Last week I asked, “Are We More Productive?” I explained that in some ways we are not, despite all our new gadgetry. Owning or using a smart phone to do your email in bed is not being more productive; it just increase output at the same rate (as in input or effort), ruins your work/life balance, and more importantly our standard of living does not improve.
Earlier this week I posted a further comment that demonstrates that in other cases we are more productive. I reported on an RFID journal article that demonstrates how, after many years of effort, RFID costs and reliability have improved to such a degree that firms such as Macy’s and Delta are making significant productivity improvements in areas such as inventory counting.
The final comment on the question, “Are we More Productive?” suggests that, overall at a macro level, we are not.
In today’s US print edition of the Financial Times there is a Comment by Stephen King, HSBC’s senior economic adviser and author of “When the Money Runs Out.” The Comment is called, “How Weak Productivity Can Neuter Monetary Policy.”
Mr. King reports that at a national level productivity is not improving. There are marginal improvements in some cases (e.g. US, UK) and in others there are even small declines (e.g. Italy). In his article he lists a few of the possible reasons for why productivity is flat; I have listed them in the past.
They include issues with how productivity is defined (lacking services component and a focus on physical production) and measured (counts of patents and sheer processing power versus how data and that power could be used differently). They also include monetary policy (quantitative easing and low or negative interest rates) and fiscal policy (lack of right mix of tax incentives and public sector investments) that actively dissuades capital and labor investment needed to drive productivity. The fact is that for whatever reason, our national accounts suggest that our overall living standards will not improve.
So here’s the thing:
- Some of our individual technology investments are not driving improved productivity, but some are
- Our technology investments are not showing or driving improved productivity at a macro level
So what is happening and what do we do about it? Without improved productivity our standard of living will stagnate or even decline.
It would seem that IT is not able to determine which investments to make in order to drive such outcomes. What I mean to say is that IT (no one, really) is able to do a good enough job to correctly and consistently predict the combination of investments, and intensity of those investments that would drive productivity. Just because RFID is now cost-effective at scale and reliable does not mean we should all go out and wire our devices and assets and supply chains. Yet some firms will. We don’t, after all, need to inventory everything all the time.
The example I used to show that at an individual level we have not improved productivity, using email, is valid but the example was incomplete. The vehicle we might now use more to do email outside of working hours, the smartphone, is potentially driving innovation elsewhere and may yet help improve productivity. Does paying restaurant, hotel and shopping bills with a smartphone make us more productive? Maybe just a smidgen; I am not sure.
Does all our recent enthusiasm for big data, now IOT, algorithms, postmodern ERP, SOA and now microservices, all yield a step change in productivity? Again, we don’t really know. There should be specific, individual uses and case studies where each of these do support value, innovation and so improved productivity; but at a macro level we just can’t tell.
Perhaps if we understood more about the nature of these technologies and how they support innovation and productivity (the productivity paradox) we might be able to pick the right winners and back the right horses. We need a way to determine the kind of innovation each technology can supper, over what time frame, and for whom. I think we have a lot more to do in IT.
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