Germany's Improvement Engine Has Lost Its Power. It's Time for a New Vehicle.

Picture: an AI visualization of Germany's productivity problem.

If we consider the standard macroeconomic measure of real GDP (or gross value added) per hour worked, Germany has made substantial productivity gains since reunification. However, the rate of improvement has slowed dramatically. Annual labour productivity per hour fell by 1.2% in 2023 and 0.3% in 2024, before increasing by only 0.4% in 2025, according to Destatis data. Productivity here is measured as real output per hour worked.

The distinction is strategically important. At 2% annual growth, productivity roughly doubles in 35 years. At 1%, it takes about 70 years. At 0.4%, the 2025 German figure, it would take roughly 174 years to double. What happened to Germany's ability to generate productivity improvements, and why hasn't the aggregate improvement system produced stronger productivity growth despite decades of improvement activity?

If German companies have spent decades investing in Industry 4.0, Lean, Six Sigma and continuous improvement, why is productivity growth still so weak? Perhaps Germany doesn't need more improvement initiatives. Perhaps it needs a better way of producing durable improvements at scale—while dealing with the improvement-capacity problem.

Think about an improvement system as a vehicle: a sit-on lawn mower, a motorbike, a car, a truck, or, metaphorically, even a space rocket. The basic principle is the same: a system must convert available resources into controlled movement toward a desired outcome. But the required vehicle changes as the load, speed, distance, terrain and risk increase. Why should improvement systems be any different? Why stop at the sit-on lawn mower level?

It is a mistake to regard improving the "improvement engine" as the ultimate objective. The engine isn't the whole vehicle. Improving the engine, or only one or two components, takes you only so far. Actually, it is a dead-end. A more powerful engine does not automatically make the vehicle fit for a heavier load, higher speed or more demanding terrain. In a motor vehicle, the driver equals the employees with their motivation, knowledge and skills. The load is the strategic productivity challenge or magnitude of change. How well do these components, related information flows and human interactions work together and how could the setting be improved? These issues affect how the vehicle performs in terms of time, quality and costs. Therefore, the fundamental issue is not simply to replace the engine. The vehicle surrounding the engine also needs to be fit for purpose: its components (wheels, steering, brakes, shock absorbers, parking brake, lights, navigation, electronic systems, transmission, etc.) their quality and how they fit together. For example, think of the wheels as PDCA cycles: they are what repeatedly translate improvement intent into movement. But the wheels can point in different directions, lack grip, be flat, or even become detached from the axle. And the driver needs the motivation, knowledge and skills to move the load in the desired direction, at the required speed and acceptable level of risk. The improvement vehicle's components or artifacts have their corresponding place in the process improvement theory and practice. You need to master the whole and the details with the correct priority for that specific case to gain proper improvement speed and traction. This is why improvement at a higher ambition level is very hard. Everyone masters change; some master process improvement; very few master high-performance process improvement, as discussed more thoroughly in the related blog post. Even a good vehicle may lack sufficient traction. And even with traction, it may end up in the ditch, or simply move in the wrong direction. Is our improvement system really up to the task, and how do we know?

You get what you measure, and you need to measure the improvement momentum your improvement system delivers. German companies measure a lot. But are all the metrics relevant, and is there a missing metric? Few companies have a comprehensive metric that tells management how effective and productive its improvement system actually is. Financial results tell you what the organization achieved. Process Improvement Yield (PIY) is intended to tell you how effectively and efficiently the organization produces process improvements:

PIY (%) = Plan Quality (%) × Plan Coverage (%) × Implementation Quality (%) × Implementation Coverage (%)

The four factors are expressed as fractions between 0 and 1 before multiplication.

