Unravelling the IT productivity paradox

Unravelling the IT productivity paradox

Daniel Lock provides a few change lessons for CIOs

“You can see the computer age everywhere but in the productivity statistics”, Nobel prize winning economist Robert Solow said way back in 1987.

In the mid-1990s, there was a productivity boom, which lasted for about ten years. Some of this was attributed to IT, but since then nothing like the technological contributions of industrial revolution in the first half of the twentieth century.

So why has IT not driven productivity? These observations spurred curious researchers to investigate the problem, most notably Erik Brynjolfsson, professor of management at the MIT Sloan School of Management.

In a paper in 1998, Brynjolfsson evaluated data that since the early 1990s had begun to show some firms pulling away from the pack in exploiting IT to increase productivity.

At the time, new management ideas such as “reengineering” and “self-directed work teams” were becoming popular. Brynjolfsson wanted to know if it was in fact these new work changes and management practices that were making the real difference in how productive firms exploited IT.

He discovered that firms using decentralised work practices were 5 per cent more productive than those which did not. Furthermore, he discovered that companies which invest heavily in IT but do not have good management practices are significantly worse off.

So how does bad design and mediocre management of IT systems hamper productivity?

Consider a service operations business that wanted to improve the efficiency of its field service team. After investing more than $1 million and 12 months automating its scheduling systems and tools, the needle had failed to shift commensurately in performance and productivity.

While field staff had less paperwork and box ticking to do, the new system was not helpful for daily operations and more development work was required.

The system was poorly designed with hard-coded and costly IT, which didn't work with existing processes. Consequently, the uptake from engineers was low; they didn't trust the system's capabilities.

Similarly, studies of the IT productivity paradox suggested that the productivity payoff of an IT investment did not follow quickly but instead required periods of intensive process reengineering. For every dollar invested in IT systems, firms typically had to invest several dollars for implementation, training, and process redesign to realise productivity gains.

While the technologies of the industrial revolution drove extraordinary productivity gains, it wasn’t always immediately obvious how the innovations would actually help.

When electricity was introduced to factories they simply swapped out waterwheels for generators and continued with the remaining belt and pulley systems. It wasn't until smaller engines were positioned throughout the factories to generate power on demand that improvements in productivity could be seen.

But how does this relate to IT in the 21st century? In one case, a mining company implemented a technical engineering solution to improve production efficiency, but inadvertently broke up employee groups that had learned to work together in particular ways, supporting each other in a dangerous environment. The miners resisted the change of course, as it didn't account for how they worked together.

For an IT ‘fix’ or new system to be effective it must fit with the social structure of the organisation, otherwise the company’s immune system will attack it.

Getting the most from IT

Here are a few tips to get the absolute most out of your technology investments.

Redesign processes first. To solve problems faced by the service operation (mentioned earlier) managers created a task force that modeled process improvements first. They ran scenarios and came up with potential solutions.

They then ran low cost, low impact tests to work through what actually worked. Once a model was working, they ran pilots, continually iterating and improving.

The result was less technology and more process redesign. For example, having a GPS equipment in engineers' cars was expensive and of little value given they knew their territory well.

Engage early. By running tests and pilots they were able to engage field staff in the process of development by gaining their feedback. It became obvious to the engineers they would have to change the way they were working.

Project teams also realised that engineers weren’t being “difficult” and some technology solutions did little more than get in the way.

The company eventually set up change champion groups, training and support structures. Managers also worked with engineers alleviate their concerns about 'reduced autonomy' due to centralised and computerised scheduling.

This created the productivity gains the organisation was looking for in half the time they’d spent previously and at a much lower cost.

IT-driven productivity is not inevitable. To make the most, CIOs need to work with the business and consider the ‘soft side’ of attitudes, skills, and motivations that drive behaviour.

They should reflect more critically upon the limits of technology in pursuit of productivity improvements.

Daniel Lock is the principal of Daniel Lock Consulting. You can contact him on his blog

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