally grow more rapidly. http://www.heritage.org/research/features/index/chapters/pdfs/Index2006_ExecSum.pdf

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Freedom Is Linked to Prosperity

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Justice Is Linked to Prosperity

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Safety Is Linked to Prosperity

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Free Trade Is Linked to Prosperity

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Productivity Is the Engine of Growth and Prosperity

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Compensation as a Function of Productivity United States, 1950 - 2006

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Productivity has 3 distinct economic effects : 1. It increases wages, so demand goes up 2. It reduces prices, so sales go up even more 3. It improves profits, so investments are made again. No other strategy accomplishes all those objectives at the same time.

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The U.S. Work Force Today 10% Transformational: Transform raw materials into finished products. Manufacturing. Fabrication. 10% Transactional: Rule-based, machine-like work. 80% Tacit: Knowledge-based, ambiguity-filled, judgement and experience needed and required

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It is with a tacit, distributed work force that we shall realize the benefits of the knowledge economy. The knowledge worker, with new and revolutionary tools, is the ultimate capitalist -- but it is human capital that now owns the means of production.

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The most important challenge of the next century will be to improve the productivity of the knowledge worker. Peter F. Drucker

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Here is how individual human productivity improves, on average, year after year during a typical, 30-year work life.

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After 30 years, the average worker is 81% more productive than on the day he first started.

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Then the worker retires . . . . . . and . . . takes it all with him.

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What if you could start with all of this hard-won, accumulated knowledge? What then?

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So that after 30 years, you would be 228% more productive than when you began.

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But what if you started with 10 thousand years of experience?

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GDP grew at the average annual inflation-adjusted rate of 3.79% Golden Years of Growth for the U. S. 1946 - 1973 The U.S. Economy falters: 1973 - 1995 GDP grew at the average annual inflation-adjusted rate of 2.84%

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Cumulative U.S. GDP for the years 1973-1995 , in real 2000 dollars $138,234.9 billion Cumulative U.S. GDP for the years 1973-1995 , in real 2000 dollars, had the U.S. remained as productive as it had been from 1946 - 1973, in real 2000 dollars. $154,960.1 billion Real GDP forfeited due to loss of productivity: $16,725.2 billion, in 2000 dollars In today’s dollars, that is $19,959.5 billion!

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Perspective That is 1 1/2 times last year’s entire U.S. GDP!

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Productivity and Quality Are Like the Seasons of Nature The Unfreezing is the Spring and Summer The Freezing is the Fall and Winter

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Since quality takes out the variations in products and processes and productivity introduces variation in products and processes, Productivity Improvement must precede quality improvement.

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Experience teaches nothing unless studied with the aid of theory. – W. Edwards Deming

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The innovative and creative environment, which is the realm of productivity improvement, is inherently disruptive, and investing in change is perceived as risky. So . . . To create growth and sustain change, people must feel free, safe and justly treated.

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What has been the performance of the U.S. corporations that have mastered Six-Sigma quality and made it the primary focus?

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The Juran Center for Leadership in Quality at the University of Minnesota chose 15 companies that they consider to be exemplary users of Six Sigma processes to improve productivity and quality. Of those 15, 12 are listed in the U.S. Stock Exchanges and provided us with comparable data. They are: General Electric, Coca-Cola, 3M, Caterpillar, American Express, Dow Chemical, Honeywell, Xerox, Ford Motor Company, Motorola, Dana Corporation, and Bank of America

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General Electric 5-year Historical Stock Price

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Motorola 5-year Historical Stock Price

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Ford Motor Company 5-year Historical Stock Price

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Dana Corporation 5-year Historical Stock Price

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Xerox 5-year Historical Stock Price

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TDA’s list of Exceptional Performers Through the use of multifactor productivity analysis, Tor Dahl & Associates identified the following 11 companies as exceptional performers, based upon their superior productivity: Anworth Mortgage  Capital Automotive Eli Lilly  EPIQ Systems GulfMark Offshore  Microsoft Oracle  Urstadt Biddle Properties US Bancorp  Wahington Mutual Wells Fargp