The productivity problem needs to be solved wisely, not by allocating large amounts of resources to issues that produce only modest financial outcomes and productivity gains. First of all, the people driving the vehicle need a metric showing the real usable power and performance the vehicle is capable of. Without the knowledge of the usable power the vehicle is producing to the wheels, how can you plan for speed or consider how to pull what kind of load? If you have a heavy trailer to pull, and a weak engine with an inadequate vehicle configuration, the mission is doomed to fail from the beginning. A 3,000 kg trailer is obviously too much for a typical sit-on lawn mower. Yet organizations sometimes attempt an equally disproportionate task: pulling an increasingly heavy productivity load with an improvement system that was never designed for the required scale, speed or complexity. Even a good improvement system fails if the organization cannot execute enough improvement.

The metric needed for understanding the current improvement capability of an organization is PIY, which provides a 0–100% measure of the effective improvement yield achieved through plan quality, plan coverage, implementation quality and implementation coverage. When you know how much time and resources went to get that score, e.g. 3%, you have a very good picture of your organization's improvement capability. Increasing the score to, say, 10%, more than three times the average, while spending less time and money would represent a substantial absolute increase in improvement performance. Increasing relative performance as well, i.e. improving faster or more effectively than competitors, is necessary for the company to remain agile and relevant in the long run.

The improvement method itself should be constructed and verified scientifically (link to doctoral dissertation "Process Improvement Essentials: A Framework for Creating and Implementing Operational Improvement Plans"), not merely recommended because consultants have found it useful. This means that the German companies need to use high-quality improvement plans with the correct coverage (all key processes). The needed quality of these plans has to be assured via a scientifically constructed and verified method producing the required and sufficient output, using relatively few resources. This means that the plan should be finalized in weeks, not months, and the effective working time needed from each key person to create the plan should be counted in hours, not days. After all, there is an upper limit of how much time can be allocated to improvement initiatives. All improvement activities, end-to-end, may only consume about 4% or approximately 10 days of the working time for a specific employee in the long run, as defined in the above cited doctoral dissertation. The analysis and synthesis should thus consume about 10% of that time, and 90% should be reserved for the implementation including also the required education and training. Usually, 10 days go easily to the planning phase, leaving nothing for the implementation. Leaving the capacity problem unsolved creates large problems in the implementation phase at the latest. Using an improvement system that does not cope with the capacity problem as a built-in feature produces a never-ending loop of planning, but little actual implementation momentum. The capacity problem can naturally show up also in the planning phase, resulting in plans that are never finalized, and once they are, they are already outdated.

A high-quality method designed from the outset to also manage the time aspect assures a stable plan quality despite the setting. Such a method makes the output also highly scalable. A scientifically constructed and verified process analysis and synthesis method provides a basis for understanding why and how the solution works across different settings, as opposed to pure consultation that lacks such a built-in feature. But the engine is only one part of the vehicle. You also need to address the willingness to drive, the structure itself, the components, their quality and how they fit together, and the knowledge and skills required to drive properly in dynamic circumstances. It is clear that a profound paradigm is required to manage these issues properly at scale for any given setting. Germany lacks a broadly adopted paradigm that integrates these issues into a coherent improvement system. Closing factories, reducing headcount and restructuring can be necessary responses to poor performance. But they are not, by themselves, a productivity-improvement paradigm.

High-Performance Process Improvement (HPPI) provides the improvement paradigm. VISTALIZER provides the technology to realize it end-to-end within the individual organization. VISTALIZER realizes this end-to-end by enabling a high-performance process improvement process for the specified whole, whether a network, company or process, and by targeting the desired PIY.

For German companies, the objective is therefore not simply to improve more. It is to improve the improvement system itself. Track PIY. Increase improvement capacity. Improve the quality and coverage of improvement plans. Strengthen the organizational structure and capabilities surrounding the improvement engine. Make successful improvement reproducible and scalable. Because a high-PIY improvement operation does not merely produce more improvement. It produces improvement at lower cost, with less capacity consumption and greater scalability. And that matters enormously when the economic load keeps getting heavier. Did anybody say cheaper?

Related Blog Posts

Improving Development vs. Developing Improvement: Why Nokia Lost the Game and VW’s Best Improvement Program Still Can’t Catch Up.

Process Change vs Process Improvement vs High-Performance Process Improvement