Productivity is one of those terms that gets thrown around constantly in business strategy discussions, yet few leaders stop to ask what it really means. For decades, industries like construction and healthcare have struggled with stagnant productivity while others, particularly technology, have surged ahead. Why is that? And more importantly, how can leaders rethink productivity to unlock growth?
In this episode of The Insurgent Mindset, we unpack the fundamentals of productivity — from how it’s measured at the national level to what it really means for leaders driving business transformation inside their organizations.
Defining Productivity and Its Limitations
Traditionally, productivity has been defined as output per labour hour, a simple ratio of what you produce versus the effort it takes. Economists measure it using GDP or Gross Value Added (GVA), divided by total labour input or using total factor productivity (TFP) dividing aggregate output by an aggregate index of inputs (e.g., labour and capital). Overall productivity is a measure of an economy’s ability to do more with less and improvements in TFP requires a more educated workforce, efficient resource allocation, and comparative advantage in trade.
Improving productivity requires more value creation per unit of input (quantity). Efficiency on the other hand, is focused on how well a unit of output is created (i.e., using fewer resources to achieve the same output with the least amount of waste – quality) A firm can be busy, efficient, and still unproductive if their work doesn’t generate output or meaningful outcomes for customers or drive competitive advantage.
That’s where the distinction between efficiency and value creation becomes crucial. Efficiency is about optimization; productivity is about innovation and growth. The firms that master both and know how to reinvest their efficiency gains into higher-value activities, are the ones that stay ahead.
The U.S. Advantage: Innovation, Capital, and Culture
Looking across markets, the U.S. continues to outperform many advanced economies in productivity growth. A major reason lies in the rapid diffusion of innovation, and the efficient allocation of labour and capital. Technology leaders like Apple, Amazon, and NVIDIA have transformed entire industries by reshaping customer value propositions and introducing new business models to create new sources of value.
Their success also reflects an ecosystem that rewards risk-taking, capital mobility, and continuous upskilling. Capital flows quickly to innovation. Workers are encouraged and even expected to upgrade their capabilities. And the cultural mindset is one of urgency and ambition.
But perhaps most important is the speed at which new technologies translate into value. In the U.S., the path from innovation to adoption is short. AI, for example, may not yet be fully visible in productivity statistics, but it’s already reshaping how work is organized, how value is created, and where growth emerges.
Australia’s Challenge: Scale, Regulation, and Risk Appetite
Australia, by contrast, faces structural headwinds that constrain productivity growth. Despite a highly educated workforce, the economy is dominated by only a few large sectors that can compete globally at scale (e.g., mining, tourism, and agriculture). The lack of scale in other sectors and the correspondingly slow diffusion of innovation means lower comparative productivity.
Regulatory friction, slower capital deployment, and a lower tolerance for risk compound the issue. Unlike the U.S., Australia’s venture and innovation ecosystems are less mature, meaning new technologies and business models take longer to diffuse. Even culturally, Australia’s balance between work and lifestyle, tends to separate “work” from “innovation.” The result? A flatlining of productivity.
The takeaway for leaders is clear: long-term productivity gains come from creating new sources of value — not just doing the old things better, faster, or cheaper.
Firm-Level Productivity: Moving from Activity to Impact
At the firm level, the lesson is the same. Efficiency gains only matter if they translate into value. Too often, leaders focus on cost-cutting or process improvement, capturing a short-term “efficiency dividend” rather than reinvesting those gains into innovation and growth.
Being efficient at the wrong things is just as dangerous as being inefficient. The question isn’t just “how can we do this faster?” but “should we be doing this at all?”
Insurgent organizations are constantly reallocating resources toward higher-value opportunities. They treat productivity as a strategic resource, not (just) a financial metric. Efficiency gains become fuel for expansion, experimentation, and new customer value creation.
The Real Opportunity of AI and Technology
AI presents perhaps the most significant opportunity to boost productivity since the internet came to life, but only for leaders willing to reimagine their business models around AI to extract new sources of value.
Real productivity gains won’t come from bolting AI onto existing workflows. It will come from redesigning how work is organized, freeing people from low-value tasks, and building adaptive systems that continuously reallocate talent and capital to the next best opportunity.
That means shifting from static hierarchies to dynamic, value-driven operating models. It means measuring productivity not just in terms of labour efficiency but in terms of strategic agility — how quickly your business can pivot, experiment, and seize new growth opportunities. In other words, by working on the numerator not just the denominator.
From Efficiency Loops to Value Loops
Ultimately, national and firm-level productivity share the same foundation: both depend on reducing friction and increasing value. For nations, that means smarter regulation, better education, and more fluid capital and labour markets. For firms, it means:
- Continuously identifying and removing organizational friction.
- Investing in innovation, talent, and customer value creation
- Treating productivity as a strategic imperative, not just a metric for short-term performance.
- Building systems that can dynamically reallocate resources to emerging opportunities.
- Leveraging technology to enable human creativity to achieve more output, not replace it.
The insurgent mindset is not about working harder; it’s about working smarter toward what truly creates value. The future belongs to those who view productivity as more than efficiency — those who see it as the art of continuously turning effort into impact.
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