Faster innovation adoption as key to improving labour productivity

Labour productivity is one of the key conditions for earning capacity. The Netherlands is lagging behind in both R&D investment and labour productivity growth. This is a concern, as there is a clear relationship between R&D, the adoption of innovations, labour productivity growth and the country’s competitiveness. Labour productivity and innovation adoption were therefore central themes in one of the sessions at our TNO Vector symposium. In this session, participants explored how the Netherlands can move forward with a strong, coherent approach to fostering human-centric innovation, accelerating innovation adoption and improving labour productivity.

‘Without productivity growth, future opportunities for citizens, businesses and government will be limited. We must stimulate growth - the key question is how?’

Productivity enables progress!

Productivity is not an end in itself, but a key means of safeguarding future earning capacity and competitiveness, maintaining public services, preserving our social system and enabling societal transitions. Against the backdrop of an ageing population and persistent labour shortages, labour productivity plays a crucial role in keeping society running and strengthening broad prosperity. The title of the introductory presentation by Albert van der Horst (Secretary-General of the Productivity Council) was therefore: Productivity enables progress!

‘Without productivity growth, future opportunities for citizens, businesses and government will be limited. We must stimulate growth – the key question is how?’

According to Albert, productivity concerns basically how much value is generated per hour worked, per hectare of land use, per kilowatt-hour of energy use, or per capita. It is also a double-edged challenge: we must consider how to stimulate labour productivity growth, while at the same time deciding how society will use that growth. Participants widely agreed that labour productivity must be closely linked to societal goals to ensure both functioning systems and progress in terms of broad prosperity.

Levers to improve labour productivity

There are four main levers for increasing labour productivity. The first is the deployment of labour-saving and labour-supporting technologies, such as AI, digitalisation and robotics. These technologies must be human-centric, meaning there is a strong balance between technology, organisation and people, so that both productivity and quality of work improve. Human-centric innovation ensures that technological solutions are aligned not only with processes, but also with the knowledge, needs and capabilities of employees.

The second lever is organising work more effectively, both within and between organisations. Redesigning tasks and responsibilities should be done together with employees.

The third lever focuses on strengthening employability and skills. This contributes not only to productivity, but also to employee health and wellbeing. Lifelong learning, not only through formal education, but especially through informal learning in the workplace, is essential.

The fourth lever is the use of external capacity, for example through outsourcing or hiring specialised expertise. In practice, organisations often focus on only one lever, but an integrated approach that combines all four is essential.

‘Are we doing the right things, and are we doing them in the right way to become more productive?’

Faster adoption and scaling of innovations is needed

In addition to ensuring that R&D and innovation efforts lead to productivity-enhancing solutions, it is crucial that these innovations are adopted and scaled more quickly. This requires a strong culture of innovation and learning within companies and across value chains. A key element is the early involvement of employees in both innovation and adoption processes.

In practice, this often still falls short. As Bart Brink (acting director at TKI Construction and Engineering) noted, innovative organisations must critically reflect on their activities: ‘Are we doing the right things, and are we doing them in the right way to become more productive?’

Start from the user and put people at the centre

To prevent innovations from remaining unused, it is essential to consider both the perspective of individual employees and that of the organisation. To facilitate adoption, innovations should address real problems or reduce less attractive tasks for employees. Thinking from the user’s perspective, anticipating future needs and embedding this from the start of the innovation process were identified by participants as key to improving labour productivity through innovation. This is why they emphasised placing the working individual at the centre.

Towards a coherent and integrated approach

A strong and coherent approach to improving labour productivity requires several building blocks. Increasing R&D investment and innovation efforts, with attention to the balance between technology, organisation and people, is essential. However, technology and social innovation alone are not enough. Broad application and implementation of successful innovations require faster progress in agenda-setting, experimentation and adoption.

To achieve this, action is needed at multiple levels:

• Micro level: training people so they can apply innovations and contribute to change and innovation programmes; strengthening learning and innovation cultures; and developing methods for human-centric innovation.
• Meso level: strengthening collaboration between organisations (for example through partnerships between companies and educational institutions) and enabling joint innovation across value chains.
• Macro level: frameworks including standards, guidelines and policies, combined with instruments that support R&D and innovation, talent availability, lifelong learning and labour participation.