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Capital Automotive 5-year Historical Stock Price

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US Bancorp 5-year Historical Stock Price

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Wells Fargo & Company 5-Year Historical Stock Price

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Microsoft Corporation 20-Year Historical Stock Price

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Six Sigma vs. High Performing Companies Revenue Costs Net Income Multifactor Prod. Impr. Profit Rate Employment Juran 12 12 High Performers 15.90% 23.27% -40.59% -2.73% -48.74% -6.13% 81.25% 69.51% 129.52% 6.93% 26.63% 45.07%

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High productivity does not eliminate jobs. It is low productivity that loses jobs.

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Juran High Perf. 1998 11.54% 19.56% 1999 9.39% 26.47% 2000 8.36% 27.61% 2001 4.78% 21.25% 2002 5.92% 24.77% 2003 7.75% 28.49% 6 Year Average 7.92% 24.82% Average Profit Rates 1998-2003

If a close focus on Six Sigma reduces productivity over time, increases unemployment, and reduces profits, should we shift focus to Performance Improvement?: 

If a close focus on Six Sigma reduces productivity over time, increases unemployment, and reduces profits, should we shift focus to Performance Improvement?

Behind every quality failure is a performance glitch.SO …It is performance improvement that brings about quality improvement.: 

Behind every quality failure is a performance glitch. SO … It is performance improvement that brings about quality improvement.

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1. Better paid 2. More satisfied 3. Less stressed 4. More secure in your job 5. Have more time for friends and family What can simultaneously make you:

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Becoming more Productive!

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Average: 92% is deemed improvable 8% is deemed perfect Total: 100%

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1. Unnecessary or Poorly Planned Meetings 2. Unnecessary Reports and Paperwork 3. Bad Attitudes 4. Rework 5. Redundancy and Duplication of Efforts 6. Number of Control Procedures Required 7. Work Processes that Cause Inefficient Production What can I stop doing?

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Question from a French seminar participant: “I can see that it must work in practice. But does it work in theory?”

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There have never in history been so many opportunities to do so many things that aren’t worth doing. – William Gaddis

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Resources Freed I. Improved Occupancy II. Improved Effectiveness Screening Delegating Planning III. Improved Efficiency TOTAL FREED RESOURCES

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“To my mind there must be, at the bottom of it all, not an equation, but an utterly simple idea. And to me, that idea, when we finally discover it, will be so compelling, so inevitable, that we will say to one another, ‘Oh, how beautiful. How could it have been otherwise?” – John Archibald Wheeler

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Competitive Survival 1. Cost-Effectiveness and/or 2. Earned Monopolistic Advantage

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Resources Freed I. Improved Occupancy II. Improved Effectiveness Screening Delegating Planning III. Improved Efficiency TOTAL FREED RESOURCES Low cost Production High Yield Activity

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And Another Thing … People hate to be unproductive. Two-thirds of people’s negative stress and dissatisfaction happens when they are unproductive.

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Productivity = Output Input

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Performance improvement potential of 6% or more per year is tied up in a logjam. The organizational logjam ties up about 3/4 of the potential in manufacturing organizations, and 1/2 of the potential in service organizations. The individual logjam ties up about 1/4 of the potential in manufacturing organizations and 1/2 of the potential in service organizations.

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A logjam usually consists of 5-7 logs. One is a key log. All logjams are different. Only the communication log has been common to all logjams.

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The Key Log must be removed first. The others follow in logical order.

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A log is removed by replacing the bad idea that created it with a good idea. Good ideas can multiply as well as bad ideas. It is ideas that cause productivity to sky-rocket. Our civilization is built upon some 25,000 ideas, and an infinity of combinations of ideas.

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Ideas primarily come from the cognitive mind: Thinking Judging Willing There is no doing in the cognitive mind.

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The doing of ideas is located in the affective mind: Pleasure/Pain Freedom/Confinement Energy/Lethargy Ideas are acted upon when pleasure or pain occurs, when there is freedom and possibility to act, and where there is energy.

