Making a Difference …and knowing it…
A question for you… What main advantage do you think technology provides a business?
What is Productivity • Brynjolfsson & Hitt: “…the amount of output produced per unit of input.” • Kock: “(production capacity)/(production cost)” • Problem with amount produced… what if demand is low? • Brynjolfsson & Hitt: “Properly measured, output should include… the value created for consumers.” • Kock: “…quality and productivity are interrelated…” • How to Measure it? More to come…
IT’s “Dirty Little Secret” • Technology Productivity Paradox • Morgan Stanley's chief economist Steven Roach, 1987 study "America's Technology Dilemma: A Profile of the Information Economy" • Particularly in the Service Sector productivity was stagnant, yet IT investments soared. • Banking and Insurance were especially lacking. • Is IT investment a bad idea? • Is productivity everything?
Measuring IT ROI • Productivity Matters • …but isn’t everything • Brynjolfsson & Hitt: IT has a strong positive relationship to revenues. • Kock: a decrease in productivity matched with an increase in revenue is acceptable. • Brynjolfsson & Hitt: “…value depends increasingly on product quality, timeliness, customization, convenience, variety and other "intangibles".” • Kock: Early Adopters of ATM’s and Market Share • Measuring IT ROI is difficult and may include more than a measure of productivity in the short term.
Productivity Growth • Brynjolfsson & Hitt • Productivity growth isn’t from working harder • “Productivity growth comes from working smarter.” • “general purpose technologies” Steam Engine, Electricity, today: IT. • Ultimately: IT increases productivity as a tool for improved business process. IT on its own doesn’t increase productivity, only when it is coupled with working smarter. • Productivity should be impacted in the long run… • Result of organizational change enabled by IT
So Now What? • Select a Business Process for Redesign • Identify problems (“opportunities for improvement”). • Cost-Benefit Analyses • Management Support • Employee Resistance • Process Rigidity • Previous IT Investment • Laws & Regulations • Functional Heterogeneity (relates to regulation)