The Innovators: Winning the Productivity Game

NEW YORK (TheStreet) -- In the 1960s when manufacturing dominated the world's economy, Edward Deming, a New York University professor, noticed that manufacturers resolved problems as they occurred, but there was no system for continuously improving manufacturing performance.

In response, Deming developed "Statistical Process Control." He tried and failed to sell it to U.S. auto companies, but found enthusiastic supporters in Japan's central government. Japan's unprecedented transformation from cheap goods to best-in-the-world manufacturing is largely attributed to Deming. Still today, Japan's top corporate award is, "The Deming Prize."

By dramatically increasing manufacturing productivity, Deming improved the standard of living for every Japanese citizen.

Fast forward to 2009. Think Microsoft(MSFT), Thomson Reuters(TRI) or even Orkin. Each of these companies is essentially a collection of leased buildings and people. What is the system for improving productivity in these pure human capital plays?

With 75% of GDP from advanced countries now coming from services it is time for a fresh approach to productivity improvement -- one that is focuses on workforce capabilities.

Like Japan in the '60s and '70s, America's standard of living depends on productivity growth. But we have a problem -- our comparative advantage is eroding. The Conference Board reported that 2008 productivity growth from emerging economies was 5.5%, down from 8.3% in the BRIC countries for 2007.

This sustained growth, largely attributable to investments in state-of-the-art manufacturing processes and technologies, far surpasses the growth rates from advanced counties such as the U.S. (1.7%), Japan (0.9%) and the European Union (0.2%).