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In Summary If you want to improve both performance and quality, you must unleash performance to create massive gains and then use quality principles to lock in the gains. Thus, productivity precedes quality, and implementation happens in the affective domain.

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“You come to the performance. At 8 o’clock it starts. And you are silent. You look at your orchestra or your opera performers. Even in the darkness, they watch your eyes. You move your hands and the music begins and, once in a great while, you deliver something that they cannot explain or will explain in different ways—a truly world-class performance. It is these moments that connect us human beings with the gods. It is magic.” Valery Gergiev, Artistic Dir. & Principal Conductor Kirov Ballet & Opera Theatre

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Management is cognitive. Leadership is affective. Management deals in the status quo. Leadership deals in change.

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The cognitive must precede the affective. Otherwise, incompetence is energized. and . . .

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Ideas are acted upon when: There is freedom to act (10 Positive Control Mechanisms) There is a threshold of pain or pleasure that is exceeded (6 Ways to Create Engagement) There is energy (3 mechanisms to create stress)

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Paraphrasing Joel Barker: A Leader is one who makes you decide to go to a place you would not have chosen to go yourself.

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The Best Leaders Divide into Two Types: Charismatic and Monastic Charismatic leaders create engaged followers. Monastic leaders create secure followers.

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The Worst Leaders Divide into Two Types: Bullies and Bureaucrats Bullies create frightened followers. Bureaucrats create powerless followers.

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Joel Barker’s film, Leadershift, demonstrates how a shift in leadership style can increase productivity 20 times.

Characteristics of an Effective Leader: 

Characteristics of an Effective Leader 1. A clear vision 2. Courage 3. Integrity 4. Rooted in reality — Peter Kostenbaum

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GWP grew at the average annual inflation-adjusted rate of 9.02% Growth of the World: 1950 - 1973 The World Economy Slows: 1973 - 1995 GWP grew at the average annual inflation-adjusted rate of 8.86% The World Economy Falters: 1995 - 2006 GWP grew at the average annual inflation-adjusted rate of 5.56%

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Cumulative GWP for the years 1995 -2006 , in real 2000 dollars $563.37 trillion Cumulative GWP for the years 1995-2006 , in real 20000 dollars, had the world remained as productive as it had been from 1973 - 1995, in real 2000 dollars. $697.56 trillion Real GWP forfeited due to loss of productivity: $134.19 trillion, in 2000 dollars In today’s dollars: $160.14 trillion!

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Are the projected productivity increases realistic?

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Percentage Increase in Growth Rates After World Productivity Congresses To Difference From Percent Increase in Growth Rate 4.08% 1.62% 2.46% Malaysia 65.9%

Life Is About Vision: 

Life Is About Vision

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Each of you in this audience has your own Vision of the future. That Vision, in many cases, includes where you work and your career success.

How Do You Realize This Vision for Your Work?: 

How Do You Realize This Vision for Your Work?

 Ask Your People Empower Them  Find & Remove the Key Barriers Create the Challenge Create the Environment Get Ready for Unparalleled Success: 

 Ask Your People  Empower Them  Find & Remove the Key Barriers  Create the Challenge  Create the Environment  Get Ready for Unparalleled Success

You Move Employees to the High Performance Domain.: 

You Move Employees to the High Performance Domain.

When Should You Do It?: 

When Should You Do It?

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Should I wish for something, it would not be for riches, honor, or power, but for the passion of the possible — for the eye that, eternally young and eternally burning, sees the possibilities. —Søren Kierkegaard

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We Said We Would 1. Define a framework that will make it possible to defeat the scourges of mankind. 2. Describe how the resources that will accomplish this will be found. 3. Define the kind of leadership that will accomplish this noble quest.

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What Talent Looks Like In Most Organizations Just because a talented individual doesn’t look the part and lacks confidence doesn’t mean they can’t be a top performer… Can you tap into the unexposed skills? In yourself? In your people? In your organization?