The productivity paradox

Technology, created to ‘free’ employees, has often proven to be a trap, yet the ongoing digital transformation could actually ‘knock’ the productivity paradox, allowing IT to return to its role as a supporter of growth

The famous American economist Robert Solow, who was awarded the Nobel Prize in Economics in 1987 for his contributions to the theory of economic growth [according to which growth depends on two inputs – labour and capital – and when the income growth that is not explained by the growth of the two inputs is attributed to technological progress – Ed.], argued that “you can see the ‘computer age’ everywhere, especially in productivity statistics.” Actually, by considering only the 1995-2000 five-year period, the growth in productivity in the so-called ‘advanced economies’ has not kept up with the growth in IT spending. According to the first theories, technology was supposed to ‘free’ people and encourage them to use their working time more productively. “But so far it has not worked out that way,” analysts Elsy Boglioli, Vanessa Lyon and Yves Morieux of The Boston Consulting Group (BCG) warned. “Several businesses invested heavily in technology but not in true integration. They integrated the tools with one another but not with the way people work”.

And this is where the ‘paradox’ lies, in the vision that the three analysts reported in their article The Smart Solution to the Productivity Paradox: “the technology that was meant to ‘free’ the people has insidiously trapped them”, they write. “It is no wonder that, based on a survey conducted in 2014 in the USA, 51% of the employees interviewed reported being ‘disengaged’, not feeling involved or active in their job and in their company [the BCG analysts refer to a survey conducted by Gallup on over 80,000 people in the USA; in 2016, the percentage of dissatisfied employees increased to 70% – Ed.]”.

The dawn of the new TechEra

We are now in the midst of a new technology age, characterised by the explosive growth of data, widespread connectivity and increasingly intensive processing power. And while history might suggest that today’s digital, cloud and related technologies will have little effect on productivity, the BCG analysts report that “the benefits could be substantial”. “Compared to the systems used in the past (complex monolithic application systems such as ERP, HRM, CRM database, etc.), today’s technologies are far more flexible and can enable new forms of collaboration. For example, Agile Software Development, which is disrupting the way in which software is developed and codes are written, through continuous improvement applied to automated and digitised processes”.

If companies successfully ‘marry‘ these new digital approaches with what the BCG calls ‘smart simplicity’, then “they can unleash the latent power of their technology and their people”. The concept of ‘smart simplicity’ is based on the premise, confirmed by studies and research, that companies are most productive when they are able to ‘harness’ the intelligence and satisfaction of their employees. And if we look at the success of digital native companies such as Netflix or Spotify, it is clear that this ‘method’ leads to business productivity and competitiveness.

 

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